When you are retired, but still have your physical and mental health, you should take a fresh look at your financial plans, your estate plan and will, and how you and your spouse communicate. Health changes can be sudden in one’s later years, and in bad cases can have a very negative impact on your ability to think through and deal with issues.
This article contains details specifically for Canadians, but the concepts will work for couples in many countries.
What follows is not a comprehensive review of all possible issues; it is a summary of some key issues to provoke thought.
In many older households, one spouse tends deals with financial matters like investments and tax returns. This can put the other spouse at risk as you grow older, because if the one who does the finances becomes ill or impaired, both spouses may lose knowledge of the “what and how” of the family finances. A good first step is to sit down and have a detailed discussion.
Take a look at all significant assets. Make a detailed list of those assets, including their location. If some are tracked via computer, add to the list the passwords and user account names for all such accounts. As much as possible, try to also record when every asset you hold in a non-registered account was purchased and how much was paid. This information will be needed when assets are sold or on the death of the person in whose name the assets were bought, because gains or losses will need to be calculated for tax purposes.
If you have non-registered investment and bank accounts, consider holding them in joint ownership with right of survivor instead. This will allow the surviving spouse to have quicker access to money, will defer taxes, and will avoid the probate procedure for these assets.
If you have RRSPs, RESPs, Registered Income Funds, and/or Tax-Free Savings Accounts, check who is listed as the beneficiary. If your estate is listed as the beneficiary, the money goes into the estate, taxes must be paid, and whatever remains will be disbursed according to the terms of the will. This could create significant problems for the surviving spouse.
Check if either spouse made the capital gains election on the 1994 income tax return (when the $100,000 capital gains exemption was eliminated and one could claim, tax-free, up to that amount of gains). If you did make the claim in 1994, note the details on your list of assets because if you sell the asset or assets in future you will be able to pay capital gains on just the increase since 1994 and not all the way back to when you first obtained the asset.
Once you have done the above, each of you should take this opportunity to review your individual wills, keeping in mind the points raised above. Be aware that a bequest written into the will years ago may have had significant changes in value over the years. If you want your estate to be distributed evenly among heirs, you might need to make some adjustments.