These documents provide clarity and direction, ensuring that their values and preferences are respected. They also take the guesswork out of deciding what to do in specified circumstances. Having clear direction can also avoid strained relationships among other family members.
In part 2 of this guide we will look at key documents involved in estate planning for everyone, including elderly parents.
A Valid Will
A will is essential to estate planning. It outlines how your parents’ assets should be distributed upon their death. Ensure that the will is up-to-date and reflects their current wishes. Consult with an estate planning lawyer to ensure all legal requirements are met. If a person dies without a will in British Columbia they are said to die “intestate” and their assets are distributed according to the rules of intestate succession that are set out in the Wills, Estates and Succession Act (“WESA”).
Wills, Estates and Succession Act (WESA) – British Columbia
The WESA contains mandatory distribution rules that can lead to results that do not align with what your parent(s) may have wanted. WESA also dictates how the person responsible for managing your parent’s estate after death gets appointed. This involves applying to court to have an Administrator appointed and WESA dictates “who” has the right to apply. Further, Administrators have different limitations than Executors (a person your parent chooses) and the process of distribution to beneficiaries can take longer under an Administrator. In short, having a valid will is a better and more efficient way to ensure your parents’ wishes are respected and the process of asset transfer and distribution runs smoothly.
Powers of Attorney
There is often some confusion around powers of attorney (POA) and what they mean. The first thing to know is that there are two types of POAs, general and enduring, and they are meant to ensure that someone of your parent’s choosing is appointed to deal with their finances and property. They do NOT cover medical, health and personal care decisions. Those matters can be dealt with by using Representative Agreements and Directives.
The second thing to know is that your parents must have legal capacity to enter into these agreements. This can present problems if your parent is experiencing cognitive difficulties which is one good reason why discussions about estate planning should not be put off. If you have concerns about a parent’s legal capacity you should get advice. Determining whether it’s too late to use these types of tools may involve discussions with their healthcare providers and other professionals like social workers.
Third, a general POA ends on death, bankruptcy or if your parent becomes mentally incompetent and can no longer make decisions. An enduring POA does not.
A valid will, POAs and Representative Agreements make up what is commonly known as an advance care plan. Again, one way to approach this subject with an elderly parent is to talk about it in the context of your own advance care planning activities. Just as a parent can become legally incompetent so can you (e.g., an accident or illness that causes a brain injury and impairs your ability to make decisions can happen to anyone at any age).
Advance Care Planning is a great way to take the pressure off family members who may have to step into the breach in the event of an emergency or urgent health crisis. At the same time, the plan can help ensure that your parent(s)’ wishes are respected. Click to learn more detailed information about advance care planning.
Considerations for POAs
A power of attorney allows your parents to designate someone to manage their financial affairs if they become incapacitated and are unable to do so themselves.
Assigning a power of attorney is crucial. This person will make financial and legal decisions on behalf of your parent(s) if they become incapacitated. They should ensure the chosen individual is trustworthy and understands the responsibilities involved.
Trusts
Various types of trusts can be set up to manage and distribute assets during your parent’s lifetime and after their death, ensuring that their wishes are carried out efficiently. If there is a dependent adult or disabled child to consider, trusts can be an effective tool.
Beneficiary Designations
In Canada, for assets such as life insurance policies, pensions, Registered Retirement Savings Plans (RRSPs), Retirement Income Funds (RRIFs), and Tax-free savings accounts (TFSAs), naming beneficiaries ensures these assets bypass probate and go directly to the designated individuals.
Letter of Intent
Although not legally binding, this document provides additional guidance to the executor and loved ones about your parents’ wishes for their funeral, distribution of personal items, and other personal preferences.
Asset Inventory
A comprehensive list of assets, including bank accounts, investments, pensions, real estate, personal property, and digital assets, helps the executor manage the estate effectively.
Password Inventory
In the digital age it would be wise for your parents to ensure they have a full list of login credentials and passwords for all online accounts. This can be done with a secure password manager (e.g., 1Password or LastPass) or could be a written document kept somewhere secure like a safety deposit box – provided you have access to the key. If they have social media accounts it would also be wise for them to record their login credentials and passwords so that you can close accounts in the future.
Business Succession Plan
If your parents own a business, this document outlines how they want the business to be managed or transferred after their death or incapacity.
By ensuring these documents are in place, you can help your elderly parents create a thorough estate plan that reflects their wishes and provides peace of mind for the entire family. Read our article Succession planning essentials for business owners to learn more about important considerations when forming a succession plan.
Additional Things To Be Concerned About
Health Care Directives:
Advance health care directives, including living wills and representation agreements, specify your parents’ preferences for medical treatment. These documents guide health care providers and family members in making decisions that align with their values and wishes.
Financial Planning:
Your parents understanding their own financial situation is essential. If you are assisting with their planning, it is essential that you also understand it. This includes understanding their income sources, expenses, debts, and investments. Consider consulting with a financial planner to ensure their finances are managed effectively and sustainably.
Depending on the nature of your parents estate and asset mix, the impact of Canada’s new capital gains tax changes need to be considered. There may be a number of ways that you can reduce the amount of tax payable on the transfer of generational wealth. The tax impact on beneficiaries associated with different types of asset transfers is definitely something to discuss with a financial advisor and an estate planning lawyer.
Long-Term Care Planning:
Discuss long-term care options, including aging in place, in-home care, assisted living, and nursing homes. Understand their preferences and financial capabilities.
Guidance from experienced estate planning professionals can help you make informed decisions and ensure that every aspect of your parents’ estate is handled with care and precision.
Guide to Estate Planning for your Elderly Parents:
Part 3: Role of adult children
Find out more about our estate planning services and book a consultation here.
Stay up to date with the latest legal scoop by signing up for our newsletter.
Disclaimer: This blog post is for informational purposes only and should not be construed as financial or legal advice. Consult with qualified professionals to create a personalized estate plan suitable for your specific circumstances.
