11.4.3 The main methods of estate planning

From: Financial Consumer Agency of Canada

For answers to many questions about estate planning, go to the Wills and estate planning page on the GetSmarterAboutMoney.ca website from the Ontario Securities Commission.

Simple estates

Here are some simple ways to manage your estate and reduce costs:

  • Leave a will. If you die without a will, your estate gets settled according to the laws of your province or territory. Any probate or legal fees that apply will be higher, and your loved ones might not get the money or other assets you want to leave them.


It's easy to make a mistake or to write a confusing will—and you won't be there to fix the problem. Legal advice is almost always beneficial. Most lawyers and notaries have a low-cost service for simple wills. They can also alert you to other issues you may not be aware of.

  • Name beneficiaries. When you buy life insurance or open a retirement savings plan, name the beneficiary you want to get the money in the event of your death. You can also name a backup beneficiary in case your first choice dies before you do. You can reduce estate costs if you name as beneficiary a spouse or common-law partner, a dependent child under age 18, a grandchild or, in some cases, a disabled adult child.
  • Plan your funeral. You and your loved ones will have more peace of mind if you plan your funeral. In most cases, there's no charge for this. You can describe the kind of funeral you would like, and sign papers so that you can donate body organs to help someone else.
  • Prepay your funeral. When you prepay, the money goes into a trust account or insurance fund until your funeral. This lets you pay the costs on your own schedule rather than when your loved ones are dealing with your death.


For more information about arranging or prepaying a funeral, go to the Consumer Information section of the Board of Funeral Services website.

  • Buy life insurance to cover expenses. You can use the death benefit from life insurance in a number of ways:
    • Leave a tax-free, lump-sum payment: If you name a beneficiary, the insurance money will pass to them without any taxes or probate fees.
    • Provide a steady stream of income: Your loved ones can use the death benefit to buy an annuity for monthly income. They won't have to pay taxes on that income.
    • Cover final estate costs: If you name your estate as the beneficiary for your life insurance policy, your executor can use the money to cover any final costs, including funeral and probate fees, outstanding debts and taxes owing. However, the money will be added to your estate and subject to probate fees.

Example: Let's say you leave your children a cottage that has been in the family for many years. If the value has increased, it could be subject to capital gain taxes, which become due when the property is transferred. If the children can't afford to pay the taxes, they may have to sell in a hurry. They may not get the best price in a rush sale and may lose something that has a special meaning to the family. If you have enough life insurance, it will cover the cost of the tax.

  • Give some of your money as gifts before your death. If you leave money to charity in your will, your estate will get a tax deduction in the year of your death. Some people use life insurance to fund a gift of this kind. Get expert advice.
  • Spend unsheltered assets first after you retire. If you have unsheltered savings—savings that are not in a tax-sheltered plan such as a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF)—you can reduce estate taxes by spending the unsheltered savings first. If your spouse or common-law partner is the beneficiary of a registered plan, the money will go to him or her without any tax or probate fees if they meet certain conditions.
  • Take advantage of final RRSP contributions. With some RRSPs, you can instruct your executor to add money into a spousal RRSP account up to 60 days after you die. This can turn taxable income into a sheltered investment, so there will be less tax and lower fees on your estate.

There may be tradeoffs

Estate planning is an important part of managing your money and meeting your financial goals. But, as with other financial choices, you may have to trade off different values. For example:

  • You can transfer some costs from your estate by paying them in advance, but the money you spend is no longer available for other purposes. And you may be unable to change your mind.
  • You can reduce estate and probate costs by transferring your property during your lifetime, either in whole or through joint ownership. However, if you do so, you lose control of your property, even if you remain joint owner. You won't be able to transfer joint property without the co-owner's agreement, and debts of the co-owner could be enforced against the joint property.
  • You can use registered tax shelters and insurance plans to transfer money to your spouse tax-free, but the money in those plans is not available for your other financial needs without paying penalties or taxes.

When you think about your estate, review your options with an experienced financial professional. Ensure that you keep enough flexibility to continue to meet your current needs and financial goals while arranging for the future.

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