How Does a Personal Directive Work?

A Personal Directive is a document you write that outlines your instructions about non-financial personal matters. It comes into to effect if something happens to you and it looks like you are unable to make your own decisions. Or if a ‘capacity assessment’ is done and confirms you can no longer make decisions.

This disability does not have to be permanent. Should you get better, you are then able to take back the power to make your own personal decisions.

What Information to Include in Your Personal Directive

Some of the instructions that you can include in your Personal Directive are:

· What medical treatments you would or wouldn’t want

· Where you would like to live

· Who you would like to live with

· Who you would want to care for your minor children

Choosing an Agent for your Personal Directive

One of the most important decision you will make when writing a Personal Directive is who you choose to appoint as an agent. Your agent will act on your behalf to fulfill the instructions that you have outlined and to help make other personal decisions on your behalf.

Your agent should be someone who is trustworthy and responsible. They will need to be willing to act on your behalf and know you well enough to be able to make those important decisions for you.

Is a Personal Directive an Estate Plan?

A Personal Directive is just one part of a complete Estate Plan. Other documents that can be prepared along with your Personal Directive includes your Last Will and Testament, and Power of Attorney

 

Summit Legal Group can provide you with a Personal Directive Preparation Guide and Fillable Questionnaire to help you begin the planning process. Please contact our office to learn more. Tel: 587-356-0356 or Email: info@summitlegalgroup.ca

 

 

Estate Planning for Self-Employed Individuals and Small Business Owners

When you leave your pet for a weekend, you have a plan. You know who’ll feed it and how much it will cost. So, what happens when you step away from your business for the weekend? More importantly, what will happen when you leave your business for much longer – as in, permanently?

Anyone who owns a small or medium-sized business, regardless of age or stake in the company, should give some serious thought to succession planning. Why? Because you never know when you’re going to be hit by a wayward bus. That metaphorical bus could kill you; or worse, could leave you physically or mentally incapacitated. In addition to a will, you should also have a personal directive and power of attorney to deal with financial and health care matters in the event the metaphorical wayward bus doesn’t kill you, but you become physically or mentally incapacitated.

If a business owner dies and there’s no plan in place, it’s the survivors who are left without direction. While your business might be humming along right now, how will it be if you’re not around? Executing someone’s affairs after death is a whole new, and potentially messy, ballgame. If you want to take care of business even after you’re gone, you need to plan what will happen to your estate, and that includes your business.

As a business owner, it’s quite likely that a significant portion of your wealth, and your family’s source of income after your death, is tied up in the family business. The success of your estate plan is dependent upon the business being transitioned to the next generation or sold to someone outside the family for a fair price. Proper estate planning can keep your business from becoming a fire-sale.

The key to successful estate planning is communication and documentation. You want to communicate with your family about a wise path for the future. But you also want to document those wishes in an estate plan to prevent future disagreements. I recommend clients review their wills every five years, or when their circumstances change, such as the birth of children, deaths in the family or a change in their financial circumstances.

SELF EMPLOYED & SMALL BUSINESS OWNERS

Estate planing considerations for small business owners include:

Minimizing Taxes

If nothing else, one good reason for estate planning is to minimize the amount your estate will owe in taxes. You’ve worked hard to establish your business as a profitable entity. Don’t lose the fruits of your labor to the CRA in taxes.

Owner Dependent Business

Although the business may, in fact, become worthless upon the owner’s death, tax may theoretically be imposed on the value of the business on the day before the owner died. If the owner’s death is unexpected the business may be thriving immediately prior to the owner’s death. To minimize the risk of the surviving family members owing tax on a business that no longer exists, you should document the business plan and the business’ characteristics that act to limit transferability of the business. Your ability to prove the limited value of the business is crucial to avoiding tax on a business that no longer exists.

Sole Proprietors

If you’re a sole proprietor, you’re well aware that your business is not separate from your personal assets – in a sense, your business is you. Probably more than any other type of business organization, you need a clear plan of action for what should take place after you’re gone. What you own personally can be used to cover business debts. Delegate and prepare your successor if you want to pass on the business. If you want to sell the business, do the research that will make selling it easy and inexpensive for your heirs.

Family Run Business

In a family-run enterprise, you may have some heirs who are involved in the business and others who are not – how do you divide your business assets? Many people choose to distribute assets based on a relative’s contribution level. Let’s say two of your children are going to take over the family business. Do you want your third, uninvolved child to have an equal share? Perhaps you want the two involved siblings to buy out the third. Regardless of what you decide, controlling these types of choices is critical. After all, the passing of a family member is hard enough to deal with on its own. Proper estate planning at least allows your business to have a smooth transition.

Buy-Sell Agreements

A buy-sell agreement is a contract between shareholders or partners which establishes a plan for the business in case one of the owners dies or becomes incapacitated. The principal benefit of a buy-sell agreement is that it establishes a sale price for the business and your share of the business. A buy-sell lets you document whether or not you want your partners to buy out your share, if you want to block certain individuals from having a role in the business, or if you want your heirs to sell your portion. Since the business price has been established, family members know they are receiving a fair price.

As any good business plan anticipates the future, a buy-sell agreement is simply another aspect of good business. While creating a buy-sell agreement requires open communication with both your family and your business partners, which can be difficult to achieve, it will establish a solid path for the future, greatly reducing any potential for disaster.

Life Insurance

If the business assets are not liquid, where do partners get the capital to buy out a deceased partner’s shares? Very often, the necessary capital comes from life insurance. This is a common business practice – each partner takes out a life insurance policy which names the other owners as beneficiaries. This strategy gives surviving owners tax-free proceeds to purchase the deceased’s portion of the business from his or her estate.

Choosing an Executor

One of the most important decisions you’ll make when you’re preparing your Estate Plan is selecting an executor. The executor of your will needs to be someone who is willing and able to carry out the many required tasks, which can take as long as two years to complete.

Your executor will be responsible for protecting and administering your estate, having your will probated and distributing assets to your beneficiaries. These are vital duties that require a significant amount of time and effort.

When deciding on an executor, you’ll want to choose someone who:

  • You can trust to manage your affairs the way you want. Avoid asking your adult children if you have any concerns about potential conflicts.

  • Has the time available to devote to executing the will. Click here to learn more about the duties of an executor.

  • Lives reasonably close to you, so they can easy to deal with your family and your assets. There are disadvantages, and potential costs to the estate, should you select an executor that lives outside of the province of Alberta.

  • Has some knowledge of tax, investments, and financial decision-making.

  • Is capable of getting things done, but is also willing to ask for help from others including professionals such as an estate lawyer or tax accountant.

  • Is willing to be your executor, and is likely to survive you.

CHOOSING AN EXECUTOR

If you have questions about choosing an executor, or about any other estate planning related matter, contact the offices of Summit Legal Group for a consultation.

Some additional options when choosing an executor:

1. Consider naming an estates professional as your executor.

Many people choose to appoint family members or close friends as their executor. However, if you have a complex estate or are concerned about potential family conflicts, consider appointing an estates professional, like a lawyer or a trust company, as an executor.

2. Choose more than one executor

For example, you could name joint executors such as a family member and friend or a family member or friend and a lawyer or trust company as co-executors.

3. Name a back-up

Include an alternate executor in case your first choice is unwilling or unable to manage your estate.

Your named executor may choose to hire a lawyer or estate professional to help them take care of handling the day-to-day administration of your estate. Their fee would be paid by the estate.

Ensure your executor has or knows where to find, the most recent copy of your will and other pertinent estate information.