11.4.6 Estate planning case studies

From: Financial Consumer Agency of Canada

Read the case studies below. Does either of them use strategies that could be useful for you?

Case study: A new family

Ross and Reena have are planning their estate with their new baby.

 

With a new baby in the family, Ross and Reena want to put their finances in order. They have three main goals in planning their estate:

  • If one of them dies, they each want to make it easier for the other to carry on financially. To start, they'd like to have enough money to pay off their mortgage.
  • They want to leave their child in good hands, with enough money to meet his needs in case something happens to both of them.
  • They want to make it as easy as they can for family members to settle their estate and pay any final costs.

Ross and Reena decide to talk to a financial professional. Together, they agree to do three things:

  • First, they each write a legal will. They name Reena's sister to take care of their child if something happens to both of them.
  • They each get a $300,000 life insurance policy and name the other spouse as the beneficiary. That way, whoever survives will have enough money to pay off the mortgage and any final costs, such as a funeral. If something happens to both of them, the money will help the sister raise their child.
  • They set up a Registered Education Savings Plan for their child's future education. They plan to save just $80 a month to start. They will save more as their incomes go up.

For now, Ross and Reena can rest easy. They know they will have to update their wills from time to time, especially if they have more children. However, they have taken care of all their main concerns.

Lessons Ross and Reena learned:

  • Even a young family can prepare for the transfer of their estate to meet their personal goals.
  • A variety of strategies can be used to meet specific objectives.
  • Professional advice can help choose the best options.

Case study: Providing an inheritance

Rodney and Rose are lisiting what to do to put their finances in order.

 

Now that they have retired, Rodney and Rose want to put their affairs in order. Their main goals are to:

  • provide an inheritance for their two adult children
  • leave their three grandchildren some money for university or college
  • leave some money to their local hospital
  • make it as easy as they can for the children to settle their estate and pay any final costs.

Rodney and Rose talk to a financial professional and decide to do three things:

  • First, they update their wills. They set up a small trust fund for each of their grandchildren out of their cash savings. They name each other as the main beneficiary of their retirement savings plans. They name the hospital as a second beneficiary. That means that after both Rodney and Rose are gone, the hospital will receive the rest of their savings.
  • They make their two adult children the beneficiaries of their $200,000 joint life insurance policy. The children will share the money, and won't have to pay any probate fees or taxes on it.
  • Rodney and Rose plan and prepay their funerals. This way there will be fewer bills when they die. Also, their children will know their exact wishes, right down to Rodney's and Rose's favourite music for their funerals.

Rodney and Rose know they may have to update their wills from time to time. However, for now, they can rest easy. They have taken care of all of their top goals.

Lessons Rodney and Rose learned:

  • Seniors can meet their personal financial goals by arranging for the orderly transfer of their estate.
  • A variety of strategies can be used to meet specific objectives.
  • Professional advice can help choose the most appropriate options.
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