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According to Scouts Canada, the motto “be prepared” means that a scout must prepare by thinking about and practising how to act in any accident or emergency so that he or she is never taken by surprise. And just like a scout, we all need to be prepared for life events. We don’t know if we’ll live to a ripe-old age of 99 or face a disabling illness early in life. You can help clients be prepared to manage their financial affairs. This is important at any age but especially for retirees.

Here are six legal documents that Sun Life Financial estate and financial planning specialist, R. Paul Thorne (B.Comm., LL.B., LL.M., CFP), suggests clients have on hand.

1) Will

The first, and arguably one of the most important legal documents a client should have is a will. It’s a key document that sets forth a client’s wishes upon their death regarding the distribution and management of their assets and the care of any minor or dependent children. A sound estate plan almost always involves a will. Without one, an estate is settled according to the intestate laws of the province where the deceased resided. Given that most clients would rather designate their own executors, trustees and beneficiaries, a will written by a professional is a must-have.

“A will is a client’s final chance to express their wishes with respect to their estate distribution. It can also assist in reducing delays and costs associated with conflict or intestate succession,” says Thorne. “By having a will drafted and executed by an experienced estate lawyer, not only can clients benefit from expert advice, they’ll avoid the errors that may occur with a holograph will or standard ‘do-it-yourself’ will.”

2) Health-care directive

Health-care directives also contribute to a sound estate plan. Depending on the province, they may also be called personal directives, powers of attorney for personal care, representation agreement or living wills. Who a client chooses to name for this role is important to help ensure that medical, health-care and personal-care decisions continue to reflect a client’s wishes in the event of incapacity.

“As we age and our medical requirements progress, it’s important to appoint a substitute decision maker and provide them with clear directions with respect to our health and personal care,” says Thorne. “It’s best to have a properly drafted and executed directive in case of incapacity, as opposed to relying upon your province’s guardianship rules which can be timely and costly.”

3) General or specific power of attorney

Unlike a health-care directive, a general power of attorney addresses your clients’ property and financial affairs. This document can be effective as soon as it’s signed or, in some provinces, upon incapacity (sometimes known as a ‘springing power of attorney’). Through this document, clients designate an authorized representative, known as an ‘attorney’ to act on their behalf. A power of attorney can also be specific, meaning that it deals with one very specific power or is limited in time.

“This document is typically used when clients are unable to handle their own affairs, although they’re effective immediately upon execution, unless it’s a ‘springing power of attorney’. It can provide an attorney with great power over a client’s property and financial affairs,” says Thorne. “Although an attorney is required to act in a client’s best interests, clients need to choose someone they trust fully. Snowbirds may choose to appoint one or more of their children to act on their behalf while they’re out of the country. Or there may be clients who want to limit the attorney to certain events, such as selling their house or accessing investments in case of an emergency.”

4) Marriage or cohabitation contract

Each province has its own matrimonial property laws that apply to married couples in the absence of an agreement. A marriage contract can set out the rights and obligations of each spouse with respect to division of assets upon marriage breakdown or death.

For some clients, separation or divorce in their younger years means they’ll experience retirement with a new spouse, often a common-law partner. Because unmarried common-law partners typically have little protection from provincial marital property laws, clients living common-law may want to consider a cohabitation agreement to set out the financial terms and conditions of their relationship.

“In many relationships, people combine their assets. If clients wish to protect specific property or interests, a marriage contract for married couples or cohabitation agreement for unmarried couples, can assist in setting out the specific terms or division they agreed on,” says Thorne. “In particular, when a common-law partner dies, without a formal agreement in place, how can you definitively and fairly determine who owns various assets?”

5) Acknowledgement of debt or promissory note

Clients who lend money to children or other family members may want the borrower to sign an acknowledgement of debt or promissory note so the loan isn’t lost or overlooked if the client dies. This type of document doesn’t necessarily have to be drafted by a lawyer, but having it drawn and notarized can formalize the agreement as proof for the executor.

“Some clients will include reference to a debt in their will. However, debt can be paid and circumstances can change,” says Thorne. “With a signed acknowledgement of debt or promissory note, the executor can confirm the amount outstanding and collect the debt on behalf of the estate more easily.”

6) Inventory of property

For soon-to-retire clients, Thorne recommends an inventory of assets or property. Although not a formal legal document, an inventory of property, in conjunction with a client’s other estate documents, can make it easier for an executor or attorney to carry out their respective duties.

“This is a good place for clients to identify the financial institutions where their assets are located. They can record the numbers of any life insurance contracts they have in force,” says Thorne. “I also recommend including contact information for a client’s lawyer, accountant, financial advisor and other people who can assist the executor or attorney in easily settling the estate or handling financial affairs. Sun Life’s financial organizer can help clients document all this information. Keeping a copy with their will can assist their executor in carrying out their duties.”

Help clients prepare for life with these documents

Prepare yourself

Sun Life’s Estate and Financial Planning Services team offers knowledge and assistance to help you prepare for complex cases. To learn more, contact a Sun Life Financial Sales Director.

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