Plan for the unthinkable

It's not easy to talk about death, but avoiding the topic could be taxing to those you leave behind in more ways than one. The emotional wake could widen family rifts if affairs are not in order and much of what you hoped to pass along could be diminished by fees and taxes. Estate planning requires the skills of a lawyer and accountant rolled into one and that's why it's important to get the right professional help to put together an effective will. If you die without a will you are deemed to have died "intestate", in which case the estate will be distributed according to the laws of the particular province. Different provinces have different rules but, as an example, here's how Ontario will transfer an estate:

1. If only the spouse survives all assets are transferred to that spouse

2. If the spouse and children survive, total assets to a certain point will go to that spouse and anything left will be divided among the spouse and surviving children.

3. If there is no living spouse but there are surviving children, the estate will be divided equally among the surviving children.

4. If there is no surviving spouse and no children the estate will be divided among surviving parents, siblings, nephews or nieces and next of kin.

5. If there is no next of kin the estate will go to the government.

A will can also identify specific sentimental articles to be left to specific people. Often the articles will not have major value, but it will be important to you for the right person to have it.

An estate plan can also smooth out the probate process -- the legal process in which a will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person's will or the estate of a deceased person without a will. The court appoints either an executor named in the will (or an administrator if there is no will) to administer the process of collecting the assets of the deceased person, paying any liabilities remaining on the person's estate and finally distributing the assets of the estate to beneficiaries named in the will or determined as such by the executor.

There are a few legal strategies that can be used to avoid probate:

Give Gifts - property that is given as a gift during your lifetime does not fall into your estate because you did not own it upon your death. The gift is the legal property of the person to whom you gave it. Consider gifting your assets while you are still alive to avoid probate on those assets.

Joint Ownership - you can designate assets such as real estate, bank accounts, and investments, as joint ownership with right of survivorship. That means the asset will pass automatically, avoiding probate, to the surviving owner upon the earlier death.

February is Your Money Month on BNN. Don’t miss an episode of BNN’s Portfolio Builder where our experts help you sort through your options for investing. The BNN Portfolio Builder brings you everything you need to know about RRSPs and TFSAs, as well as tips on sorting through mutual funds, ETFs, stocks and bonds.