Becoming a parent is a major life change. It will inevitably influence everything from your social life to your personal finances. Making a will and estate planning are among the most essential tasks that should be conducted by new parents. It can be overwhelming to think about estate planning or writing a will, especially as a new parent.
There are two main pieces to your estate plan in Canada – wills, and power of attorney. Writing a will might not be fun, but it’s a significant thing to do when you become a parent. In this article, we are going to talk about estate planning and how to write a will when you have children.
Why Do Parents Need a Will?
It’s significant for every Canadian citizen to have a will. Parents with children definitely need it even more. A will not just allows people to create a plan to secure the financial future of their children but also protects their assets and personal finances. While personal loans Manitoba may help you finance big-ticket purchases, a will may help to protect these purchases and valuable assets that you own. There are several reasons why parents need a will:
- To name the preferred guardian of minor children. Appointing a guardian means this person would take care of your minor kids in the event that you and the other parent passed away. What will happen if you don’t have a will? In this case, the Canadian court will appoint the person, but it might not be the person you know or want to choose.
- To identify how you want your assets distributed. Your assets mean your auto, your house, your clothing, or jewelry. The court will define how your estate will be handled unless you have a will. Your valuable assets and property will be distributed in probate court. The result might differ from your own point of view. State courts will appoint a person to hold and disperse funds on behalf of your minor children until they reach 18. Only then your children will be considered adults.
- Add your children as beneficiaries. Family law in Canada stipulates that parents are obliged to provide for any dependent kids in their will. A parent needs to create and update a will that accounts for leaving assets to their kids. It’s widespread for one parent to default to leaving the assets to the other spouse.
In the event both parents pass away, the assets will be left to their children. A parent has the right to leave valuable assets directly to their kids. However, keep in mind that the assets will be held in trust in this case until the age you stipulate in the will or the age of majority in the Canadian province where you live.
- To establish and carry out a trust. Sometimes, parents may decide to establish a trust. Is it beneficial? Yes, this option lets parents control when and how their assets will be given to their children. If a parent doesn’t want their children to have unconstrained access to their inheritance, he or she may establish a trust. This way the funds will be held and controlled by another person until the age you want to children to get them.
How to Write a Will
A will is a legal document that states how you want your estate to be divided once you die. A great option is to get professional legal assistance when you make a will. If you want to ensure all the papers are prepared and witnessed properly, you can learn about the laws in your province or territory that deal with wills using the information from the Financial Consumer Agency of Canada and find provincial and territorial resources on estate law.
A great idea is to write a will as soon as you become a parent. After that, you should update it if you undergo a big life change (such as losing a spouse or getting divorced) or have more children. Here are the steps to make when you prepare your will:
- Select a legal executor. This is the person who would execute your wishes as stated in your will.
- Do an inventory of your liabilities and valuable assets. You need to know what you own and what will be required to be repaid if you pass away.
- Make a decision about how you want to allocate your valuable assets and who will inherit your estate.
- Talk to your guardian. It is necessary to ensure this person realizes and wants to take care of your kids upon your death.
- Consider a “living will” as well. It can go together with your will and allow you to direct your end-of-life medical care. The estate attorney may help you prepare the papers and the will. Make sure you consult with your estate attorney about the current laws.
- Talk to a tax attorney or a financial planner in case you want to know more about estate taxes.
- Find an attorney to prepare a will.
- Sign your will in the presence of two witnesses who are not named in the will. After that, it can be notarized.
Protect Your Income
A will and POAs may dictate your wishes, but they won’t take care of your children and relatives should you pass away or become incapacitated. Hence, you also need insurance. Depending on the person’s life stage, life insurance may play various roles. Safety and security may be the priority for a young family with a mortgage. A life estate can be utilized as an estate planning tool for middle-aged people.
It can be viewed as a chance to leave a legacy and pay taxes so your heirs don’t have to do that. Term life insurance is the most cost-effective option for young families especially if their finances are tight. This policy pays out a large sum in case a person passes away during the term, typically 10 to 20 years.
This option is cheaper compared to other types of insurance but it has some downsides. It must be renewed once the term ends, and it generally comes at a higher cost. Thus, it’s better to purchase this policy in your 20s.
The Bottom Line
Becoming a parent will impact all aspects of your life from personal finances to social life. Estate planning and making a will should be your priorities, especially as a new parent. It’s essential to write a will once you have children who depend on you. Follow these tips to write a will and avoid mistakes so that you protect your family.