If someone dies without a will in Canada, his or her estate will be divided by the provincial government through a process known as probate. What this can mean is that a person's assets will not go to the beneficiary the individual may have desired, but will be distributed according to a formula. The best way to avoid this and ensure that the intended beneficiaries receive the assets is through estate planning and the drafting of a will.
Many Ontario residents are unclear about the laws relating to the debts of an individual who has passed away. Some worry about being pursued by debt collectors after a relative dies, and others are concerned that their inheritance will be eroded by a benefactor's credit card bills and other debts. While a last will and testament is an important estate planning document, it addresses the distribution of assets and not the payment of debts.
When an individual in Ontario passes on, that person's estate may be require to pay certain taxes. At the time of death, the executor of an estate is required to file a terminal tax return on that person's behalf. Any capital property that is owned by an individual will be considered sold just before the person's death. Therefore, there may be capital gains or capital losses that affect how much tax an estate owes.
Financial advisers say it is important for Ontario couples to discuss their finances and be prepared for the death of a spouse. Otherwise, the loss of a spouse can put an enormous financial strain on the survivor. Reports indicate that many Canadians do not have wills. Excuses often heard include not being able to decide on an executor or a specific guardian because a person is afraid they will change their mind.
Ontario residents may be interested in an explanation of the tax implications for different types of inherited assets. Either the estate of the owner of the assets or the beneficiary may face taxes depending on the type of inheritance and the instructions to the executor. In some cases, a decedent's taxes will be paid by the estate, provided that the executor of the estate was directed to do so. The beneficiary would then inherit these funds as taxpaid money, and no tax would be owed.
While experts recommend that everyone undertake thorough estate planning, it is especially important for Ontario residents with children, substantial assets or a business. Proper estate planning ensures not only that someone's wishes will be carried out upon their death, but it also makes life easier for the executor and their heirs.
There are a number of reasons that Ontario residents might put off discussing estate planning with their heirs. In addition to the discomfort that some people feel when talking about their own mortality, many are also concerned about raising issues related to estate planning, like inheritances, dividing a family business and distributing heirlooms. Some parents have the concern that if they tell their children they stand to inherit substantial assets, they may not put as much effort into establishing a career.
Residents of the greater Toronto area may be interested in some information regarding the three types of documents that every estate plan should contain. These documents help to ease the burden on the executor and dictate what will happen to a person's assets after his or her death.
Ontario residents who have taken steps to plan the execution of their estates after they pass away may need to consider reviewing and revising the relevant documents occasionally. Estate plans may need revision every few years as circumstances change.
When parents in Ontario and across Canada are in the middle of planning their estate, they need to balance their need for financial security with the desire to take care of their heirs. One expert in the field observed that the burden of taking care of others can overwhelm seniors who might not be able to care for themselves properly.