Congratulations! Becoming a parent is a major life change, and it impacts everything from your social life to your finances. One of the most important tasks that should be on your “new parent financial to-do list” is making a will and estate planning.
Estate planning can feel overwhelming, especially as a new parent. A recent survey commissioned by Willful with AngusReid found that 61% of Canadian parents don’t have an up-to-date will - that’s almost two-thirds of parents!
In Canada, there are two main pieces to your estate plan - wills and power of attorney.
In this article, we’ll break down everything you need to know about estate planning for new parents. You’ll check this off your to-do list in no time!
Why do parents need a will?
While it’s important for every Canadian adult to have a will, parents are definitely top the list. For good reason! A will not only protects your finances and assets, but it also allows you to create a plan to secure the future of your children.
Here are some of the top reasons parents need a will:
Appoint a guardian for your minor children
This is probably the most important part of a will for parents. Appointing a guardian accounts for who would care for your child/children in the event that you and the other parent passed away. If you don’t have a will, the courts will appoint this person, and it may not be who you would have wanted.
Need some help? Here are some tips on How To Choose A Guardian.
Add your children as beneficiaries (or backup beneficiaries)
In Canada, family law stipulates that parents have an obligation to provide for any dependent children in their will. When you have a child, you should update or create a will that accounts for leaving assets to your children, either directly when you pass away, or in the event you and the other parent pass away together. It’s very common for one parent to default to leaving everything to the other spouse; and then in the event that both parents pass away together, to leave everything to their children. You can also leave assets directly to your children; but note that they would be held in trust until either the age of majority in your province, or until the age you stipulate in the will.
Stipulate the age your children will receive an inheritance
Many parents don’t want to leave an inheritance to their children when they turn 18 or 19 (depending on the age of majority in your province); rather they’d like it to be distributed at an age where they might make more mature decisions. Willful allows parents to stipulate whether they want an inheritance to go to any minor children at 18, 21, or 25. Without stipulating that in a will, the funds would go directly to the child when they turned 18.
What happens if parents pass away without a will?
If you die without a will, you’re considered to have died intestate. If that happens, your estate will default to the provincial rules and many decisions related to your children will be decided by the courts.
Here are some things that could happen if you die without a will as a parent:
- The courts will appoint a guardian for minor children, and it may not be the person you would have wanted
- The courts will appoint an executor to wrap up your estate, which will drag out the length of time it takes to administer your estate
- There’s a provincial formula in each province that outlines how your assets will be distributed - most people say “well everything would go to my spouse anyway!,” which isn’t true if you have kids - in Ontario, your assets would be split evenly between your spouse and kids, and if they are minors, those assets would be held in trust until they turn 18 (which means your spouse wouldn’t be able to access them unless it was for the reasonable care of the children)
- Your children would receive their inheritance as soon as they turn 18, vs. at an age of your choosing
What if I already have a will when I have my child?
Kudos! You already have this document in place so you’re ahead of the game. You simply need to update your will to add a guardian for your new child/children, and add your new child/children as a beneficiary (or backup beneficiary).
Your will can account for unborn children, so if it does. then you may not need to update your beneficiaries (but you will likely still need to appoint a guardian).
Willful wills do not account for unborn children.
Even if you have a will, the birth of a child is a great time to review your will and make sure your wishes are up to date.
What are the different ways for parents to make a will?
There are many ways for parents to make legal wills in Canada. You can visit a lawyer, use an online platform like Willful, or even handwrite your will (If you’re not in BC or PEI).
How you choose to make your will depends on your budget and the complexity of your situation.
Overwhelmed by the idea of creating a will? Willful has helped thousands of parents create or update their will for as little as $99 - get started today (CTA), or book a call with our team to run through common questions parents have about creating their will.
Why do new parents need a power of attorney?
A will is a must-have, and will definitely come into effect one day. A power of attorney on the other hand is more of a “just in case” document. Think about it like the difference between life insurance and car insurance - if you have life insurance, you know it’s definitely going to come into effect when you pass away - but you purchase car insurance just in case you get into an accident. The same is true of a power of attorney - it appoints someone to make financial and medical decisions for you in the event that you’re incapacitated due to illness or injury.
It’s not a fun one to think about, but just like car insurance, it’s an essential part of emergency planning - and it’s even more important for parents, since it allows someone to easily step in if something happens to you, so your children’s lives aren’t disrupted. Without these documents, someone close to you would have to apply to the courts to act in that role, and in the meantime, your family may fall behind on bills, miss important financial milestones, or be unable to make key medical decisions for you.
What do parents need to know when creating a power of attorney?
There are two different power of attorney documents - one that appoints someone to make medical decisions for you (for example deciding whether you should stay on life support); and one that allows someone to manage your finances while you’re incapacitated
You can create power of attorney documents via a platform like Willful, using government forms in your province, or by visiting a lawyer
It’s important to keep your attorney (the person you appoint to make decisions for you) current, and to appoint backups in case they are unable to perform in that role
Remember that your attorney must be over the age of majority, so you’re not going to appoint your minor children in this role
Willful has also helped thousands of parents create or update their power of attorney documents - our $149 Premium plan includes a will and power of attorney documents. Get started today, or book a call with our team to learn more about making a will as a parent.