Just the basics – estate planning in a nutshell

Estate planning is about putting a plan in place now for the ‘who, what and how’ of taking care of things if we die or if we become incapable of managing our own finances or making our own health care decisions. With a few basic legal documents, we create a roadmap and give the people we choose legal authority to act when they are needed.

This is my last Will and Testament…

No one wants to think about dying, but most of us also don’t want the people we love to suffer more because we left them silence and uncertainty instead of a plan. We have worked hard in our lives, and there can be great satisfaction in knowing our loved ones will be taken care of.

A Will is the main legal document that comes into play when a person dies (there are also more sophisticated documents like trusts, but since we’re just talking basics here, let’s stick with the Will).  The Will says who will handle the estate – this is the executor, whose job is to take care of everything from safeguarding property, applying for probate if needed, selling property and investments that need selling, paying debts, making sure tax returns get filed and taxes paid, and eventually distributing the money. Usually there is one primary executor (often the spouse) and preferably one or two alternates who can step in if needed.

The other important ‘who’ in a Will is the guardian; for parents with minor children, this is critical and one of the main reasons to do a Will. The Will says who will act as guardian and be responsible for a child’s care and upbringing. In families with two parents living together, the surviving parent is automatically the guardian; for these families, the main point of the Will is to appoint an alternate guardian in case something happens to both parents.

The Wills also says what is to happen with the estate. This part covers topics such as how personal effects are to be dealt with, whether any cash or charitable gifts are to be made, and which people are to inherit the residue – the value of the estate that is left after debts, taxes and other specific gifts. The residue is what most people think of as their estate. The people who inherit in a Will are the beneficiaries. If the beneficiaries are not yet old enough to handle their own money, the Will sets out who will handle their money in the meantime (the trustee), what the trustee can do with the money, and at what age the money is to be paid out to beneficiary to handle on their own.

Most people say something about their funeral wishes in their Will, and the Will also has some legaleze (too much still; we’re working on that) to give the executor the flexibility they need to get the job done.

The other two main estate planning documents are used during life for two different realms of our lives: finances, and health and personal care decisions.

Taking care of the bacon – Powers of Attorney

The enduring Power of Attorney is the main legal document for dealing with property and legal affairs. It gives the person named, called the attorney, the power to deal with your home, property, bank accounts and investments as if they were you. A Power of Attorney can be very specific or general, and can be made effective immediately or only down the road in specific situations. A Power of Attorney is a very powerful document, and it is essential that the attorney be completely trustworthy, as well as organized and reliable.

Many people do not realize that without a Power of Attorney, their spouse or another family member needs to bring a court application to get the legal authority to manage finances if needed. This can only be done if the person is legally found to be mentally incapable of managing their own affairs. Although not legally complicated, this process is expensive, often stressful, and requires a lot of jumping through hoops such as getting affidavits from doctors about incapacity.

Taking care of me the Representation Agreement

A Representation Agreement is the main legal document in BC for dealing with health and personal care decisions. It gives the person you named, called the representative, the power to make decisions for you about medical care and personal care if you are no longer capable of making those decisions for yourself.

Unlike with the Power of Attorney, there is legislation (called the Health Care (Consent) and Care Facility (Admission) Act) which provides for a temporary substitute decision-maker if a person is incapable and does not have a Representation Agreement. This law creates an order of priority of who is allowed to make medical decisions in certain situations – spouse, then an adult child, then a parent, then a sibling and so on.

With a Representation Agreement, you decide who is to make these critical decisions for you, and you can name a primary and then alternates in case the primary can’t act. The powers of a representative are flexible and can include decisions that a substitute would not be allowed to make. Because the person you want to make life and death decisions for you might be different than the person you want to manage your finances, and you can name different people in your Representation Agreement than in your Power of Attorney.

Most people have heard of ‘living wills’ to express their wishes about end of life and to let loved ones know at what point they do not want heroic measures taken to prolong life.  This language is very often included in a Representation Agreement so that the representative knows what your wishes are and will follow them.

An alternative to the Representation Agreement is an Advance Directive which is a written instruction (essentially, directly to health care providers) giving or refusing consent to the health care described in the directive. For most people, a Representation Agreement will be a better choice, because it makes sure there is a person you trust with authority to speak to doctors and make decisions. But there are situations, for example when a person does not have anyone who can be a representative, when an Advance Directive makes sense.