How Much Do You Really Understand About Your Last Will and Testament?
Many people take great comfort in having a will drawn up so their loved ones are financially protected once they are gone. Usually these legal documents are done and then stored away and forgotten about. They could be sitting this way for many years to come. Do the contents become outdated in respect to what legal obligations the executor or beneficiary of the will be left with?
Another issue that also arises with last wills and testaments is that because it becomes a legal document it is often written in complex legal language that the maker of the will really doesn’t understand. Yet, they have to read the contents before they sign it. The legal representative drafting the will if it is a lawyer will make every effort to ensure that the individual understands what they are reading, and that it complies with the wishes that the will maker has outlined with the lawyer during the drafting for the will. However, what may not be totally explained is what the tax implications may be for those who will benefit from the will, or the tax responsibilities that will have to be handled by the executor.
For this reason, it is really important to understand what the tax implications will be in respect to what your will contains.
Here is an example:
You have decided that you are going to have a testamentary trust in your will for a loved one. Maybe you have a life insurance policy where you want the money paid to a person but not until they have reached the age of 21, or perhaps until they marry. Then you would appoint a trustee to look after the proceeds of the insurance money, for the person until they reach this specified age.
Generally the tax paid on testamentary trusts were calculated on a graduating scale. Now new laws are being introduced to tax testamentary trusts at the top rate of the tax scale which is 29%, and it is expected that this new law will come into effect as of January 1, 2016, although there are a few exceptions in respect to these types of trusts, and the specific amount of potential tax that has to be paid will have to be compliant with the provincial rules as well that are applicable to the different provinces.
All too often we think that making a will is relatively easy, after all you can most likely purchase a will kit at your local book store. The making of the will of itself may indeed be a relatively simple process, but it is almost certain that the following through of the will maker’s wishes when it comes to their assets will not be an easy task for the executor’s named in the will.
When it comes to making your will you can adopt the attitude that once it becomes the executor’s problem you no longer have to worry about it, or you can….
a) make sure you know exactly what your assets are by discussing with your accountant what you own, who can assist you with what their value may be and what the current tax implications may be regarding them.
b) utilize the services of a estate planner, who knows the current laws and what potential impact they will have on the will you now have, even if you prepared the will in prior years.
c) that the executors that you are naming in your will are going to be willing to take on the responsibilities that come with being an executor. Sometimes individuals are named as the executor in a will without their knowledge and are not prepared for the responsibilities that come with this.
The bottom line is don’t just assume that the will you have in place is not going to have any current tax implications because it was made many years earlier. The tax laws change all the time, and you want to be sure that these are not going to adversely affect your last will and testament, and if they do is there anything you can do now to minimize the impact.