Two people at a desk discussing
Care Planning

What Is Estate Planning?

And how can I help my aging parents get their affairs in order?

Estate planning is often a key part of caregiving. Ensuring that your aging parents have documents like up-to-date wills, powers of attorney, advance care directives and other components of an estate plan can save them — and you — time, money and heartache. Here’s what you need to know to get started.

What is estate planning and why do you need it?

Figurine house on desk near documents and calculator

Estate planning is the process of creating a roadmap for how a person’s assets will be distributed, and how other important matters — like medical treatments — will be handled as they age, through decline or illness, and after they die. When your parents have a solid estate plan, it means that:

  • the people they’ve chosen can legally make medical and financial decisions on their behalf if they’re incapacitated
  • after death, their debts can be paid and their assets preserved and transferred to loved ones as quickly as possible
  • taxes, fees and other expenses can be deferred or minimized
  • they can provide for family and dependents to the best of their abilities
  • you and they can rest easier, knowing that their affairs are in order 

Some of the major components of an estate plan include wills, powers of attorney for property and personal care, advance care directives, and funeral arrangements. 

When to start estate planning

Senior woman signing legal documents up close

If you’re a caregiver for your aging mom or dad, chances are you and your parents have already thought about at least some aspects of their estate plan. You may be paying some of their bills, accompanying them to doctors’ appointments and helping them make medical decisions, or talking to them about downsizing and what to do with cherished possessions. An estate plan formalizes all these processes. Your parents’ estate plan must be created while they have the mental capacity to make informed decisions. 

If you can, talk to your mom or dad about their plans for an estate, whether they have an up-to-date will and powers of attorney, and their values and wishes around death and dying and funeral arrangements. 

(And here’s a thought: as you shepherd your mom or dad through the process of estate planning, why not do yourself and your family a favour and make sure that your own plan is up to date?) 

Power of attorney or substitute decision-maker

If your parent becomes mentally incapable of making  decisions on their own, someone else will have to decide for them. Powers of Attorney are the legal documents that let your parent appoint you or someone else to make personal-care and financial decisions on their behalf. For example, as your parent’s substitute decision-maker, you can pay their bills, negotiate their rent or mortgage, handle their investments, or make decisions about where they will live. You can decide what kind of medical treatment — if any — they can receive. 

Your parent needs to appoint a substitute decision-maker for financial matters (property) and for personal care decisions. These can be the same person or different people. It’s important to have POA set up well before your parent becomes incapacitated. Otherwise, you may have to apply to court to take on these roles. In most Canadian jurisdictions, even close family members may need a signed POA to take control of another person’s finances or make healthcare decisions for them. Without powers of attorney, a government agent may act for your parent or appoint someone (not necessarily someone your parent would choose) to act for them.

Most provinces and territories have downloadable POA documents, and you can also work with a lawyer to complete them.

Last will and testament

In a perfect world, every Canadian adult would have an up-to-date will that clearly states how they would like their assets to be distributed after they’re gone. Not having a will makes it much more difficult and costly for a person’s family and loved ones to properly deal with their affairs after death. 

Especially if your mom or dad seems to be declining or has been diagnosed with a terminal illness, it’s important to make sure that they have a will, that it’s up-to-date, that you know where it is, and that they have appointed an executor who is in charge of administering the estate in accordance with the terms of the will.

Tax planning

At death, a person’s investments are considered to be sold, and the capital gains (profits) and losses triggered by their sale are included in the person’s final income tax return. As well, most assets that are distributed through a person’s will are subject to probate fees (or estate administration taxes). Depending on your province, these taxes and fees can often be substantial. Fortunately, there are ways to minimize or eliminate them. For example, some types of assets, including registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), tax-free savings accounts (TFSAs), and life insurance policies, allow the owner to name a beneficiary other than the estate. These assets bypass the estate and are distributed directly to the beneficiary and are therefore not subject to probate fees. In some cases, assets may be transferred tax-free (for example, to a surviving spouse), or they may be taxed at the beneficiary’s lower tax rate.

Advance care directives

An advance care directive (sometimes called a “living will,” although technically that’s not a legal term in Canada) is a specific part of a power of attorney for personal care that specifies which types of medical treatment a person consents to or refuses. As you and your parent draft your POA documents, it’s a good idea to take some time to discuss — and write down — their wishes.

Funeral arrangements

Many people find it very useful to know in advance a parent’s or loved one’s wishes regarding funeral arrangements. Some people, for example, may wish to be cremated and others buried; some may want to be embalmed while others will not. Knowing this information in advance can help you plan and make decisions during a difficult time. It’s a good idea to keep instructions regarding funeral arrangements separate from the will, which may not be read until well after the funeral or cremation.

It’s a good idea to review and update wills, POA documents, and other estate-planning documents every few years, or whenever any of the “Five Ds” occur:

  • Decade
  • Death
  • Divorce
  • Diagnosis
  • Decline

Getting your parent’s affairs in order

Elderly couple holding hands upclose

The older we get, the more stuff and paperwork we tend to accumulate. As you help your mom or dad create an estate plan, consider helping them organize their important papers and accounts. With everything in place, it’ll be easier for you to hit the ground running in the event that you have to make decisions for them. It’s a great thing to have power of attorney for financial care, but that won’t do you a lot of good if you don’t know, for example, where your mom banks or the code to her ATM card.

Here’s a list of important papers and information to gather and store in a safe place:

  • Legal and identity documents like driver’s license, social insurance number card, birth certificate, marriage or divorce papers, citizenship papers, passports
  • The location of their will, living will, power of attorney and other legal documents
  • The names and contact information for all the professionals your parent deals with: doctors, lawyers, financial planner, accountant, insurance brokers
  • Financial information
  • a list of accounts and assets and where they are located, as well as account numbers and beneficiary designations for registered accounts: this might include savings and chequing accounts, retirement savings accounts (RRSPs, RRIFs or LIFs), tax-free savings accounts (TFSAs), pension information, or non-registered investment accounts
  • a list of any debts: credit cards, mortgage, loans, as well as the financial institution that holds the debts and payment information
  • a list of insurance policies: life, critical illness, long-term care and other policies, as well as vehicle and house insurance
  • a list of monthly bills (telephone, utilities, property taxes, mortgage or rent, credit cards etc.) and account numbers: How they are paid and when? Does your parent have an automatic withdrawal set up, or do they pay by cheque or in person?
  • A list of all print and online subscriptions, with account numbers and passwords
  • A list of social media accounts with login information
  • Names and contact information for your parent’s relatives, close friends, clergy and other important contacts

This is sensitive information, so make sure that it’s stored somewhere safe: on a password-protected hard drive or memory stick, in a safety deposit box, in a secure filing cabinet or lockbox, or with your parent’s lawyer. In the event that your parent becomes incapacitated, having this kind of information organized and easily accessible will be a godsend for their substitute decision-maker.

Keep everyone in the loop about your parent's affairs

We designed CareEasy to allow families and friends to have full transparency to coordinate care. As you work with your parents to create their estate plan, CareEasy can help you keep everybody in the loop.

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