The Four Essential Documents You Need in Your Estate Plan
Updated: Dec 13, 2022
Are you feeling overwhelmed by estate planning? It doesn't have to be scary. Learn about the four key documents you need to get started.
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An estate plan is a fundamental part of being prepared for the future and yet it’s something people often avoid putting together. Most of us don’t want to think about what happens to our assets after we die.
One common misconception is that only people with a lot of assets need estate plans but it’s for everyone, regardless of how much money you have today or plan to have tomorrow.
Estate planning doesn’t have to be overwhelming; it all starts with four key documents.
What is an estate plan?
Before we dive into the documents, let’s break down what an estate plan is and why it’s important. An estate plan begins with preparing the legal documents needed to protect and care for the people you care about after you die.
It will also ensure your assets can be managed and your healthcare wishes will be respected in the event your become incapacitated. Most importantly, estate planning is about the careful consideration you put into those legal documents when preparing them.
Without these documents in place, your loved ones could end up fighting for your assets in court, even if you fully intended to pass them on to specific people. When Prince passed away in 2016, he left a $156 million estate and no will. With no spouse or living children, Comerica Bank & Trust was assigned by the court to administrate the estate's affairs during litigation. It took a six-year legal battle between his six half-siblings to finally settle his estate, with $3 million going to the bank to pay for the costs and expenses they incurred during that time.
The four essential documents you need in your estate plan
1. Your will
A will is a legally binding declaration of how you want your assets and property distributed after you die.
This is also where you name your executor(s), specify who you’d like to be your childrens’ guardians, how your pets should be taken care of, and any gifts you’d like to leave. Some lawyers will store the original, but you can also register your will with the Canada Will Registry. When selecting your executors (the people who will be in charge of managing your estate), think of the people in your life you can count on to get stuff done. Ideally, you want the most organized, objective, and dependable people you know. If no one comes to mind, you can also appoint a lawyer, financial advisor or professional executor. Some people think they have to appoint a family member but sometimes the best person is outside of the family.
Whoever you decide on, it’s important to ask them if they are willing to be your executor. It’s also a good idea to appoint more than one executor as a backup.
2. Power of attorney
A power of attorney is a document you sign which gives someone the authority to manage your money or property on your behalf while you are alive. Whoever you’ve appointed becomes your “attorney”, even if they’re not a lawyer.
Having an attorney can be helpful if you’re ever unable to pay bills or take care of other important matters, due to illness or hospitalization, mobility issues, or even just being away for work or travel.
Your “attorney” cannot make a will for you, change a will you’ve already created, change a beneficiary on a life insurance plan, or appoint a new power of attorney on your behalf. A power of attorney is only valid when you’re mentally capable of managing your own affairs.
An enduring power of attorney is important if you’ve been diagnosed with a progressive illness like Alzheimer’s. This allows for your attorney to continue making decisions on your behalf once you have lost the legal capacity to do so.
3. Health care proxy and advance healthcare directive
A health care proxy (also referred to as a substitute decision maker) is the person who makes medical decisions on your behalf if you’re unable to communicate. They ensure that you receive the care you want if you are unable to communicate with your medical team.
Your proxy will typically be named in your advance healthcare directive or living will, which states your end-of-life wishes, and how you would like to be cared for. When preparing your advance healthcare directive, consider the following:
What medical treatments would you want or not want?
How would you want your pain managed?
Would you want treatment even if a cure wasn’t possible?
Do you want your organs or tissue donated?
Making these decisions in advance takes the pressure off of your family or friends to make difficult decisions about your health during an already stressful time.
Keep in mind that the terms for advance care planning documents can vary depending on where they were created. Our Advance Care Planning Terms resource has all the terms that are used in Canada and links to regional resources.
4. Letter of instruction
A letter of instruction can include step-by-step instructions and information about less legally binding matters, including:
Names and contact info for anyone who should be invited to your funeral
Any funeral plans you’ve made
The charity you want people to donate to in lieu of flowers
Names and contact info of lawyers, accountants, and financial advisors
Any final messages you want to leave for your loved ones
While more valuable assets need to be distributed through a will, a letter of instruction can include instructions about how to distribute items that have sentimental value.
For example, an antique vase that’s worth thousands of dollars would need to go through a will, but a vase you made in your beginners pottery class could likely be passed down to your grandchild.
Some of these documents may have different names depending on which province or territory you are in. Check out our resources to keep track of all the names, no matter where you’re located.
Who can help you prepare your estate planning documents?
There are two main professionals who can help you create your estate plan:
If you have a complex estate or aren’t sure where to start, a lawyer can help you create most of your important documents, including your will and power of attorney. While the letter of instruction isn’t legally binding, your lawyer will likely have suggestions about what to include.
Depending on your province or territory you may not need a lawyer to create an advanced healthcare directive and appoint your substitute decision maker, unless your situation is complex.
If you have a fairly straightforward estate, Willful offers various plans for creating a will and power of attorney documents for finances and healthcare decisions.
A financial advisor can help you make informed estate planning decisions, especially if your estate plan includes succession planning for your business or your estate is quite complicated.
Where should you store your estate planning documents?
Having a thorough and thoughtfully prepared estate plan doesn’t help your loved ones if they can’t find what they need when you pass away. That’s why it’s so important to ensure that your executor knows exactly where to find all the key documents they require to fulfil your wishes. So, where should you store your documents?
A safety deposit box may seem like an ideal place to store your will and other important documents except that the proof your executor needs to show they’re your executor is inside the safety deposit box. A shoebox under your bed or a filing cabinet may seem like a better alternative, but they both don’t guarantee your executor will find your documents.
An estate planning platform like EstateBox ensures your executor and loved ones have access to everything they need to manage your estate. You simply scan your documents and upload them to a single, secure digital environment, granting access to only those individuals who require it. If you’re just getting started with estate planning and unsure where to begin, EstateBox is also designed to guide you through the process of uploading the right documents in the right place.
How often should you update your estate planning documents?
After creating a well thought-out estate plan, notifying the appropriate people and storing your important documents in a safe, easy to find place, you may think you’re done. However, your documents should reflect any changes that have occurred in your life and the lives of those involved in your estate plan. Here are just a few life changes that may necessitate a change to your estate plan:
The death of an executor
A change in your relationship with an executor
A change in your relationship status (marriage, common-law, divorce)
Moving to another province, territory, or country
Adoption or birth of a child
Remember to touch base with your executor(s) every few years to see if they’re still in a position to fill that role. If your executor moves to another continent, they won’t be able to manage your estate very well.
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While we’re passionate about all things estate planning, we’re not professionals. We recommend speaking with your lawyer or financial advisor when putting together an estate plan.
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