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Revise Your Estate Plan As Your Priorities Change

Each estate plan is unique to the individual. What they all have in common is the need to respond to changing circumstances.

Do your choices from yesterday fit your priorities today?

Young family

Estate planning isn't just for older people and the wealthy. Even those starting out have something to plan for.

Most young families are juggling debt and rising living expenses. If you're in this phase, a priority is to shield your assets from unforeseen events. Choosing the proper life insurance and disability coverage to generate income or pay off the mortgage and other bills makes this possible.

You're likely making a will and power of attorney for the first time. Give careful thought to who you wish to name as the executor of your estate and who should represent you through an enduring power of attorney or representation agreement.

If you have young children, an essential step is appointing a guardian to care for them should something happen to you and your spouse. At the same time consider a trust as a way to provide for your children if you no longer can. Through a trust you're able to stipulate how your legacy will be used. For example, you may set aside a sum for your children's education. You can also choose to have the trust's assets paid out gradually as your children mature, rather than having them receive (and possibly spend) their inheritance all at once.

Older family and empty nest

Once your kids are in their late teens or have left home, your estate planning priorities are likely to have changed. There's a good chance your debt is smaller and you face fewer financial commitments. Your assets are growing more rapidly as you reach your peak earning years. You may have divorced and remarried. Preparing for retirement takes on more urgency. These developments call for a thorough evaluation of your estate plan.

Insurance can still play a vital, yet different role as you age. In your younger years life insurance helped protect your family's financial security, probably through a term life policy. But as your obligations decline, the need for pure insurance protection decreases.

At this stage switching to permanent life insurance can be a better choice. This coverage leaves a portion of the insurance premium to fund protection, but allocates the rest to a savings component that can pay future premiums and build wealth. And because that amount is sheltered within the policy, it grows tax-deferred, giving your retirement savings a lift.

Mid-life is also when health risks should command more of your attention. A recent survey by Sun Life reported that while a majority of Canadians realized a serious health event could impact their personal finances, only 13% said they had money set aside to deal with it. Critical illness and long-term care insurance are two practical options for covering unexpected or future health care bills.

It's crucial to review your executor and power of attorney appointments at this stage. Are they still suitable? Individuals you originally appointed may have moved, or might no longer be appropriate for any number of reasons.

Estate planning and blended families

Research indicates that the majority of men and women eventually re-partner after marital breakdown. Those in second unions have unique estate planning considerations.

The traditional approach of leaving an estate to one's spouse and children may not be as simple in a blended family. You will want to protect the interests of your children from your prior relationship. At the same time you wish to ensure your new spouse is looked after. There are questions about how to best treat the family home, your investments and life insurance benefits. How do you decide what's fair?

Without professional guidance estate planning for a blended family can be challenging. Contact your BlueShore Financial advisor who can review all of your options.

Retired

Retirement brings forth fresh financial questions. For your estate plan it usually comes down to balancing your own needs with a desire to leave a legacy.

As you age and your wealth increases, your estate often becomes more complicated, demanding careful planning. Assess the capabilities of your executor, trustees and other representatives you previously appointed to see if they're still up to the task. Don't assume your adult children can fill these roles; first confirm they possess the right skills.

When contemplating the transfer of your assets, it's easy to get caught up in "to whom" and "how much". Equally important is the "how to".

One option is to give away some of your wealth while you're still alive to witness the benefits. But doing so can also mean triggering taxable capital gains on any property you dispose. If you take a different path and leave everything in a sizeable estate to transfer at death, the tax implications can be even greater. In fact, without sufficient cash on hand to pay your final tax bill, your loved ones could be forced to sell assets to raise the needed funds, including property you wouldn't want them to part with.

On the other hand, if leaving something to your favourite charity is a priority and you gift qualifying property (e.g. publicly traded shares), that transfer is tax-exempt. The bottom line is to seek advice to leverage tools like life insurance, trusts and giving strategies to avoid the pitfalls in transferring your wealth and accomplish what you want.

Get expert advice

Over time relationships change and children grow up. You build wealth – some to enjoy and some to leave to the people and causes you care about. Your priorities and the challenges you face as you move through life won't sit still. Your solutions shouldn't either.

Don't lose sight of estate matters in your financial planning. Your BlueShore Financial advisor can help you keep your estate plan in focus and aligned with your priorities. Our financial advisors use a team approach that includes in-house investment, insurance and business specialists, as well as external partners to meet your legal, tax and accounting needs. Contact your advisor for a professional review.

This article is provided as a general source of information and should not be considered personal financial or investment advice or solicitation. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete.
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