Financial Considerations for Retirees: Estate Planning

May 14, 2025

Estate planning is the process of anticipating and arranging for the management and transfer of a person's assets and liabilities, both during their lifetime and after death. Although this can be a difficult topic for some people to think about, having a solid plan in place may allow you to enjoy your retirement knowing your wishes will be carried out during your lifetime and after you pass on to provide for your loved ones. There are various areas to consider including creating a Will, completing a Power of Attorney for both property and personal care and setting out a plan for your end-of-life arrangements.

Create an Inventory of Your Assets and Liabilities

Before decisions can be made on the distribution of assets and payments of debt, the first step is to make a list of all your assets and outstanding financial obligations. Include statements from financial institutions, life insurance policies, property deeds and corporate records if you own a business.

Physical assets can include:

• Land, houses, cottages or other real estate
• Cars, boats and other vehicles
• Valuables such as art, antiques, jewelry or coins/stamps

Financial assets can include:

• Bank accounts
• Investment accounts such as Registered Retirement Savings Plan (RRSP), Tax-free Savings Account (TFSA), Registered Pension Plans (RPP)/Deferred Profit Savings Plan (DPSP) etc.
• Stock Certificates
• Life Insurance Policies

Debt can include:

• Mortgage
• Car loans
• Credit card balances
• Lines of credit

Once the lists have been completed, establish the current value of each asset and determine the balances of outstanding debt. To calculate your net worth, subtract your debt from the total of your assets. Net worth is what you have left to distribute to your beneficiaries in your Last Will and Testament.

Transferring Assets

There are several ways that assets can be transferred to a beneficiary. Understanding the options and their advantages and disadvantages will help determine how to implement strategies to support the transition of assets.

Last Will and Testament

A Will documents and directs an individual’s wishes regarding the estate upon their death. There are several types of Wills including a Holographic Will which is entirely handwritten by the testator, a Do-It-Yourself Will kit which is a set of documents with instructions that allow an individual to create a Will without the guidance of a lawyer or a Will that is drawn up by a lawyer. Having a Will drafted by a qualified lawyer helps to ensure the estate distribution follows estate laws within your province or territory and may eliminate disputes between beneficiaries, as the deceased wishes are clearly outlined. An essential decision when constructing a Will is naming an executor whose role is to ensure the deceased's wishes are carried out after death. This includes managing the estate, paying debts, filing income taxes and distributing assets to beneficiaries as outlined in the will. A Will allows the individual to choose beneficiaries for their assets, which may include family members, friends or charities. If multiple primary beneficiaries are named, it is common practice to assign a percentage or specific dollar value to each outlining how the assets will be distributed.

For more details see our previous article: The Importance of Having a Will, May 10, 2023

Naming beneficiaries

Some investment accounts such as RRSPs or TFSAs and life insurance policies allow the account holder to name a beneficiary of the funds in the event of their passing. This allows the assets to pass directly from the deceased to the chosen recipient, potentially saving on costs and speeding up the process of transitioning the assets. Beneficiaries can include spouses, children or other individuals. Naming a beneficiary that is not a spouse on an RRSP or Retirement Income Fund (RIF) could have certain tax implications. It is important to review your beneficiary designations regularly, especially after life events like marriage, divorce or the birth/addition of a family member.

Trusts

This is a legal agreement where an individual (settlor) transfers assets to another party (trustee) who holds legal title, with instructions on how the assets are to be used for the benefit of a certain party (the beneficiary). Specifically with estate planning, certain trust can address tax implications. Trusts can be particularly beneficial if a beneficiary is a minor and cannot manage their portion of the inheritance. The estate funds can be held in a trust until the beneficiary reaches a designated age. In situations where there is a beneficiary with a disability, receiving the inheritance in a trust allows the trustee to manage the funds on their behalf, providing a distribution which may improve their quality of life and may reduce the impact on their government benefits.

Incapacity Planning

Incapacity planning refers to specifically focusing on preparing for the possibility that you may become unable to manage your own affairs due to illness, injury, or other circumstances. To prepare for this possibility, consider drafting a power of attorney for property and for personal care. With a power of attorney, the attorney has the legal power to make decisions and to perform numerous actions (or specific actions as outlined in the legal document) on behalf of the grantor while they are still alive. For a power of attorney to be valid, the grantor must be mentally capable when signing the document.

Power of Attorney for Property

This is a legal document that allows someone you trust to manage your financial affairs and property on your behalf. This includes tasks like accessing bank accounts, paying bills and managing investments. The responsibility of the attorney is to act in the best interest of the grantor and keep detailed records of all transactions performed. A continuing power of attorney allows the power of attorney to act for the grantor even if they become mentally incapable, whereas a non-continuing power of attorney cannot be used if the grantor becomes mentally incapable.

Power of Attorney for Personal Care

Allows an individual to appoint someone to make decisions of a personal nature if they become mentally incapable. This could include decisions about where the individual lives, what they eat or the medical treatment they receive. The power of attorney could make advanced directives on the types of medical treatment the grantor would like to receive if suffering from a terminal medical condition, incurable injury or severe mental or physical incapacity. The grantor should appoint an individual they know well and trust with such important decisions.

For more details see our previous article: The Importance of a Power of Attorney (POA), June 14, 2023

Charitable Donations

Charitable giving is the act of voluntarily donating money, shares of a capital stock, units of a mutual fund or a physical asset to a qualified registered charity. Incorporating charitable giving into an estate plan transitions an act of generosity to an estate planning strategy. Incorporating a charitable donation in your Will reduces the tax owed by your estate. If a deceased individual owns capital property at time of death, Canada Revenue Agency (CRA) treats this as if the property was sold at fair market value (FMV) resulting in accrued capital gains. By donating the property to a registered charity, the estate will receive a donation receipt for the amount of the gift which could reduce the tax liability at death.

Gifting During Your Lifetime

An individual may consider gifting monetary assets along with treasured heirlooms in their lifetime. This may save in potential tax and probate fees, but it also creates a sense of satisfaction seeing a loved one enjoy the gift being given. By choosing not to wait until death to provide for your loved ones, you may be able to support them in achieving a dream like home ownership, paying off debt or saving for educational expenses. You may also see a family member enjoy a piece of art or jewelry. Be aware of potential downsides to gift giving. This may include capital gains if you are selling a property that is not your principal residence and income tax owing if cash is withdrawn from your Registered Retirement Savings Plan (RRSP) or Registered Income Fund (RIF). It is important to ensure that you leave yourself enough assets to fund your retirement needs and dreams.

Planning for Your End-of-Life Celebration

Planning your own funeral may have several benefits including reducing the stress of your loved ones when they are grieving your loss and ensuring your wishes are honored. It allows for financial planning, potentially locking in prices and preventing unexpected expenses that family may come across. The burden of decision making is taken care of during a difficult time. Areas to consider may include:

• Your preference for a funeral, memorial service or celebration of life
• What you would like to have done with your physical body (burial, cremation etc.)
• Your wishes about organ donation
• Arrangements for the payment of the service or celebration of life

Over time, an individual's situation may change and this may alter goals of an estate plan. Review your plan regularly especially if there have been material changes such as the death of a spouse, other designated beneficiary, an addition to the family or a significant adjustment to the value of your estate. Work with qualified, trusted and knowledgeable professionals including a lawyer, accountant and financial advisor to ensure all areas of estate planning have been addressed.

FirstOntario Credit Union in partnership with Credential Securities and Credential Asset Management Inc. has an experienced team of advisors specializing in various areas of wealth management including retirement planning, investment management, estate and succession planning, individual financial risk management and more. These professionals are here to help you plan for the future and reach your financial goals. Visit FirstOntario.com/Investments or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.

Mutual funds, other securities and securities related financial planning services are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Unless otherwise stated, mutual fund securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions.