However, estate law is extremely complex, says Michael Prsa, an estate lawyer in Brampton, Ont. “I’ve seen many situations where one wrong word in a so-called ‘simple will’ has led to a major mess.” Expect to pay a lawyer around $350 for a garden-variety will, more if detailed tax planning or bequests are involved.

Hunting and gathering
Before drawing up a will, make a list of all your assets, what they cost, what they’re worth, and where they are located. (Assets held jointly, such as a house or bank account, may not be covered by a will.) Then list your intended beneficiaries, their relationship to you, where they live and how old they are. If you want to leave bequests to charity, find out their exact names and addresses.

Get educated
A will is your chance to decide what happens to your stuff once you’re gone. But there are rules limiting your ability to ignore certain people. Children from an earlier marriage or an ex-spouse may have a claim on your estate, even if you’d rather they didn’t. Leaving them out of your will could lead to protracted legal claims and unnecessary confrontations between your heirs later on.

“You should carefully consider the practical and emotional impact of your will,” says Prsa.

The right person for the job
One of the most important decisions is picking the executor who will carry out your final wishes. Most people pick a spouse or adult child, but “this can get very complicated very quickly, particularly in blended families,” says Prsa. In some cases, it makes more sense to pick a neutral third party or a trust company.

It’s also smart to provide alternate choices for your executor, the proposed guardian of any minor children, and your beneficiaries.

Upgrade as necessary
A marriage immediately invalidates any pre-existing will, but a divorce only cancels out any mention of your ex: the rest of your wishes remain valid. These legal oddities make it crucial to keep your will as up-to-date as possible. Simple changes can be addressed with a codicil, but bigger changes will require a whole new will.

That afternoon, at our kitchen table, he showed me how saving can earn you money through compounded interest, and how owing money can bury you in debt. His message? If you have a financial plan, you have choices—and having choices and setting goals is what leading a successful and satisfying life is all about.

My dad’s personal financial plan was his road map, helping him navigate to his dreams. And the roads to those dreams were built on details. For instance, dad always knew exactly what his take-home pay was, how much the family spent every week on groceries and gas, and how much he needed to save each month to pay off his mortgage in 10 years—his main financial focus when I was growing up.

His plan wasn’t just about counting pennies though, it also allowed him to plan for luxuries—and pay for them in cash. That’s why there was a special column in his plan for $50 in weekly savings towards a family trip to Italy. He had a system he believed in, and made sure the household finances were managed effectively.

These days, most people I know don’t have a financial plan. We spend a lot of time planning for other aspects of our lives, such as our careers, marriages and having kids, but many of us fail to build a plan to achieve our financial goals.

If you would like to stop wondering about whether you’ll ever realize your financial goals, and build a plan to actually reach them, I can help. Read on and I’ll not only show you how to build a proper financial plan, I’ll take you through each step, complete with worksheets and a blank financial plan template that you can fill in at the end. Follow my simple instructions and in no time at all, you’ll have the peace of mind that comes with a professional-quality personal financial plan—without having to pay a financial planner a dime.

1. Talk to your spouse
Most couples never talk to each other about their financial goals. If you’re in a relationship, before you roll up your sleeves and dig into the numbers, talk to your spouse about what you want to accomplish. “Have a brief conversation about goals, values, and what kind of lifestyle you want,” says Karin Mizgala, chief executive officer of Money Coaches Canada, a national network of fee-only financial experts based in Vancouver. “That’s key to a good start.”

Action step #1: Click here to find 10 worksheets in the “MoneySense financial plan kit.” There is a PDF version of each worksheet that you can download and print out if you want to fill in the sheets with a pencil or pen. There is also a Microsoft Word version you can fill out on your computer. Print out “Worksheet 1-Prioritize your goals” for this step. You and your spouse should fill this sheet out separately, then compare the results when you’re done.

2. Figure out where you’re at
Before you start worrying about where you want to go, you first have to figure out where you are now. In this step you’ll create a net worth statement, which is essentially an honest measure of your current wealth. You do this by tallying up the value of what you own (your assets) and what you owe (your liabilities). When you subtract your liabilities from your assets, you get a number that represents your net worth. Your net worth statement is an important tool that charts your financial progress over the years. For instance, if your net worth is going down, you’re eroding your wealth and making it harder to achieve your goals. If it’s increasing, you’re on your way to getting richer and achieving your financial goals.

Action step #2: Determine your net worth. Print out “Worksheet 2-Gather your documents.” It’s a checklist to help you pull together what you’ll need before you start, including bank statements, credit card statements, and life insurance polices.

Once you have all your documents in front of you, you’re ready to fill out “Worksheet 3-Your net worth statement.” First list the values of all of your assets, including your home, your cars, your cash and investments. Then list your liabilities, including credit card debts, your mortgage and any other outstanding loans. Tally both your assets and your liabilities and transfer those amounts to the following section, your simplified net worth statement.

Finally, subtract your liabilities from your assets to discover your true net worth. This shorter net worth statement gives a clear snapshot of exactly where you stand today.

3. Track your spending
The key to building a strong financial plan for the future is to understand how much you spend and save right now. This is called tracking your cash flow, and it can give you a sense of control and confidence that makes it easier to make financial changes in your life.

Personally, I’ve kept a small journal tracking my spending for years because it helps me modify my behaviour if my spending gets out of control. It’s not always easy, but it works.

“The part most people dread is taking a really close look at their expenses,” says Mizgala. “But don’t put it off. Successfully managing cash flow is your key to financial control. It will give you an awareness that has more long-term value than anything you can invest in, buy or sell.”

The point of the exercise is to find out whether you finish each year with a cash surplus or a cash deficit. This number will tell you a lot about your general financial shape. A surplus means you’re living within your means, while a deficit shows you’re spending more than you make. If you have a deficit, you will have to cut your expenses (or increase your income) to achieve any financial goals.

What do most people find after doing this exercise? “They’re shocked,” says Mizgala. “It’s a very revealing exercise, mainly because if you have a family with two spouses with debit and credit cards, it’s hard to really see the complete financial picture unless you write it down. This awareness allows you to set up a system for the household.”

Action step #3: Record your cash flow. Fill out “Worksheet 4-Your spending and savings.” It shows what money is coming in (wages, interest, government benefits) and what’s flowing out (rent, debt payments, utility bills). Fill in all your monthly expenses in column 1 and your annual expenses in column 2. (You can leave column 3, the estimate for your future spending in retirement for a later date.)

Tally up your expenses in both columns and subtract them from total net income on both a monthly and yearly basis. The result is your cash flow deficit or surplus.

A good way to approach this exercise is to start with your regular monthly after-tax income and subtract the bills that don’t change month to month, such as rent or mortgage payments. If you don’t know the exact numbers, put in averages for things like groceries, gas or children’s activities. Then add in expenses that only come up a few times a year, such as travel, car repairs and gym fees. Estimate a total for these and divide it by 12, and put that figure in the monthly column of your worksheet. You may not pay the bills in 12 monthly installments but imagine you are setting money aside each month so that you have the total amount when the bill comes due.

4. Adjust your spending
Look closer. Are your expenses higher than your income? If so, you’re living beyond your means. You’ll need to adjust your expenses accordingly so you don’t go further into debt.

This step is not about punishing yourself or laying blame. If you’d rather eat out four times a week than buy a cottage in 10 years, that’s your choice. But you owe it to yourself to be honest about what you’re doing so you’re not wondering why you can’t reach your financial goals.

If you decide to cut back, there are some less painful ways of doing it. Consider renegotiating your mortgage to a lower rate or cutting out one major expense completely. A close friend of mine cut the $5,000 annual family vacation and substituted a couple of long weekends of camping instead. It saves his family $4,000 annually.

If you have a cash surplus, congratulations. You can start allocating money to meet your goals right away.

Action step #4: Compare your spending to your goals. Take a second look at “Worksheet 1-Prioritize your goals” and “Worksheet 4-Your spending and savings.” The idea here is to look at how well your current spending habits mesh with your goals. If you have a cash flow deficit you won’t be able to meet your goals, so you’ll have to see if you can free up cash by cutting back your spending in areas that are less important to you.

For instance, if you have a $5,000 a year deficit on Worksheet 4 and one of your goals is to go on a $4,000 family vacation to Britain in four years, you need to figure out a way to cut $6,000 a year from your spending. You could try using only one car and taking public transit to work. Such a cut could save you $6,000 a year in vehicle costs, allowing you to both balance your budget and reach your travel goal.

5. Set your life goals
Financial goals don’t just happen. You make them happen. This step requires you to assess where you want to be five, 10 and 20 years from now and answer some big questions, such as where you want to live in retirement and when you want to stop working.

One tip is to visualize what your life will be like 10 years from now if you do everything right. The truth is when they picture their future lives, very few people see themselves in a $10-million house in Hawaii. Most people’s goals are more realistic, such as keeping up their current standard of living in retirement (with maybe a few upgrades), preventing any financial disasters, and having the freedom to do the things they love, such as spending more time with friends and family.

“Think of what type of life you want in the future and how you are going to organize your life right now to get it,” says Mizgala. “Your job is to structure your finances so you can achieve your vision.”

Action step #5: Set your top three goals. Fill in “Worksheet 5-Your life and financial goals” and “Worksheet 6-Your top three goals.” If your are in a relationship, sit down with your partner and examine what your goals are and how they fit in with your spending and saving patterns. On Worksheet 5, list each of your top four or five goals and assign a dollar value to each, as well as a time frame for achieving the goal.

Now, compare how closely your goals align with those of your partner. In Worksheet 6, list the three most important goals that you both agree on, in order of priority, in column 1.

6. Develop a strategy
Once you know where you’re going, you need a plan to get there. The usual route is to spend less than you earn and invest the surplus in such a way that you can get where you want to go.

One word of caution—if you’ve identified your goals but you’re in debt, you probably should address that debt before you start investing for the future. “Even when people are not overspending and have debts that carry reasonable interest rates, I encourage them to work aggressively at paying those debts down,” says Norbert Schlenker, founder of Libra Investment Management in Salt Spring Island, B.C. “Don’t even think about investing before your debts are all gone.”

Action step #6: Chart a path to your goals. Go back to “Worksheet 6-Your top three goals” and in column 2, note any obstacles to achieving each goal. Then, in column 3, write down the action steps that you and your spouse have both agreed on to make that goal a reality. For instance, when you tally up the costs of your top three goals, you may find that you need an extra $65,000 in five years to meet those goals. The main obstacle may be that your household income is low because one partner works only part-time. That partner may decide to work full-time in order to earn extra money. The key is to develop strategies and appropriate timelines to make your goals materialize.

7. Review your insurance
If you work full time, much of your insurance may be provided by your employer’s group plan. But is it enough? If you feel confident enough to do some basic calculations yourself you can find out.

Many workplace benefit plans include disability insurance, but if yours doesn’t, get enough to replace at least 60% of your after-tax income.

Then look at your life insurance needs. The general rule of thumb is to get enough life insurance to cover 10 times your income if you have kids under 10 years old (five times your income if you have kids over 10), plus the amount needed to pay off your debt. So if you make $50,000 a year, you have $250,000 outstanding on your mortgage, and two kids under 10, you will need $750,000 in term life insurance. Go to www.term.ca for quotes.

At this point, it may make sense to have an agent review all your insurance policies—disability, life, auto and home—to make sure your coverage is adequate. But be careful. “Do not be oversold on insurance by an industry that is famous for doing exactly that,” says Schlenker. “Pay attention to fees, especially with life insurance. If you need more life insurance, chances are renewable term is the right product for you. You want plain vanilla coverage for a plain vanilla problem—your kids going hungry because you can’t work.”

Action step #7: Review your coverage. There’s no worksheet for this step, but you should still take some time to carefully review all of your insurance coverage. If you don’t have group coverage through work, you probably have private insurance policies for medical, dental, life and disability insurance. Consult an independent insurance agent for a quick review. If you need extra coverage, make a note of it so you can include that in your final financial plan.

8. Slash your taxes
Most tax planning is relatively simple. You’re probably doing a lot of things right already. For instance, if you own your home and use RRSPs, Registered Education Savings Plans (RESPs), and Tax-Free Savings Accounts (TFSAs), you’re already taking advantage of the best tax shelters out there.

To reduce the taxes you pay on your investment portfolio returns it helps to understand that the income tax system treats the various sources of investment income differently. Interest on bonds and foreign dividends is taxed at your full marginal tax rate, Canadian dividends are taxed at rates about one-third lower, and capital gains at half the full rate. So there are advantages to holding investments that generate capital gains and Canadian dividends outside of your RRSP and TFSA if you’re tight on contribution room.

Action step #8: Consider calling a tax accountant. Again, there’s no worksheet for this step. But a few basic principles apply. For those with low to moderate incomes, paying off debt—including the mortgage—is the best tax-planning you can do. That’s because you don’t pay taxes on the capital gains on your home and there’s no tax on the return you get for getting out of debt. If, however, you’re in a higher tax bracket—earning $85,000 a year or more—it may be worth paying for a couple of hours of an accountant’s time to see what mix of investment options—RRSPs, RESPs and TFSAs—is right for you tax-wise. Have these suggestions handy for your final plan.

9. Create an investing policy
Every professional financial plan includes an Investment Policy Statement (IPS) that recommends how a portfolio should be invested. It puts in writing the rules that will make you a more disciplined investor. Having an IPS helps you to stick with your plan and keeps you from changing course when the market gets volatile.

A typical investment policy might specify that your portfolio should always maintain a ratio of 60% stocks to 40% fixed-income investments. This ratio is determined by your time horizon and risk tolerance. The longer your time horizon and the greater your tolerance for risk, the higher the equity portion of your portfolio. As you near retirement and need the security of more stable income from your investments, the portfolio mix will usually tilt towards bonds.

An IPS also states the expected annual returns for your portfolio—typically 5% to 6% per year—over a very long time period, such as 20 years or more. Your IPS might also note the volatility you should expect for a given portfolio. For instance, it could say that you should expect the portfolio to suffer a 10% drop in the short term at least once a decade.

Action step #9: Determine which investments are right for you. Fill in “Worksheet 7-How are you currently invested?” and “Worksheet 8-Which investments are right for you?” On Worksheet 7, itemize every investment you own today—including cash, fixed-income products and equity holdings.

Worksheet 8 will help you assess how much you need to save monthly, when you’ll need the money, and what your risk tolerance is. The results will allow you to zero in on how you should invest in future to meet your goals.

If you have trouble with this section, you can always leave it for now. Once your financial plan is complete, you can consult a fee-only adviser to help you build an investment strategy that’s right for you.

10. Write up a will
Every adult who owns assets and has a spouse or children should have a will. An accurate and up-to-date will is the only way to ensure your assets will be distributed the way you want them to be. If you don’t have one, you’re letting the laws in the province you live in make those decisions for you. And if you hold the belief that your spouse will automatically inherit everything—you’re wrong. In most parts of Canada children trump partners. Without a will your husband or wife will get a predetermined amount of your assets—the rest goes to the kids.

Action step #10: Create or update your will. If you have an updated will it should be filed with your financial plan. If you don’t have one, hire a lawyer to draw one up for you. Visit www.lawyerlocate.ca and search for lawyers in your area who specialize in wills and estates.

11. Create your final plan
A typical financial plan has five main parts. The first outlines where you stand right now, that’s your current situation. The second contains your top financial goals, or where you want to go. The third is a simple net worth statement. The fourth lists the steps you must take to achieve your goals. It includes your income and expenses, an overview of your insurance, a section on retirement planning, and a section on estate planning. Finally, the fifth section—usually a separate document—is your Investment Policy Statement, which lays out how your portfolio is to be invested.

To get a better feel for what your financial plan might look like, let’s take a look at a plan that has already been created by a fictional couple, Patty and Walter Berglund. The Berglunds are a 34-year-old couple living in Halifax. They have two daughters, Debra and Marie, ages 5 and 2. Their household income is $110,000 and after all expenses have been paid, they have $20,000 in cash left over each year.

Their plan lists their top five goals—to pay down $20,000 in consumer debt, save $5,000 for a family trip to Disney World in two years, pay off their $150,000 mortgage in 15 years, save $60,000 in RESPs for their daughters’ post-secondary education and finally, to retire comfortably at age 60.

This is followed by a basic statement of their assets and liabilities that shows a net worth of $82,000. The couple’s projected income and expenses show a $20,000 annual cash surplus. That money is earmarked for their goals in the following way: In the first year the entire $20,000 surplus will go towards paying down the debt. In year two, $5,000 will go towards the big family Disney World trip, $5,000 towards an extra payment on their mortgage, $5,000 to the RESPs and $5,000 to a spousal RRSP for Patty. The couple agrees to continue using the annual surplus in this way each year until their goals change.

After consulting with an insurance agent, the Berglunds agreed that their group plans with their employer are mostly adequate but they decided to increase Walter’s insurance coverage by $300,000. In the section on retirement planning, the couple made some assumptions: that Walter remains employed as a physiotherapist and stays in the hospital’s defined benefit pension plan until age 60, and that Patty continues working part time earning $30,000 a year as a social worker. Walter will start saving $5,000 annually in a spousal RRSP for Patty once their consumer debt is paid off (excluding the mortgage). If they do this, the couple should have more than enough to cover their retirement expenses adequately. Their wills and power of attorneys are all in order.

The second document, the Investment Policy Statement (IPS), outlines the Berglunds’ investment plan. They have an average tolerance for risk and don’t require regular income from the portfolio right now. So a balanced 60% equity, 40% fixed income mix suits them fine. The couple wants a well-diversified portfolio at minimal expense. Thus, their policy states that low-cost index funds or exchange-traded funds are to be used wherever possible.

Their IPS also states that once a year the Berglunds will review their portfolio and rebalance to bring the asset allocation back to their pre-determined target mix of 60% equity and 40% fixed income. It also states clearly that sudden market price movements are not grounds for revision. This will help stop the Berglunds from making impulsive investment decisions out of fear or greed.

Action step #11: Create your financial plan. Open “Worksheet 9-Your financial plan” and gather together all of the worksheets you have already filled out. Worksheet 9 is a blank financial plan with all the sections already labeled for you. At this point, all you are really doing is taking information from the completed worksheets and putting it all together to form your plan. Before you proceed, it may help to review the sample plan for Patty and Walter Berglund at the end of Worksheet 9.

Now fill out “Worksheet 10-Your investment policy statement.” Again, refer to Patty and Walter Berglund’s Investment Policy Statement at the bottom of this worksheet for guidance. Write a brief summary of your current status, and under Objectives and Constraints write down your risk tolerance, time horizon, any taxation strategies you plan to use, and the amount of time you wish to spend managing your portfolio—in many cases, minimal.

Under Investment Strategy Guidelines, write an outline of how your investments will be allocated, according to asset class. The next three headings—Security Guidelines, Location Guidelines and Risk Control, Monitoring and Review are fairly generic and are already filled in for you.

Phew, it’s done! You now have a financial plan for the rest of your life. From this point on, as your goals change, modifications to your basic plan will be straightforward.

Of course you still have to follow your plan. But you’ll probably find that the process of putting it together has already changed some of your beliefs about how your money should be spent and invested, so changing your financial behaviour may not be as hard as you think.

To make sure you stay on track, you should take the time to review your plan at least once a year, and update it as necessary. It’s also a good idea to pull it out whenever you run into a big financial or life event, such as a market crash, marriage or job change. “It’s a tool to support you through life,” says Mizgala. “Money and household finances won’t be as scary when you break it down into these manageable bits. If you truly commit, it will be a huge boon to your emotional and financial well-being.”

Get a copy of the will

Your dad had a perfect right to leave you out of his will. But if you can show you were named in a previous version of his will, you may be able to argue that your dad was not in his right mind when he inexplicably dropped you from his list of heirs. “You should ask your dad’s executor for three things — a copy of your dad’s last will, a copy of his prior will, and a list of his assets,” says Barry Fish, a wills and estates lawyer in Thornhill, Ont. If your dad’s executor hands over the necessary documents, proceed to step 3.

Get a lawyer — fast

If your dad’s executor won’t give you copies of the documents, you will have to sue to see them. Have a lawyer file a court application to force the executor to hand over the papers. “As long as you can show that you may be a beneficiary under your dad’s prior will, the court will likely order the executor to provide you with copies,” says Fish. But act quickly. Once the money is handed out, your chances for a successful challenge are next to zero. “You can’t protest six months after your brother has taken the money and spent it at Casino Rama,” says Ed Olkovich, a wills and estates lawyer in Toronto. “If the money is gone, it’s gone.”

File a challenge

Have your lawyer file a “Notice of Objection” or a “Caveat” to advise the court that you are challenging the will. You will have to outline the grounds for your challenge. Grounds can include forgery, fraud, undue influence, and mental incapacity. It could be that your dad had dementia and didn’t know what he was doing when he made his last will. It could be that he was pressured by your sister, who was taking care of him, to leave everything to her. Even if you don’t have grounds to contest a will, you may be able to argue your right to other claims. For instance, if you took care of your father’s six-plex for years and weren’t paid for your work, you may have a claim for labor costs.

Consider the cost

Think about whether a fight is worth it. In the best case, your father’s estate will agree to settle within months. But if your dispute drags on for years, the bill can run into six figures and may be entirely your responsibility. “If your case goes to trial, the loser is responsible for his own legal costs and also those of the winning side,” says Charles Ticker, a wills and estates lawyer in Markham, Ont. “So make sure there’s enough to fight over.”

Consider mediation

In some cities, you must undergo mediation before a courtwill hear your case. In other areas, mediation only occurs when both you and the estate agree to be involved. Mediation involves meeting with both a representative of your dad’s estate and a mediator, who is usually a former judge or estate lawyer. The mediator shuttles between you and the other side and tries to hammer out a compromise that will settle the estate as quickly as possible. “Mediation is emotionally draining, but very effective,” says Ticker. “Both sides know it’s their best chance to end the fight without a drawn-out battle in court.”

Many entrepreneurs, though, don’t realize the importance of signing up yet another key player — an insurance specialist. Albert Luk, a Toronto lawyer who works with many entrepreneurs, says life insurance is like a financial Swiss Army knife for the self-employed. It’s a risk-management tool, a way to shelter assets from creditors, and a means of keeping a business in the family.

Luk and other advisers urge business owners to forge close relationships with experienced insurance specialists. You probably won’t find this to be a natural partnership, since planning for disability or death goes against the fierce optimism of many business owners. But if you start looking at insurance specialists as strategic resources, and not as angels of death, you may find they can save you money. At the very least, a good specialist can explain, in plain English, all those complicated insurance options that you’ve never had time to untangle.

Start with basic life insurance. You may already have a policy that pays your spouse a decent amount in the event of your death. If so, that’s great — but if you’re an entrepreneur who has built a sizeable business, you probably need more. When you die, whether it’s because of old age or being hit by a bus, the inheritors of your business will face problems that go beyond heartache. Your death triggers a “deemed disposition” of the business, which means that your heirs have to pay tax on the capital gains that you and the company have (at least theoretically) enjoyed up to that point, even though you haven’t actually sold the business.

The tax bill that results can be a whopper. Let’s say you start a business at 30 and build it into an operation worth $10 million by the time you turn 50. If you died the next day, says Ted Warburton, a partner with First York Insurance in Toronto, your estate would potentially face a $2.3-million-dollar tax bill, based on the current tax rates on capital gains.

Yes, your heirs could ask the bank for a loan to pay the taxes. But Warburton recalls a case where a 48-year-old entrepreneur died — and the bank promptly reduced his business’s credit line by $1,000,000. The lender feared the uncertainties that often follow when the company’s founder passes away.

In such a case, your heirs could be forced to scour the business for cash — which is usually tied up in receivables, inventory and equipment. In extreme cases, your heirs might have to sell the business’s real estate or negotiate a quick sale of the entire company to raise the money needed to pay the taxman. But a hurried sale could result in the inheritors being forced to dump valuable assets at a huge discount. In the example above, the late entrepreneur’s family was forced to sell the business for 50 cents on the dollar. “I’ve seen businesses that have been crippled by this tax,” Warburton says.

If you’re in a similar situation, you could avoid these problems by having your company fund a permanant insurance policy that will pay $2.3-million on your death. The premium wouldn’t come cheap, at about $20,000 a year, but with this kind of insurance the amount you pay will never increase. Especially if you want your firm to remain in your family’s hands, you may find the annual bill (even if it’s not tax deductible) to be a low price to pay for a tax-free death benefit. “It will allow the family or heirs to focus their attention on fixing the business, not selling it or drawing cash out at a horrendous time,” says Warburton. (In fact, your business’s tax bill could be much higher than $2.3 million 30 years from now, based on future growth. Warburton assumes you may look at an estate freeze to lock in the value of your share of the business, and attribute future growth to your children or other heirs — but that’s another column.)

Luk says some entrepreneurs may go further and consider a universal life plan, in which the policyholder pays more into the policy than the death benefit requires. This allows you to build a savings component into your insurance, which offers several benefits. If you’ve maxed your RRSP contributions, for instance, putting funds into your personally owned life insurance policy is another way of accumulating savings that grow tax-free (although your initial contributions are not tax-deductible, as RRSPs are). Better still, should you come out on the wrong end of a bankruptcy or lawsuit, your insurance policy, including the savings component, will remain out of reach of any creditor — unlike your house, bank account, or RRSP.

Now may be a good time to start thinking about such issues. Many forecasters predict a declining economy for 2007. In tough times even healthy businesses can be capsized by the failure of a key customer , and it’s wise to lock some assets away. But don’t wait till the wolves are at the door before transferring your assets into an insurance policy to keep them from creditors. “You have to do it long before any potential judgment, or it can be unwound,” says Warburton. Those who contribute to a universal life policy often put their money into segregated funds, or seg funds, which are the insurers’ version of mutual funds. (The “seg” label comes about because these funds are segregated from the insurer’s general funds). Seg funds offer guarantees: no matter what the market does, if you hold on to your funds for 10 years you’ll get 75% or 100% of your capital back, depending upon the policy. But guarantees cost money, so most seg funds charge annual fees at least a half a percentage point higher than comparable mutual funds.

Depending upon your circumstances, those higher fees may or may not be worth the expense. Bernie Geiss of Cove Financial Planning in North Vancouver, B.C., argues against investing in seg funds, because the management fees are typically higher than similar mutual funds. Investing in other life insurance policies such as universal life and whole life, which are designed to accumulate cash, have other problems. For starters, capital gains are fully taxable when withdrawn from the policy, unlike capital gains earned outside an insurance policy which are taxed at half your income tax rate. As well, investment options are limited and fees are very high.

Instead, Geiss offers his entrepreneurial clients a different way to buy more insurance for less. Through his formula, the entrepreneur buys a universal-life insurance policy, makes excess deposits to the cash account and borrows back an equal amount, investing the money in activities that produce business income. When the cash value compared to the loan has grown to a sufficient degree, the premiums stop. The loan interest, of course, is fully tax deductible.

This structure can eliminate all net costs and make the insurance program cash flow positive. As usual there are lots of ifs, ands or buts, so you’ll need to explore this with an accountant or financial planner at your side.

Since everyone’s needs are different, Warburton urges business owners to sit down with an insurance professional to review their coverage and discuss their goals. That way, he says, “you may or may not ever use these tools, but at least it will be a conscious business decision.”

Is Anderson on the outs with his heirs? Not at all. But he brought them up to be independent. When his son and daughter were in high school, he decided that he would help pay for as much schooling as they wanted — and that would be the end of his parental responsibilities. Anderson, a retired school principal, wanted to give back to children in general by leaving the remainder of his cash to a foundation that will fund kids’ charities for decades to come.

You might think that his son and daughter would be upset, but they’re just fine with their dad’s plans. They understand their father’s reasoning and they’re grateful because, as his portfolio has grown, he’s continued to give them generous gifts. He set up Registered Education Savings Plans (RESPs) for his grandchildren and gave each of his kids cash that they could spend on anything they wanted. His son, a dentist, has already used his share to buy a summer cottage.

Carl’s estate plan was successful because he took the time to think about the goals he wanted to accomplish, then worked backwards from there. To do as he did, ask yourself these questions:

What’s the money for?

Too many people plan their estates by focusing only on how to minimize taxes. While taxes can be important, far more important is knowing what you want your money to accomplish. If you don’t know what your goals are, how can you design a plan to meet them?

You may decide that your money will do the most good if you leave it all to your kids. Or, like Carl, you may decide that your money will accomplish more if it’s left to charity or to somebody else entirely.

When do they need it?

Carl’s kids appreciate receiving their share of their dad’s cash when they need it most — in early adulthood. Michael Alexander, a Toronto lawyer, inheritance counsellor and author of How to Inherit Money, says that giving your kids money while you’re still alive is becoming more popular. “In the U.S. a lot of parents are saying you’re getting your inheritance right now because we’re paying for four years at Duke or Yale,” he says. “They’re realizing that setting up their kids with a good education will do them a lot more good than leaving them a sum of money later in life.”

JoAnne Anderson, a financial planner with The Money-Power Group at Raymond James in Mississauga, Ont., (and no relation to Carl), says that considering the “time value” of your gift is becoming more important as we live longer. Many of us are now living into our 90s, and heirs who are in their 60s often have little need for the money. The three most popular ways to give while you’re alive, she says, are to help with the purchase of a child’s starter home, deposit money directly into a child’s RRSP, or like Carl and Thelma did, set up Registered Education Savings Plans (RESPs) for the grandkids.

Who needs what?

Different heirs have different needs, so don’t treat everyone the same. Alexander worked with one family who had an only child who was a very talented athlete. So the parents decided that in lieu of an inheritance, they would spare no expense to provide year-round training for their child at the best training centres. “You really have to give some thought to who your children are, and what their interests and aspirations are,” Alexander says. “A child who becomes an entrepreneur will have very different needs from one who becomes a school teacher.”

Have I explained things?

Alexander stresses that communication is vital. He worked with a family with three children, one of whom felt passionately attached to the family cottage. The parents decided to make him the sole heir to the $500,000 cottage, “but they made a deal with their other two kids, and told them they would get other things which are worth just as much,” says Alexander.

Whatever you decide, explain your decision and the reasoning behind it to everyone involved. Otherwise children can take a bequest as a sign you loved their sibling more.

Carl Anderson took the time to talk to his children and explain all his decisions. That’s why he knows his kids are “really happy with what we’ve done.” When you consider that his will leaves them absolutely nothing, that’s not a bad accomplishment at all.

“You want money? Clean up your act”

It’s possible to do your kids harm by leaving them too much money. Michael Alexander, a lawyer, author and inheritance counselor, says he received three large inheritances while he was in graduate school, and it was the most stressful period of his life. “You create tremendous pressure by leaving a large amount of money to a child,” he says. “Some kids even get involved in self-destructive behavior.”

To avoid problems, give your children a portion of their inheritance when they’re younger so they can learn about how to handle money while you’re still around to guide them. “There’s a learning curve with managing money and giving kids a bit of cash early on allows them to make mistakes,” says Alexander.

Of course, you may have to adjust your strategy if your children have alcohol, drug or gambling problems. “In these cases you should set up a trust that might include a family friend and an institution together,” he says. “You can leave a lot up to the discretion of the trustees, including a provision stipulating that if a child cleans up his act, he gets more money.”

Eventually, though, it got to the point where I felt I didn’t really have any choice. My husband was verbally abusive towards me, and in the spring of 2001, I discovered he was cheating on me as well. Although we tried counselling, in the end I think we were just too different. My heart ached for my eight-year-old daughter Charlotte, but I couldn’t go on with the marriage.

We didn’t rush into a separation. Part of the reason we held off for over a year was that we faced so many family crises, including the death of my mom. As well, I was determined to make the most of the assets we had, and that meant making our three-bedroom home ready for sale. I couldn’t afford to buy my ex-husban out, so selling was the only option. But I knew from experience that a fresh coat of paint and some attention to the little details can make the difference between a lengthy show period and a solid offer. We made sure that house was perfection every time we held an open house — I’d wipe the sink out with a towel to make it sparkle, and believe me, that’s not the way I normally live. But it paid off. We got our asking price.

When it came to dividing the assets, we tried to put our feelings aside and take a practical approach. We recognized that we would be foolish to set the lawyers on each other — there wasn’t the money. We had accumulated a lot of debt over the years of our marriage because we were not like-minded when it came to spending. We had credit card debt, a line of credit, and although I didn’t have a car payment, John did. He kept his car and assumed his car payment, but kept the equivalent in workplace RRSPs. Because I wanted to start with a clean slate, we paid off the rest of the debts with the proceeds from the house, walking away with about $20,000 each. I took that money and invested it in energy stocks, which worked out well for me.

As for child support payments, I had been to see a lawyer, so I had the chart that tells you how much a non-custodial parent should pay according to income. It’s not rocket science. John started off paying $120 a week for Charlotte, but a few years ago he became self-employed, so we dropped that to $80 a week. I kept the small inheritance I received when my mom died and used a portion of it to buy a newer second-hand car.

Emotionally, that first year was a bit of a roller-coaster ride. At first, I felt a tremendous sense of freedom. Charlotte and I moved into a three-bedroom apartment in a town close to our old home in Belleville, Ont. Although I couldn’t afford to buy a house, I wanted our place to be as much like a home as possible for Charlotte, so I chose the upper floor of a townhouse in a neighborhood with a good school. In the meantime, John moved to Toronto.

From that point on, we were officially over in my mind. I have never ever allowed John to stay overnight here. If he comes down on a Saturday, he stays with his parents who live close by. I don’t want any false hopes for anyone. Still, it took Charlotte a long time to accept that we were split up for good. For the first while when John came to visit, she would wail and beg me to let him stay. I just had to say to her kindly but firmly, “No, we’re not going to get back together.” That was emotionally overwhelming for me and after the euphoria, I went through a period of depression. You do sort of mourn the loss, not so much of what you had, but of what you hoped for from your marriage.

I got through it all by focusing on Charlotte. I was such a basket case and she was my guiding light. I think that, because I was so overwhelmed with everything — the loss, the anger, and all the upheaval — I made every decision in terms of what would be best for my daughter. When it came to deciding where we would live, and where she would go to school, or even how I would communicate with her father, I tried to put into perspective how my actions might affect her and her relationship with her dad.

Financially, Charlotte and I had to make some adjustments — I guess it’s a given that everybody is poorer after a divorce. We were living on one income and I was self-employed. At first I was in survival mode, fuelled mostly by fear. But over a few months a plan began to emerge. I upgraded some of my skills and became more computer literate. I put an ad in the local phone book. I got new cards printed and my friends and clients came through for me with jobs. I think women kind of network together in a way that is almost unspoken.

I’m more careful with money than I used to be. I drive back to Belleville to buy my groceries because I’ve calculated that, by shopping at No Frills, I can save about a third. We don’t eat out that often, but I try to make it a special treat once a month, and we wait for most movies to come out on video. We go for long walks, we swim, we check out junky antique stores, play cards and games and go tobogganing. We always shop sales for clothing, although I like quality, so I tend to frequent warehouse outlets or pick up end-of-season markdowns. I went to the Jones of New York sale and got about $400 to $500 worth of clothing for $100.

Because we economize in small ways, we can afford special trips now and then. We went to Ottawa during Spring Break; I found a deal that included two nights at the Delta, with breakfast, for less than $179. Overall, I think that I’ve been able to provide a rich and rewarding life for both myself and my daughter.

I began to get counselling after I found out John was cheating on me. It has helped me re-establish my identity, and separate emotions from logic so I can make wise choices. After three years, I’m feeling good about myself. Now I’m focused on rebuilding my life. I’m taking university courses and that has been wonderful for my growth as a person.

Things have settled down between John and me. I wouldn’t say that we’re the best of friends, but we manage to keep from squabbling in front of Charlotte. She sees her dad every Sunday and I recognize that, for that to happen, I have to cut him some leeway. He makes the drive down and he doesn’t always have the money to take her out somewhere. At first there was absolutely no way I would have left him with Charlotte in the apartment, but we’ve worked through that. Sometimes the two of them will just rent a movie and I’ll do my own thing. If I feel like joining them I do. He, in turn, respects my privacy. It’s kind of a weird situation, but we’re just trying to make it work, for Charlotte’s sake.

My greatest satisfaction on coming through this? I know that I can do it all on my own. I don’t have to count on anyone for anything. There was a time when I thought I couldn’t, and that affected my decision to remain in a relationship that wasn’t good for me. I know now that I made the right decision when I ended my marriage. My biggest regret is that I didn’t do something sooner. I watched years of my life vanish before me. But I can’t worry about that now. You can only look forward.

(Anonymous lives in Southern Ontario.)

Five rules for keeping it together through divorce

Every situation is different and you can’t always avoid going to court during a divorce, says Maureen Murdoch, a family law lawyer from Jasper, Alta. But by following these simple guidelines, you should be able to make the process of separation and divorce easier.

Rule #1

Separate your emotional state from your financial state: “I have seen people fight over everything from the joint funeral plots to who gets the color TV,” says Murdoch. But continuing to bicker and fight in court over small details of a settlement prevents you both from moving on with your lives. “Be big about things,” advises Murdoch. “It pays off in the long run.”

Rule #2

Recognize that you’re likely to be poorer after a divorce. Once you have an idea how the assets will be divided and whether you will get, or pay, support, examine your budget and figure out a way to make up any shortfall, either by working more or by taking a more frugal approach to life.

Rule #3

Consider mediation. Too often couples who once lived together in harmony find themselves pitted against each other in court. Mediation — during which a couple comes to a compromise with the help of a third party — can provide a gentler, less hostile environment for attaining an agreement. Some provinces, like Alberta, offer it free. But even if you have to pay, mediation is often cheaper in the long run, says Murdoch. “If both spouses have input into the settlement, then they’re more likely to follow it.”

Rule #4

Focus on the kids: Research shows that the more conflict there is between divorcing parents, the harder it is on the kids, says Murdoch. And yet, people often become hyper-critical of their fellow parent after a divorce. “They’ll get bent out of shape over something, like whether he is allowed sugar after dinner. But they fail to see that what really causes lasting damage to a child is trashing the other parent.”

You can’t change who your co-parent is. So find a way to cooperate for the good of your child, advises Murdoch. Her rules of thumb: keep the lines of communication open; don’t use your child to send messages or spy on your spouse; use mediation as a way to resolve disputes about the kids; and get your child counselling, if needed.

Rule #5

Look to the future: The steps people go through during a separation or divorce are similar to grieving a death in the family, says Murdoch. Despair and bad feelings are part of the package, and it may take several years and some counselling before you’re able to move on emotionally. “You have to realize that divorce is a process,” she says. “And those feelings of sadness or anger are normal.” The good news: eventually they fade. “I’ve seen some people who have been totally devastated by a divorce. A few years later I run into them and they’re like different people. You have to try to look at this as a chance for a new beginning.”

Well, no, according to Peggy English, a family mediator in Vancouver. “When parents have to tell their children they’re splitting up, my advice is, ‘Let the kids cry, let them stomp out, let them scream,’” says English. “The parents have to acknowledge to their kids that there is a crisis in the family and also tell them, ‘Together we have got the skills to pull ourselves through it.’”

As English and other mediators will tell you, most people dread difficult conversations. As a result, many of us avoid those conversations and plod forward without discussing issues that are poisoning our lives or our finances. Maybe you want to suggest a pre-nup agreement to your fiancée, but don’t know how she’ll react. Maybe your husband’s free-spending ways are driving you crazy. Maybe you’re getting older and want to have a full and frank discussion with your children about your estate plans. Or maybe you want to tell your aging mother or father that it’s time to sell the house and move into a seniors’ residence.

Whatever the specific topic, difficult conversations are difficult for a reason. You can’t hold an honest discussion on an emotional issue without stress, tears and possibly anger. But the good news is that there are ways to get through these conversations and resolve problems more effectively than you may have thought possible. Take these tips from the pros:

In the form of a question, please

Douglas Stone, Bruce Patton and Sheila Heen of the Harvard Negotiation Project conducted thousands of interviews over 15 years on the topic of difficult conversations. They concluded that people who succeed at difficult conversations don’t think of them as just a vehicle to deliver messages. Instead, they see the conversations as a chance to honestly explore the other person’s perspective on the issue. To have a good conversation, you don’t begin by announcing: “You’re wrong and here’s why.” Instead, you say: “Help me understand your point of view.”

Stone, Patton and Heen argue in their landmark work, Difficult Conversations: How to Discuss What Matters Most, that each of us has our own narrative about what is going on in the world. “To get anywhere in a disagreement,” they write, “we need to understand the other person’s story well enough to see how their conclusions make sense within it.” To make sure you understand the issues, listen to the other person, ask questions about what he or she says, and paraphrase the other person’s views back to him or her. To understand is not necessarily to agree, but the better you grasp how other people see their own behavior, the more effective you can be at suggesting a way to work out your problems.

Count to 10

If you’ve just opened your family’s credit card statement and are burning to blast your husband right this second about his lavish ways, fight the temptation. Take a deep breath, assemble your thoughts, consider what you want to achieve. Then ask your husband to set aside a time to discuss the issue.

When the time comes to sit down, don’t begin in anger and don’t assume that your husband or other loved one is doing something purely to spite you. “One of my favorite sayings is ‘There’s a reasonable reason for unreasonable behavior,’” says Dr. Barbara Landau, a registered psychologist and lawyer who is president of Cooperative Solutions, a family mediation service in Toronto.

Understanding your partner’s motivation is particularly crucial in situations where a spendthrift husband or wife is constantly frustrating a frugal spouse with big, unexpected expenditures. “Sometimes these situations arise because there hasn’t been enough communication,” says Peter Grove, a chartered accountant and family mediator in Vancouver. “It could be that the husband is a senior partner in a law firm. The wife knows he’s making big bucks and can’t understand why there should be any financial difficulty. It might help if he sat down with her and said, ‘Yes, we have a good income, but look how heavy our expenses are — we’ve got a very large mortgage on our house, we just bought that cabin in Whistler, here’s what we’re spending on the children’s education, and here’s what we’re paying in income taxes.’”

Be positive

There is no foolproof way to start a difficult conversation, but, where possible, look for ways to stress the positive and emphasize the future rather than the past.

This is particularly important when dealing with elderly parents, who may feel vulnerable because of their age. If you bluntly suggest they move into a seniors’ residence, they’re likely to feel threatened. Instead, you might ask if there’s anything you can do to help them maintain their independence. Discussing their independence is necessarily going to involve a frank talk about forms of help, such as in-home care and assisted-living residences.

You can use a similar approach if you want to discuss your parents’ will. Jonathan Clements, a personal finance columnist for The Wall Street Journal, recommends you ask your parents what they would like to achieve with their estate and what legacy they want to construct. Phrasing things that way puts the emphasis on the future and on your parents’ ability to shape it rather than suggesting you’re anxious to get your hands on their money.

Give fair warning

People need time to prepare themselves for dealing with many emotionally loaded situations. Consider what happened to a sixty-ish couple we’ll call Nan and Pierre Chapelle. They had decided it was time to get serious about estate planning. So they invited their four adult children over for Sunday dinner and told the kids that before dinner they wanted to decide who would get various family heirlooms after their deaths. To speed the process, they handed out stickers preprinted with each child’s name, then asked them to affix the stickers to the items they wanted. It was an eminently practical plan — but the Chapelles hadn’t realized that what seemed logical and efficient to them was highly emotional for their kids. The children, taken by surprise, flatly refused to participate in what seemed to them to be a ghoulish ritual. Nan and Pierre haven’t dared to raise the issue since.

“Canadians don’t even like to talk about money, let alone death,” says Sandra Foster, president of Headspring Consulting in Toronto and author of You Can’t Take it With You: The Common Sense Guide to Estate Planning for Canadians. “If I’d been in the parents’ situation, I probably would have had a softer conversation first. They could have said, ‘We’re trying to get our affairs in order and there’s a lot to deal with. Next Sunday after dinner we’d like each of you to pick out four or five things that you’d like.’”

Tell a story

One good way to broach a touchy topic with loved ones is to use a story about other people. This signals to your loved ones that you’re not attacking them personally. Relating the case of a friend or an acquaintance who suffered through a bitter and expensive divorce may help to explain to your fiancée why you would like a pre-nup. Similarly, mentioning a neighbor’s nasty squabble over a will may provide a springboard to discussing your own will with your adult children.

Tears can be good

Many of us dread displays of strong emotion, but you can’t have an honest conversation on many topics without tears being shed. “I think it’s often wise to start by saying, ‘This is going to be a difficult conversation. This is going to be tough for you, I know, but it’s also tough for me to bring this up,’” says Judy Aymar, director of client services for Halifax’s Northwoodcare Inc., the largest seniors’ complex in the Maritimes.

English, the family mediator, stresses the importance of being honest when it comes to strong emotions. In a divorce, children don’t want vague reassurances that everything will be fine. It’s more helpful for them to hear their parents acknowledge that the situation is going to hard for the whole family.

English believes there are four other things that divorcing parents need to say to their children: we love you; it’s not your fault; there’s nothing you can do that can put us back together again; and here’s the plan — you’re going to live here, you’re going to live there, here’s the schedule, here’s how you’ll be able to get hold of Daddy and Mommy. “No. 4 is incredibly important,” she says, “because little and even big kids will say, ‘It feels as though my world has fallen apart.’”

Stress what doesn’t change

One of the most comforting things you can do for people going through a transition is to talk about what will stay the same. Maybe your mom shouldn’t be driving anymore. You know it and you suspect she knows it, too. She might be more inclined to surrender her license if family members promise to drive her every Saturday to the farmer’s market that she’s enjoyed for years.

Take the long view

“In divorces,” says the mediator English, “one thing I find helpful to say is, ‘How do you see the future? How do you want your children to look back on this experience 10 or 15 years from now when they’re adults sitting around the dining room table with you?’” It’s a question that forces people to lift their eyes up from the here-and-now and consider the bigger picture. And it’s worth asking in a lot of other family situations. If you’re concerned about an elderly family member continuing to live alone, you might want to ask: How do you see yourself managing a year, or five years, from now?

Know when to get help

If an issue has been festering for years and family members no longer trust one another, you may want to consider bringing in an outside mediator to help propel the discussion forward. Iris Norris (whose name we’ve changed to protect her privacy) can vouch for the benefits. A widow in her eighties, she recently decided to sell her Toronto home and move near her daughter Moira, who lives 150 km west of the city. To Iris’s son, Alex, it seemed as though his sister Moira was unduly influencing their mother. He worried that he would receive less than a fair share of the inheritance upon Iris’s death. Alex stopped speaking to Moira; Iris was distraught.

The Norrises eventually went to Barbara Landau’s Cooperative Solutions in search of a neutral professional to help them talk through their problems. They met with Landau and another mediator individually and as a group. Through two day-long mediation sessions, held a few weeks apart, Moira and Alex began to realize they both wanted what was best for their mother, but perceived her needs differently. It also became clear that tension had been building for years between mother and son, caused in part by Iris’s life-long aversion to confrontation. Iris assured her children that they would inherit her estate equally, and that they could consult her lawyer any time if they had any concerns about her will’s fairness.

“I feel that mediation was our best and only choice,” Moira says. “We needed to get everything out in the open in a safe, neutral place, in front of trained, impartial professionals.” The sessions were emotionally draining, and the bill came to somewhere around $5,000. Was it worth it? Absolutely, say the Norrises, who have resumed having family dinners together. With guidance, they managed to talk their way through a conversation that could have torn apart their family.

Unfortunately, many Canadians don’t take the time to make an estate plan. Maybe it’s the terminology — “estate” suggests a spacious manor set in rolling hills and a stable of fancy cars. But drawing up an estate plan is a smart move for folks at any income level, and the good news is that the process is easier than you think.

The first and most important step is to make a will. “It’s the cornerstone of your estate plan,” says Sandy Cardy, vice-president, tax and estate planning at Mackenzie Financial Corp. in Toronto. “Yet about 50% of the people who should have a will, don’t.”

If you die without a will — known as “dying intestate” — the government decides who your beneficiaries are, and how your assets will be divvied up. “Not only will your assets not go where you want them — for example, a common-law or same-sex spouse might not be recognized in most provinces — but they’re not going in the most tax efficient way,” says Cardy. It’s well worth paying a lawyer to draft a proper will, she says. A lawyer can also help you draft medical and financial powers of attorney, which set out who will make decisions on your behalf if you become incapacitated. Rates vary considerably so phone a few lawyers to find how much they charge for this service. Expect to spend $400 to $600 for a basic set of wills and powers of attorney for you and your spouse.

Once you’ve written a will, it’s crucial to talk to your family about its contents. “There’s nothing like greed for cash, inheritances and family heirlooms to drive a wedge between siblings,” says Cardy. “I see it every day — otherwise very healthy, happy siblings being ripped apart.” She’s witnessed fights over money, like the one that occurred when $50,000 was left in one daughter’s name (in an attempt to reduce probate fees) without clear instruction to split it 50-50 with her sister. She’s also seen families blown apart over emotional landmines, such as the case of adult siblings who refused to speak after fighting over possession of an old cribbage board from the cottage.

Debbie Ammeter, vice-president of advanced financial planning at Investors Group Financial Services in Winnipeg, says you should ease into a discussion of your will gradually. “People have trouble talking about money and death,” she says, so you might start by talking about related issues, such as plans for your funeral, powers of attorney or health care issues. “Then you can get into discussions about your will and estate, so you’re doing it gradually rather than just jumping in and talking about your finances all at once.” If you’re not comfortable speaking to all your heirs as a group, try one-on-one conversations, but be sure to give a consistent message to everyone.

Your will should be set up so the taxman gets as small a slice as possible. In general, a surviving spouse won’t have to pay tax on assets left to him or her. Most of the hit comes when assets are transferred to the next generation. “While we can’t avoid taxes, there are strategies to minimize the hit, or spread the cost out over time,” says Cardy. Talk to a lawyer about how to gift assets while you’re still alive, or get an accountant or financial planner to advise you about ways to transfer a cottage so that the capital gains on it are recorded over more than one year.

You may also look at custom-designed testamentary trusts to help you control how your assets are distributed. For example, you might arrange for a child who’s lousy with budgeting to receive her inheritance in stages at ages 18, 21, and 30. Again, a lawyer’s advice is essential.

Sure, it takes some effort to structure a proper estate plan. But you’ll save your family time, money, and more importantly, headache and heartache. Think of it as a way to protect your legacy. “Don’t sit back and assume the kids will sort everything out once you’re gone,” says Cardy, “because that won’t happen.”