INFocus: Do you have your house in order?

Date: October, 2014 well kept house

This article was originally published in the Fall ’14 inFocus Issue.

There are many personal documents that you must review and/or update on a regular basis. Many people don’t find time to deal with these very important matters. Following are a few examples:

Your Will

There are many events that may affect your will such as a divorce, the death of a beneficiary or trustee and changes in tax law. It’s important that you review your will on a regular basis to ensure appropriate changes are made.

In addition, you may want to change the beneficiaries of your life insurance policy, RRIF, RRSP and TFSA etc. A beneficiary has to be named for a RRIF, TFSA and RRSP. For a RRIF, the amount of tax that would otherwise result can be deferred if the RRIF contract or deceased’s will names the surviving spouse (or common-law partner) as either a beneficiary of the RRIF or a successor annuitant. Naming the surviving spouse as a successor annuitant instead of a beneficiary of the RRIF provides some additional benefits. Moreover, a residual beneficiary should be named in your RRSP and RRIF in case something happens to the primary beneficiary.

Power of Attorney

A power of attorney is a legal document that appoints a person to act as an agent to manage your financial and/or medical affairs. There are two types of power of attorney: a power of attorney for all financial matters and one for personal care if you become incapable of making health care decisions. Having a power of attorney will ensure your bills, taxes, accounts, investments and personal care will be taken care of should you ever become mentally incapable. Once you have established a power of attorney, you should review your choice every so often to reevaluate if the person you have chosen still has the mental and physical ability, as well as continued trustworthiness, to act on your behalf.

Insurance Policies

Make sure your insurance coverage for your home, automobiles, life, disability and critical illness is appropriate.

For example, a condominium corporation has its own insurance to cover the condominium building, including the common areas and all original construction inside your unit, such as kitchen and floors. The cost of this insurance is included in your monthly condo fees. Therefore, the condo owner’s insurance should cover only the interior walls, fixtures and personal property and any betterments done in your condominium unit. Accordingly, make sure your insurance is not covering something that the condominium insurance already covers. You should review the Standard Unit by-laws to determine what your condominium insurance covers. Not all condominiums are the same.

Generally, disability and critical illness insurance should be paid personally in order for the disability benefit to be tax free upon receipt.

Funeral Arrangements

You should summarize your funeral directions since your executor may not be able to access your will on very short notice. Include information regarding pre-arranged services, cemetery plots, burial or cremation instructions, organ donation, etc.

Documents

Another important part of keeping your house in order is to ensure you keep a detailed list of where all your important documents are located, such as marriage contract, child-support agreements, trust documents, insurance policies, birth certificate, passport and credit card information. This should also include contact information for your investment advisor, insurance agent, lawyer, accountant, bank accounts, safety deposit box, the names and contact information for executors and trustees, and names of guardians for children, if applicable.

Being committed to the upkeep of your personal documents is important so that when the time comes for these documents to be executed, it ensures that they are used the way they are intended. Taking the time to review these documents on a regular basis ensures the future well-being of your assets – especially the most important ones – your loved ones.

Connect with the Author

Deborah (Debby) Stern, BComm, CPA, CA, Deborah Stern CPA Professional Corporation, Partner – Audit & Advisory

Debby E. Stern is a partner in Crowe Soberman’s Audit & Advisory Group. She provides auditing, business advisory services, cash flows, personal and corporate tax planning and tax compliance to a wide variety of clients. Her specialties also include succession and estate planning.

Connect with Debby at: 416.963.7103 or deborah.stern@crowesoberman.com.

Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article.

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