Planning Financially for Death in the Family

Death is as unpredictable as it is a certainty, and given the right circumstances, we would prefer to be prepared than caught off guard by it. Preparing for a loss in the family can take many forms, including the financial side of things or the emotional and mental aspects, among others.

This article will primarily deal with the financial implications of a loss in Canada. Namely, how exactly do you prepare for a death in the family, and how do you ensure a smooth transition after their passing?

Financially Dealing with a Loss and Things to Keep in Mind

Planning financially for the death of a family member in Canada involves several vital steps to ensure that their affairs are in order and that their loved ones are provided for. Here are some important aspects to consider:

Life Insurance

A life insurance policy is a contract between an insurer and the policy owner, guaranteeing a sum to pre-named beneficiaries in case of the policy owner's demise. In return, the policy owner pays monthly premiums to the insurer during his lifetime.

One of the first orders of business in any tragedy is insurance - especially in a heavily insured society like Canada. Check if the deceased had any life insurance policies. If so, contact the insurance company to initiate the claims process. Life insurance can financially support dependents or beneficiaries after the policyholder's death.

Will and Estate Planning

A will and estate planning refer to the management of a deceased individual's financials and assets after their passing.

When dealing with a death in the family, it is vital to determine if the deceased had a will to ensure proper compliance with their wishes. If there is a will, the executor (named in the will) will administer the estate according to the deceased's wishes. Without a will, the estate will be distributed according to provincial intestacy laws. Consulting with a lawyer specializing in estate planning can be helpful in navigating this process.

Probate

Probate is the logical next step that follows the existence of a will. It involves the administration of a deceased person's will.

In Canada, probate is the legal process of validating a will and distributing the deceased's estate. Depending on the province, certain assets may need to go through probate. As a family, you need to be aware of Probate fees that can vary by province along with the laws in your jurisdiction.

Funeral Expenses

Funeral expenses are an aspect of financial planning when encountering death in the family. Since funerals can be expensive, planning for these costs is crucial. Contact the funeral home to arrange the services if the deceased had a prepaid funeral plan. Otherwise, arrange for family members to cover the expenses and help share the burden.

Debts and Liabilities

Determine if the deceased had any outstanding debts or liabilities. Debts may include mortgages, loans, credit card balances, etc. These debts must be settled from the deceased's estate before distributing assets to beneficiaries.

Government Benefits

Check if the deceased was receiving any government benefits or pensions, such as the Canada Pension Plan (CPP) or Old Age Security (OAS). Notify the relevant authorities of the death, as benefits may need to be discontinued or transferred to a surviving spouse or dependent.

Taxes

Canadian law mandates a final tax return to be filed for the deceased, covering the period from the beginning of the tax year to the date of death. Any taxes owed must be paid from the estate. Depending on the size of the estate, there may also be estate taxes or capital gains taxes to be considered.

Financial Support for Survivors

Assess the financial needs of surviving family members, especially if they were dependent on the deceased for income or support. This may include spousal support, child support, or arranging for guardianship if there are minor children involved.

Review and Update Your Plans

The death of a family member can serve as a reminder to review and update your estate plan, will, life insurance policies, and other financial arrangements to ensure that your wishes are documented and your loved ones are protected.

Conclusion

In conclusion, planning financially for the death of a family member in Canada involves navigating various legal, financial, and practical considerations. From managing estate affairs to settling debts and ensuring the welfare of surviving dependents, careful attention to these matters is essential. Seeking professional guidance can help streamline the process and ensure compliance with relevant laws and regulations, ultimately providing peace of mind during a challenging time.