Guest post by Willful, Canada’s quickest and easiest way to get a legal will online.
Homeownership is an exciting milestone that comes with a wide array of emotions. While it can feel overwhelming at times, the right information and resources can help you feel at ease as you settle into your new home. Here’s what you need to know about making an estate plan as a first-time homebuyer.
Get a will
Buying a home is one of the key life events that motivate people to get a will. You’ve invested a lot of time, energy, and money into your home so it’s important to take the necessary steps to protect it. By making a will, you can name a beneficiary or beneficiaries to inherit your home and benefit from it’s financial and sentimental value if you were to pass away.
Without a will, there’s no guarantee that your home will be passed on to the person you would want to receive it. When a person passes away without a will, they are considered to have died “intestate”. This means that the court will use provincial estate laws to distribute the estate and name an executor to act on their behalf. This process can be lengthy, expensive, and stressful for loved ones. Having a will in place ensures that your most valuable asset is passed on exactly how you intend and saves your loved ones from any confusion and potential arguments.
It’s important to note that if you’ve purchased your home with your spouse or another person, the right of survivorship applies and your home will pass directly to the surviving owner.
Create a Power of Attorney for Property
Estate planning isn’t just about what happens after death. It also includes planning for emergencies such as illness or injury causing incapacitation. Becoming a homeowner comes with a list of responsibilities such as a mortgage, property taxes, utility bills, repairs, maintenance – the list goes on. If you were to become incapacitated and unable to continue managing these duties, it’s important to have a trustworthy person in place to take them on. By creating a Power of Attorney for Property, you can give someone the power to make decisions about your property and finances if you were to become unable to do so yourself.
When choosing a person to act as your Power of Attorney for Property, it’s necessary that they are mentally competent and over the age of majority in your province. Whether you choose your spouse, sibling, parent, or close friend, they should be someone who is responsible and has strong judgment skills. Make sure to have a conversation with this person before naming them as your attorney to ask them if they’re willing to take on the responsibility of this role. It’s also a good idea to list backups in case this person changes their mind or becomes unable to take on the role.
Arrange life insurance to cover your mortgage and taxes
If you were to die before paying off your home, your mortgage will still need to be paid off. Responsibility for paying off your mortgage will be transferred either to your estate, your spouse, or your borrowing partner if you had a joint mortgage. There may also be capital gains taxes payable on your final tax return.
To ensure that you leave your home to your beneficiaries without outstanding debt or tax, you should take out a life insurance policy that will cover these costs. This can be crucial in preventing your family from selling the home to cover these costs. It’s important to compare life insurance quotes to make sure that you get the right type and amount of coverage for you.
Keep your documents safe
Your will, Power of Attorney for Property, and life insurance policy are just three pieces of your estate planning puzzle. When creating these documents, you should also create a folder of information about your home (this can be a hardcopy or digital folder) to share with your executor and attorney. This could include:
- Your mortgage provider and contact information for your mortgage broker
- Which bank account your mortgage payments come out of, payment frequency and deadlines
- Your home insurance provider
- Other home service providers (cable, internet, gas, hydro, water, etc.) and account numbers. This will help your attorney identify the bills that need to be paid or help your executor know what needs to be closed down.
- Any other relevant information related to the upkeep or maintenance of your home
While this information can be stored digitally, it’s important to remember that by law your will and power of attorney documents are required to be signed and witnessed physical paper copies. Make sure to store all documents somewhere safe and notify your executor and attorney where you’ve stored them.
Keep it up-to-date
Your estate plan is like a car. It needs routine maintenance and upkeep to continue working. Any time you experience a big life change such as moving, getting married (or divorced), having a child, or adopting a pet, it’s important to update your will to reflect the change in your life.
It’s also a good idea to treat your estate plan like taxes, review your will once a year to make sure everything is up-to-date and make any necessary changes. If you’ve made your will with a lawyer, that might mean making an appointment to chat with them or if you’ve made your will using an online platform like Willful, you can log in at any time to make the necessary changes for no additional cost.