An Estate plan can be defined as a collective term for an individual's Last Will, Health and Personal Care Power of Attorney and a Power of Attorney. It is a common misconception that and Estate Planning is only limited to preparing a Will and planning the allocation of one's wealth after the person is deceased. In this blog, we will discuss the differences between each estate planning documents.
A complete estate plan starts with a Personal Care Power of Attorney which is also called the Living Will and comes into play if a person becomes "incapable of making personal decisions" during his lifetime and is used to make personal and healthcare decisions of an individual. It means that a person is in state of mind where he/she cannot understand the information that is relevant to the personal care decision or can’t appreciate what could happen because of making a certain decision (or not making a decision) about the matter. The Power of Attorney also comes into play during the lifetime and is used to make financial decisions for an individual. The Last Will is the document that comes into effect at the death of an individual and is used to allocate and manage and individual's estate.
An Estate Plan can only be considered "complete" if all the three documents of an individual are in place and updated according to an individual's latest situation in terms of:
Change in circumstances: Consider a situation where an individual might have a clause about the guardianship of minor children and allocation of assets for their education but once the children are past their minor age and if their education is complete, these clauses will become invalid, and the wealth allocated for these purposes should be re assigned; and
Change in assets: The value of an individual's financial assets keeps changing all the time. Also, an individual may buy or sell his investments any time. There can be a case where the value of an asset increases so much with time that an individual may considering reassigning it or distributing it to more than one individual. Also, the Will needs to be amended according to any sale/purchase of an asset.
Powers of Attorney
Powers of Attorney is defined as a legal document which gives a right to someone else to act on your behalf. As it is a legal document, it can be designed to add various clauses governing the level of authority, the time of applicability and the conditions under which a power of attorney may be enforced or revoked. A Continuing Power of Attorney provides for management of estate during lifetime if an individual is unable to do so. There are three types of Power of Attorneys:
Non-Continuing Power of Attorney: A Non-Continuing Power of Attorney for property covers an individual's financial affairs but can’t be used if the individual becomes mentally incapable. An individual may give this Power of Attorney, to someone to look after financial transactions while the individual is away from home for an extended period.
Personal Care Power of Attorney or Living Wills: As discussed earlier, A Living Will is a legal document that outlines your wishes for medical care if you become unable to communicate or make decisions for yourself. It specifies the types of medical treatments you would want or not want to receive, and can also include your preferences for other medical decisions such as pain management, End of Life and organ donation. A Living Will should meet the following criteria:
Personal choice regarding end-of-life care
List of medical treatments that an individual "does not want"
List of medical treatments that will be acceptable to an individual
Name of Health Care Power of Attorney
Duly signed and witnessed by two individuals
Continuing Power of Attorney: The continuing power of attorney is the second part of the estate plan for an individual. As Power of Attorney for Personal Care takes care of the end-of-life care of an individual when he/she is not able to make decisions, the continuing power of attorney takes care of the financial affairs of a person. The legal document must meet the following requirements to be a valid Continuing Power of Attorney:
Be called a Continuing Power of Attorney for property or say that it allows your attorney to continue acting for you, if you become mentally incapable.
Name one or more persons to act as your attorney for property.
Be signed by the issuing individual and dated; and
Be signed by two witnesses who witnessed you sign the document.
Mental incapacity is when someone cannot understand relevant information or cannot appreciate what may happen as a result of decisions they make or do not make about their finances, health or personal care. The licensed professionals who are qualified to assess an individual’s decision-making capacity are psychiatrists and psychologists. A minimum of two licensed professionals are required to certify the loss of mental capacity.
The Last Will and Testament
The Last Will and Testament is a legal, written, and signed document that primarily expresses an individual's intentions for the distribution of the estate. A will provides for management of an estate after death. Will is the only document that gives control to legal representative over the distribution of deceased’s assets. A will provides for the administration and distribution of an estate after death. It will also specify the name of executor.
To accomplish transfers of property to beneficiaries upon death.
To preserve as much wealth as possible for the beneficiaries.
To set out instructions as to how the estate is to be administered.
To control the distribution of assets.
To provide evidence of deceased’s wishes for guardianship and maintenance of dependants.
A valid will must have the following requirements:
Must be in writing.
The individual (testator/testatrix) must be at least 18 years of age unless he/she is married or contemplating marriage, a member of the Canadian Military or a mariner at sea or during a voyage.
Must be signed by the testator/testatrix in the presence of two witnesses who are present at the same time; otherwise, the will is invalid and of no force and effect. Must be in writing.
The individual (testator/testatrix) must be at least 18 years of age unless he/she is married or contemplating marriage, a member of the Canadian Military or a mariner at sea or during a voyage.
Must be signed by the testator/testatrix in the presence of two witnesses who are present at the same time; otherwise, the will is invalid and of no force and effect.
There are three types of wills:
A Holographic Will is a Will that is written entirely in your own handwriting and signed by you. No witness is necessary. This type of Will is generally not recommended as it may leave your intended beneficiaries with difficulties trying to interpret your wishes if any portion of the Will is unclear. In fact, some provinces do not even recognize holograph Wills.
A Formal Will is typed and signed by you in the presence of at least two witnesses. These witnesses cannot be your beneficiaries or their spouses. Lawyers, Professional Estate Planners or notaries draft most formal Wills because they are qualified and trained to ensure that the legal drafting of your Will meets your wishes and your beneficiaries’ needs.
A Notarial Will which is prepared by a notary and signed before a witness, is valid in Quebec only. This Will must bear the date and mention the place where it was made. In certain cases, the presence of two witnesses may be required; for instance, when a testator is blind.
Unlike the other two forms of Wills, the notarial Will does not need to be probated by a court in the province of Québec. The probate process is not required because, under Québec law, the notary is an officer of the court able to authenticate Wills.
For further information or if you need to prepare a will, please visit the nearest Softron office or contact Softron at:
Telephone: 1-877-SOFTRON, Website: www.softrontax.com
