Personal Investor: Women most vulnerable without estate plan

Nearly half of older Canadians don’t have a valid will, according to Fidelity Investments. Not having an estate plan in the event of death can compound the anguish for the surviving spouse but it tends to take a harder toll on women. On average they outlive men by three years, and in many cases, women are younger than their spouses.

That’s why Fidelity says it’s especially important for women to ensure a comprehensive estate plan is in place early in life – a legal accounting of assets and property, and how they will be distributed among beneficiaries.   

A will comes into effect upon death. Assets included in a proper will can be transferred to the beneficiaries for their immediate use, or they can be structured to set aside property for use according to specific instructions. Investments are deemed to be sold on the date of death (deemed disposition) and the rate of taxation depends on the individual assets.  

Assets in a RRSP or registered retirement income fund (RRIF) are usually rolled over tax-free to the RRSP or RRIF of the surviving spouse or dependent children or grandchildren. For other beneficiaries, the plan will be collapsed and fully taxed as income in the estate.

If there is no surviving spouse nor dependents, a tax-free savings account will also be collapsed and future income will be taxed – but even naming a spouse doesn't guarantee the assets will be rolled over to the spouse's TFSA. TFSA rules vary from province to province.

Tax consequences on every estate plan are unique, because every estate is unique. That's why it's important to stay on top of changes in legislation, family circumstances, marital status, the death of a beneficiary or assets sold or bought.