Christopher Liew: The estate planning steps Canadians put off until it’s too late

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Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

Estate planning is one of those tasks everyone agrees is important and almost everyone finds a reason to delay. The problem is that the most expensive estate mistakes I see don’t come from bad planning. They come from no planning at all.

Canada is in the final stretch of its largest ever wealth transfer, with CPA Canada estimating $1 trillion moving from boomers to their heirs between 2023 and 2026.

Yet as CTV News reported, only about half of Canadians have a will. That’s a lot of money changing hands with no instructions attached.

Below, I’ll walk through five estate planning steps Canadians delay the most, and why waiting costs more than you’d think.

1. Writing a will in the first place

This is the big one, and the one people delay the longest. If you die without a will, you die intestate, and your province or territory decides who gets what using a rigid legal formula.

In Ontario, for example, your estate is distributed under the Succession Law Reform Act, and someone has to apply to the court just to get permission to administer it. Even worse, in several provinces a common-law partner has no automatic right to inherit anything, no matter how long you’ve been together.

Your family doesn’t get a say. The formula does. A will is the only way to keep that power in your hands.

2. Updating your beneficiary designations

Registered accounts like RRSPs, RRIFs, and TFSAs, along with life insurance, pass directly to whoever you named on the account, outside your will entirely. That’s efficient when the designations are current. It’s a disaster when they’re not.

I’ve seen situations where an ex-spouse from decades ago was still listed on a life insurance policy. Divorce, remarriage, new kids: every major life event should trigger a review.

One detail many people miss: on a TFSA, name your spouse as successor holder, not just beneficiary. A successor holder takes over the account itself and keeps it growing tax-free, while a beneficiary only receives the value at death, and any growth after that can become taxable. Quebec handles this differently, where designations generally need to be made in your will.

I touched on similar oversights in my recent column on retirement savings mistakes, and these fixes take one form and about 10 minutes.

3. Planning for the tax bill nobody expects

One belief I hear constantly: “Canada has no inheritance tax, so my family gets everything.” Technically true, but it’s a bit misleading.

When you die, the Canada Revenue Agency treats you as having sold all your capital property at fair market value right before death. That deemed disposition can trigger a huge capital gains bill on your final return, and your remaining RRSP or RRIF gets taxed as income unless it rolls over to a spouse or a financially dependent child or grandchild.

I broke this exact myth down with real numbers in a recent Blueprint Financial video on the inheritance tax lie if you want to go deeper. The short version of it: without planning, the CRA can end up as one of your largest beneficiaries.

4. Signing your powers of attorney

A will only works after you’re gone. If you become incapacitated while alive, you need powers of attorney: one for your property and finances, and one for your personal and medical care.

The gap here is startling. A Scotiatrust survey found that 41 per cent of affluent Canadians over 50 have no power of attorney for their finances, and 47 per cent have none for their personal care. The top excuse? They haven’t gotten around to it.

Without these documents, your family may need a court application just to pay your bills or make care decisions. That’s time, money, and stress at the worst possible moment.

5. Actually telling your family the plan

That same survey CTV News covered found only half of married Canadians have discussed end-of-life wishes with their spouse or family. A perfect estate plan that nobody knows about is barely a plan at all.

Tell your executor where your will is stored. Keep a list of your accounts, insurance policies, and digital assets somewhere your family can find it. That being said, you don’t need to share every dollar figure; you just need to make sure nobody is left guessing.

Final thoughts

Estate planning isn’t really about death. It’s about making sure the people you love aren’t handed a legal and financial mess on the worst day of their lives. None of these five steps is complicated, and most can be started this month. The only truly expensive option is waiting.