Do I need an estate plan?
- Just a few estate planning components put you in control of your legacy
- By creating a plan, you avoid leaving a financial or legal mess for your loved ones
- Give yourself and your family peace of mind by clearing the path ahead of time
Does estate planning seem like something for much older, wealthier people? Think again.
Even if you don’t yet have a long list of potential heirs or a lot of property to distribute, documenting your wishes will provide some comfort about the future. It allows you to direct how your assets will be distributed, and it ensures that your loved ones won’t be faced with a legal or financial mess if you die unexpectedly. Estate planning is really about looking after your family.
As a busy resident physician or new-in-practice physician, you have a lot of reasons to put off estate planning while you take care of other priorities. But it’s important, and at this stage of your life estate planning can actually be fairly simple.
Let’s look at a fictional young couple and what they can usefully include in their estate plan at this point in their lives.
Dr. Leon Moric, 32, is an anesthesiology resident. Jo Leblanc, 30, is a physiotherapist. The two got married last year and would like to have a baby sooner rather than later.
Dr. Moric’s family helped him pay for his medical education, so he’ll be able to finish residency with little debt. The couple would like to buy a house in a few years — hopefully when the real estate market has cooled off somewhat.
They haven't really thought about estate planning; it seems premature, since they feel like they’re just starting their lives.
But by tackling just a few items, the couple will ensure that their wishes will be known. They’ll reduce the burden on the surviving spouse should one of them die, or on their parents should they both die suddenly. They can also make provisions for any future children.
Draw up a will
The first thing they each need to do is draw up a will. A will is the foundation of any estate plan. Most couples name each other as executor1, but they should also name an alternate executor, in case their spouse were to become incapacitated or they were both to die.
Even though they don’t have children now, they can appoint someone as guardian to any future children and should financially provide for these children in their wills.
Their wills should also lay out how they want their assets distributed, first to each other, and then to their future children, family members, charities and so on. They can also include details about funeral wishes or burial plans.
Wills should be reviewed on a regular basis — about every five years — and always when there are major life changes.
Set up powers of attorney2
Giving someone continuing power of attorney allows that person to act on your behalf in financial matters or make decisions about your personal care when you are unable to.
Even though Dr. Moric and his wife own everything jointly, power of attorney for property would give each of them the ability to do much more on the other’s behalf in financial matters. They can also give each other power of attorney for personal care — in other words, the authority to make medical and other personal decisions if the other is incapacitated, whether temporarily or permanently.
They can set up their powers of attorney at the same time that they draw up their wills.
Get life insurance
Dr. Moric has a term insurance policy of $1 million through his provincial medical association, which he can renew until age 65.
Term insurance is a common starting point because it’s less expensive than permanent insurance. It provides insurance coverage for a specified period of time, giving beneficiaries a tax-free death benefit if the policyholder passes away during that period. Once the policy expires, there is no death benefit.
If Dr. Moric or his wife were to die during this period of their lives, life insurance would help replace income and protect the financial security of their family.
Later on, they should consider adding permanent life insurance to their coverage. Unlike term insurance, permanent insurance accumulates cash value, which they can access if they ever need it.
As their wealth increases, permanent life insurance can be used as a tax-efficient way to pay the taxes their estate will owe. This way, they can leave a greater legacy for their children and grandchildren.
You’re not too young
Even when you’re just starting out, an estate plan is important. Having a will, powers of attorney and life insurance puts you in the driver’s seat and creates a clear path for your loved ones should you die prematurely — which will no doubt give you and your family some peace of mind.
To learn more about creating an estate plan, contact an MD Advisor*.
1 An “executor” is called a “liquidator” in the province of Quebec and an “estate trustee” in the province of Ontario.
2 In Canada, a power of attorney can be called a “continuing power of attorney,” “enduring power of attorney” or “protection mandate,” depending on the jurisdiction and the terms contained in the document. A power of attorney for personal care can be called a “representation agreement,” “personal directive,” “enduring power of attorney appointing a personal attorney,” “health care directive,” “advance health care directive” or “protection mandate,” depending on the jurisdiction.
*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.