When you get past the squeamishness of confronting your own death, it can be rewarding to think about how to allocate all of your major financial, physical and sentimentally valuable assets, including your banking and investment accounts, retirement savings, any life insurance policies and real estate holdings, to mitigate the potential problems you leave behind when you die without a will.
But estate planning is not just about your worldly possessions.
It’s just as important to your beneficiaries that you take care of the other side of the ledger: your key liabilities, such as credit card accounts, lines of credit, taxes, mortgages and other loans that your estate will become responsible for on death.
In some cases, the payment of an estate’s outstanding debts may even take precedence over the deceased’s intended gifts to beneficiaries, as the family of an Ontario farmer recently discovered, some 31 years after his death.
According to the decision, the man at the heart of the case died in 1994, leaving two farm properties to his sons via options to purchase. In the meantime, the properties have ballooned in value and the estate has accumulated a massive tax liability, resulting in a Canada Revenue lien on the farms worth $600,000.
A judge authorized the sale of the properties by the estate’s executor to pay the tax bill and other debts over the objections of the sons, who argued this would void the gifts their father had made to them in his will.
However, the Court of Appeal upheld the ruling, effectively putting the executor’s duty to settle an estate’s debts ahead of the testator’s intentions regarding the distribution of assets.
A comprehensive estate plan can not guarantee that your future liabilities exceed your assets, but an experienced trusts and estates lawyer can help you try to minimize the tax your estate will owe.
The more complex your assets, the more work it will take to maximize the tax efficiency of your estate. But with the assistance of a good lawyer and accountant, you can put together an estate plan perfectly tailored to your individual situation.
Those with complicated financial affairs should also consider appointing an executor who is familiar with your assets and comfortable working with them. If none of your close friends or family fit the bill, it may be worth turning to a corporate executor.
Disclaimer: The content on this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this website are advised to seek specific legal advice by contacting members of Laredo Law (or their own legal counsel) regarding any specific legal issues.
