Paperwork is a part of life, and retirement is no exception. This includes a variety of legal documents that Sun Life Financial estate and financial planning specialist, R. Paul Thorne (B.Comm., LL.B., LL.M., CFP), suggests clients have on hand to assist with the administration of their affairs.
1) Will
A sound estate plan almost always involves a will.
“A will is a client’s final chance to express their wishes with respect to their estate distribution. It can also assist in reducing delays and costs associated with conflict or intestate succession,” says Thorne.
Without one, an estate is settled according to the intestate laws of the province. Given that most clients would rather designate their own executors, trustees and beneficiaries, a will is a must-have. And some clients may want to consult a professional.
“By having a will drafted and executed by an experienced estate lawyer, not only can clients benefit from expert advice, they’ll avoid the errors that may occur with a holograph will or standard ‘do-it-yourself’ will.”
2) Health-care directive
Health-care directives (also known as personal directives, power of attorney for personal care, representation agreement and living will) also contribute to a sound estate plan.
“As we age and our medical requirements progress, it’s important to appoint a substitute decision-maker and provide them with clear directions with respect to our health and personal care.”
Who a client chooses is equally important to help ensure that medical, health care and personal care decisions continue to reflect a client’s wishes in the event of incapacity.
“It’s best to have a properly drafted and executed directive in case of incapacity, as opposed to relying upon your province’s guardianship rules which can be timely and costly,” suggests Thorne.
3) General or specific power of attorney
Unlike a health-care directive, a general power of attorney addresses clients’ property and financial affairs. This document can be effective as soon as it’s signed or, in some provinces, upon incapacity (sometimes known as a ‘springing power of attorney’).
Through this document, clients designate an authorized representative (known as an ‘attorney’) to act on their behalf, with Thorne recommending a cautious approach, based on his experience as a former estate lawyer.
“This document can provide an attorney with great power over a client’s property and financial affairs. Although an attorney is required to act in a client’s best interests, clients need to choose someone they trust fully — this document is typically used when they’re unable to handle their own affairs.”
A power of attorney can also be specific, meaning that it deals with one very specific power or is limited in time.
“Snowbirds may choose to appoint one or more of their children to act on their behalf while they’re out of the country. Or there may be clients who want to limit the attorney to certain events, such as selling their house or accessing investments in case of an emergency.”
4) Copy of marriage contract
A marriage contract can set out the rights and obligations of each spouse with respect to division of assets upon death. Each province has its own matrimonial property laws that apply in the absence of an agreement.
“If clients wish to protect specific property or interests, a marriage contract can assist in setting out the specific terms or division they agreed on,” says Thorne.
5) Cohabitation agreement
For some clients, separation or divorce in their younger years means they’ll experience retirement with a new spouse, often a common-law partner. Because they’re not subject to matrimonial laws and typically have little protection from provincial marital property laws, clients living common-law may want to consider a cohabitation agreement to set out the financial terms and conditions of their relationship.
“In many relationships, people combine their assets. When a common-law partner dies, without a formal agreement in place, how can you definitively and fairly determine who owns various assets?”
6) Acknowledgement of debt or promissory note
Clients who lend money to children or other family members may want the borrower to sign an acknowledgement of debt or promissory note so the loan isn’t lost or overlooked if the client dies. This type of document doesn’t necessarily have to be drafted by a lawyer, but having it drawn and notarized can formalize the agreement as proof for the executor.
“Some clients will include reference to a debt in their will,” says Thorne, “However, debt can be paid and circumstances can change. With a signed acknowledgement of debt or promissory note, the executor can confirm the amount outstanding and collect the debt on behalf of the estate more easily.”
7) Inventory of assets
For soon-to-retire clients with substantial assets, Thorne recommends an ‘inventory of assets’ — or an inventory of their property. Although not a formal legal document, an inventory of property, in conjunction with a client’s other estate documents, can make it easier for an executor or attorney to carry out their respective duties.
“This type of document is also a good place for clients to identify the financial institutions where their assets are located. They can record the numbers of any life insurance contracts they have in force. I also recommend including contact information for a client’s lawyer, accountant, advisor and other people who can assist the executor or attorney in easily settling the estate or handling financial affairs,” concludes Thorne.
