Many people view estate planning as task to take care of later in life. Or, it’s often misinterpreted as something only for the wealthy and highly established.
In reality, an estate plan is for everyone. It’s simply a tool for loved ones to use to navigate your finances and affairs after passing away or becoming unable to make decisions for yourself.
Despite its importance, there are plenty of misconceptions about estate planning involve.
Here are five common myths we’re clearing up.
Myth 1: Estate planning is only for wealthy people
You don’t need millions of dollars in the bank to benefit from an estate plan.
Your estate can include your home, savings, investments, life insurance, vehicles, personal belongings and other assets. More importantly, estate planning is about deciding what happens to those assets and who can make important decisions on your behalf.
For many Canadians, the size of the estate is not the most important part of the plan. Instead, it’s ensuring that your wishes are understood and legally documented.
Myth 2: A will and an estate plan are the same
A will is a critical part of an estate plan but is only a part of a greater whole.
A comprehensive estate plan can also address things such as:
- Powers of attorney
- Beneficiary designations
- Insurance policies
- Investments
- Transfer of assets
A will generally deals with the distribution of assets that form part of your estate. However, some assets can pass directly to a named beneficiary outside the estate, depending on how they are structured.
That’s why it’s important to look at the entirety of your financial portfolio rather than treating your will as a standalone document.
Myth 3: If I die without a will, the government takes everything
Dying without a will is known as dying *intestate.* Thankfully, it does not generally mean the government simply takes your assets.
Instead, provincial or territorial laws determine how your estate is distributed. The rules vary depending on where you live and your family circumstances, and the process may not reflect what you would have chosen yourself.
But without a will, you also lose the opportunity to clearly name your preferred executor and provide specific instructions for distributing your assets.
Creating a will allows you to have much more control over what happens after you’re gone.
It can also spare your family a lot of heartache if assets are distributed in a way percieved unfair.
Myth 4: An estate plan only applies after dying
A solid estate plan is critical if you become unable to make decisions while you’re still alive.
Accidents happen. Illness and disease happen. Life is full of twists and turns that we need to be prepared for at any age or stage in our lives.
A power of attorney can allow someone you trust to make financial or property decisions on your behalf if you become incapable of doing so. Depending on the province or territory, separate documents and terminology may apply to personal or health-care decisions.
Estate planning isn’t just about deciding who receives your assets. It’s also about deciding who you trust to help manage your affairs if you can’t do it yourself.
Myth 5: You only need to make an estate plan once
Your estate plan should evolve as your life changes.
Marriage, divorce, the birth or adoption of a child, the death of a beneficiary, purchasing a home, starting or selling a business, receiving an inheritance or experiencing a significant change in your finances can all be reasons to review your plan.
Even if nothing major has changed, it’s worth periodically checking that your will, powers of attorney and beneficiary designations still reflect your wishes.
An estate plan isn’t a “set it and forget it” document. It should keep pace with your life.
Preparedness is key
Estate planning isn’t about how old you are or how much money you have. It’s about making thoughtful decisions before someone else has to make them for you.
Taking the time to create and periodically review an estate plan can help provide clarity for you and your family. It makes a significant difference for the people you leave behind who are grieving.
Creating a comprehensive estate plan can be a major task. We highly recommend seeking the support of a licensed financial professional. This can ensure your plan is fully compliant and set in stone.
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