I find it surprising when I learn about how many people reach their 40’s or 50’s without ever thinking about what happens to their assets when they are gone. Even more surprising? Many are paying for insurance coverage that does not truly protect what matters most. They don’t pay attention in understanding estates.
Here’s the reality.
Only 15% of Canadians have an actual estate plan in place. 82% of Canadians worry about their families being burdened with funeral costs and debts after they are gone. Yet they don’t take action.
Why?
In my experience, it is not laziness. It is the confusion. The words estate planning, probate and capital gains tax sound complicated and intimidating. Most people put it off because they aren’t sure what to do, where to start, or what it really means.
This article is here to simplify that. I want to walk you through what an estate actually is and why it matters. And the practical steps you can take today—even if you think you don’t have much to leave behind. The truth is if you have anyone who depends on you or cares about you, estate planning isn’t a luxury. It’s required.
Understanding Estates: What Is an Estate?
Understanding estates starts with a simple idea: your estate is everything you own. That sounds basic, but many people miss what “everything” actually includes. Your estate includes:
- Your home and any other property including your furniture, car, etc..
- Money in bank accounts and investments
- Your car and personal belongings
- Your RRSP and TFSA accounts
- Life insurance policies
- Your business (if you own one)
- Real estate properties.
Anything with value is part of your estate. The median net worth of Canadian families is around $520,000, which includes a mix of real estate, savings, and investments. Many of us have far more tied up in our estates than we realize.
When you die, your estate is used to:
- Pay any debts (mortgages, credit cards, loans)
- Cover final expenses (funeral, legal fees, probate costs)
- Pay taxes owing
- Distribute what’s left to the people you care about
The question that keeps people up at night is simple: Who decides what happens to all of this? And will your family end up paying unnecessary costs?
Why Understanding Estates Matters More Than Ever in Canada?
A few things have changed in Canada recently that make estate planning more relevant—and more urgent.
First: Canadians are living longer. Life expectancy is now around 83 years. That means your assets need to last longer than ever before. Your plan needs to account for that reality.
Second: Tax rules changed significantly. As of June 25, 2024, the federal government increased capital gains tax on estates. If you own an appreciated asset like a cottage that’s doubled in value—you now face higher taxes at death. This also applies to investment property.
Third: Families look different now. More Canadians are in blended families, common-law partnerships, or have complex family situations. Without a clear plan, provincial law decides what happens to your assets—and it might not align with your wishes.
Fourth: Probate fees are significant. If your estate goes through probate (the legal process that proves your will is valid), your family pays court fees. In Ontario, where many readers live, probate fees are 1.5% of your estate value above $50,000. On a $500,000 estate, that’s approximately $6,750 going to court instead of to your family.
Understanding Estates and the Hidden Costs of Not Planning
Over the years, I’ve seen families face avoidable stress and expense because the person who died left no clear plan. Let me share what typically happens when there’s no estate plan in place:
Your family pays more, gets less.
Without a will, Ontario law decides who inherits what assets. Your children might receive everything at age 18 in one lump sum—regardless of whether they are ready to handle it. Your spouse might not get everything (depending on how many kids you have). And if you have a common-law partner, they might receive nothing at all, even if you were together for decades.
Probate becomes mandatory and expensive.
When there’s no will or unclear beneficiaries, your estate must go through probate. That means court involvement, legal fees, and those probate fees I mentioned. The timeline stretches to months or even years. Meanwhile, your family can’t access money to pay bills or funeral costs.
Taxes create surprises.
Many people are shocked to learn this fact. When you die, the Canada Revenue Agency (CRA) considers all your appreciated assets “sold” at fair market value. Your estate owes tax on those gains. Without planning, your family might have to sell your cottage, rental property, or investments just to cover the tax bill.
Executor stress multiplies.
Someone has to handle all of this. Without clear instructions, your executor (usually a family member) is making decisions under pressure, often grieving at the same time. Mistakes happen. Family conflicts arise.
Understanding Estates and how Much Your Insurance Policy Actually Protects
This is where my experience as a broker becomes especially relevant. I have met people who believed they were well-protected. They later realized their insurance policy was doing far less than they thought.
Here’s a common scenario: A 45 year old person buys a permanent life insurance policy. They pay higher premiums for 20+ years, believing it is building cash value and protecting their family. But here’s what actually happens in many cases:
- The premiums are high—sometimes $200 to $400+ monthly for coverage they might not actually need
- The cash value grows slowly in the early years
- If they die in year 5 or 10, the death benefit is the same whether they paid premiums for 5 years or 25 years
- The policy might not actually address their real protection gap (like covering their mortgage or kids’ education)
A better approach? Match your insurance to your actual needs and life stage.
If you are a parent with a mortgage and young kids, term life insurance might be exactly what you need. This coverage is temporary and more affordable. It covers the specific period when your kids are dependent and your mortgage is largest. As you age, your kids become independent, your mortgage shrinks, and your need for large death benefits decreases.
If you are near retirement or have a cottage you wish to pass down tax-efficiently, permanent insurance might make sense. It can be beneficial for estate tax purposes. But that’s a different conversation with different costs.
The problem I see most often is people buying the wrong type of insurance for their life stage. They then become locked into expensive premiums. These premiums do not match their actual protection needs.
Understanding Estates at Each Life Stage
Your insurance and estate planning needs aren’t the same at every age. Let me walk through what typically matters at each stage.
Single and Early Career (Ages 18–35)
You might think, “I don’t have enough to worry about estate planning yet.” But consider:
If you die without a will, your parents might need to go to court to inherit your accounts (if you don’t name them as beneficiaries)
Even modest assets—like your car, savings, digital accounts—need to go somewhere clear
If you’re in a relationship, your partner has no automatic rights unless named in your will or as a beneficiary
What you need: A simple will naming beneficiaries and an executor. Life insurance might be low-cost term coverage only if others depend on you.
Married or Partnered with Kids (Ages 30–50)
This is the critical stage where most people need protection but often lack clear planning.
- Your kids need a guardian named in your will (if they’re minors, and you and your partner both die)
- Your family needs income replacement if you die
- Your mortgage and debts need to be covered
- Probate fees could eat into your kids’ inheritance
What you need: A clear will with backup executors. Obtain life insurance sufficient to cover your mortgage. It should replace your income for the years your kids are dependent. Ideally, establish a trust or guardianship plans for minor children.
I often recommend young families start with affordable term insurance. For example, a 20 or 30 year term. This should cover the mortgage and offer 10 years of income replacement. The premiums might be $30–60 monthly for significant coverage. Compare that to permanent insurance at $200+ monthly, and the difference is meaningful.
Approaching Retirement (Ages 50–65)
Your protection needs shift. Your mortgage might be gone. Your kids are independent. But new concerns emerge:
- Estate taxes on appreciated assets (especially if you own a cottage or investment property)
- Probate fees on a larger estate
- Ensuring your surviving spouse has enough income
- Passing a family cottage or business fairly to heirs
What you need: You need a comprehensive estate plan. You might also need permanent insurance to cover capital gains taxes. Plan clearly around income needs for your spouse.
Retirement (Age 65+)
Most people don’t need large life insurance at this stage. But some situations still call for it:
- Covering capital gains tax on investment property so your heirs don’t have to sell assets
- Leaving a meaningful legacy to family or charity
- Ensuring a surviving spouse has financial security
What you need: Minimal life insurance unless you have specific estate tax or legacy goals. Instead, focus on clear beneficiary designations, a solid will, and powers of attorney.
Understanding Estates: Common Estate Planning Mistakes
Over the years, patterns emerge. Here are the mistakes that show up most often—and how to avoid them.
Mistake #1: No Will at All
About 52% of Canadian adults don’t have a will. If you die without one, Ontario law decides everything. Your estate might go to people you wouldn’t have chosen. Your kids’ guardian is decided by the court, not by you. Your assets sit in legal limbo while lawyers sort it out.
How to fix it: Get a simple will done. If you have kids, this is non-negotiable. If you have assets over $100,000, professional legal help is worthwhile. For simpler situations, online services exist, but review them carefully.
Mistake #2: Not Updating Your Will
Life changes. You get married. You have kids. You divorce. You accumulate assets. Your will doesn’t magically update itself.
I’ve seen wills from 15 years ago that named an ex-spouse as executor or beneficiary. I’ve seen assets left to someone who died before the will-maker. I’ve seen children born after the will was written completely left out.
How to fix it: Review your will every 3–5 years. You should also review it whenever major life changes happen, like marriage, kids, divorce, or significant wealth changes.
Mistake #3: Naming the Wrong Person as Executor
Your executor has a massive job. They need to:
- Locate your will and apply for probate
- Find all your assets and debts
- File your final tax return
- Pay bills and taxes
- Distribute assets to beneficiaries
- Deal with emotional family dynamics
Many people choose an executor based on emotion (“I want my eldest to do it“) rather than skills or capabilities. Sometimes the person you choose doesn’t live in Canada, which complicates probate. Sometimes they’re disorganized or not trusted by your other beneficiaries.
How to fix it: Choose someone who is actually organized, financially responsible, and trusted. Consider naming a co-executor (a family member plus a lawyer or professional) if your estate is complex.
Mistake #4: Ignoring Capital Gains Tax
This one surprises people. You’d assume your RRSP or investment account just passes to your heirs tax-free. Not always.
When you die, the Canada Revenue Agency considers all your capital assets “sold” at fair market value. If your investments gained $200,000 in value, your estate owes tax on that gain. If you own a cottage that’s appreciated significantly, same thing.
Since June 2024, the tax is even heavier. On gains over $250,000 in a year, the inclusion rate is now 66.67% (instead of 50%). That dramatically increases the tax bill.
How to fix it: Talk to a tax advisor and broker about strategies. Some solutions include life insurance to cover the taxes. You can consider spousal rollovers for registered accounts. Another choice is restructuring how assets are held before death. Don’t assume your family can just inherit without a tax hit.
Mistake #5: Not Reviewing Beneficiaries Regularly
This is a quick one but critical. If you have an RRSP, TFSA, life insurance policy, or pension, you named a beneficiary. But did you review it recently?
Many people name a spouse, then forget to update after divorce. Others name their estate as beneficiary on life insurance (which defeats the purpose—the money now goes through probate). Some don’t name anyone, and the money sits in limbo.
How to fix it: Check all your beneficiary designations. Make sure they match your current wishes and your overall estate plan. Life insurance, RRSPs, TFSAs, and pensions should have named beneficiaries to avoid probate delays.
Mistake #6: Not Planning for Blended Families
If you are in a blended family, standard estate planning doesn’t work. If you leave everything to your spouse, you lose control over your kids’ inheritance. They might not get anything if they are from a previous relationship. If your spouse remarries after you die, your kids might inherit even less.
How to fix it: Use a spousal trust or family trust. These legal structures allow you to offer for your surviving spouse while ensuring your children still receive an inheritance. It takes more planning, but it prevents family conflict and ensures everyone you care about is protected.
Understanding Estates and How Life Insurance Fits In Your Estate Plan
Now, let me bring this back to insurance—because it’s often the most efficient tool in an estate plan.
Here’s why: Life insurance is fast, tax-free, and avoids probate.
When you die, the death benefit bypasses probate. It goes directly to your named beneficiary. No court delays. No probate fees. No creditors claiming it. The money arrives in days, not months.
Compare that to your estate, which might take 6–12 months to settle after probate.
Life insurance solves four main estate planning problems:
- It covers probate fees and final expenses.
Funeral, legal fees, executor costs, and probate fees on remaining estate can be significant. These expenses add up to $5,000–$15,000+ depending on your estate size and location. Life insurance can cover this instantly, so your family doesn’t have to find the money quickly.
- It covers capital gains tax.
Remember the cottage example? If you own appreciated assets and want them to stay in the family, life insurance pays the tax bill. Your heirs keep the cottage; the insurance covers the tax. Without it, they might have to sell.
- It provides income for your surviving spouse and family.
If you’re the primary earner, term insurance replaces lost income while your kids are young. Permanent insurance can provide ongoing income for a surviving spouse.
- It balances inheritance fairly across beneficiaries.
In blended families, you might leave the cottage to your kids from an earlier relationship. You also want to give some inheritance for your current spouse. Life insurance to one beneficiary and assets to another can balance things fairly without family conflict.
But here’s the key: You need the right type and amount of insurance for your actual situation.
Term insurance works brilliantly for temporary needs (kids at home, mortgage years). Permanent insurance makes sense if you have permanent needs (estate taxes on a cottage, ongoing support for a disabled child).
The insurance industry has done a poor job explaining this. Many people buy permanent insurance when term would serve them better, then resent the higher premiums. Others buy no insurance at all and leave their families in a financial crisis.
Simple Steps to Get Your Estate Plan Started
You don’t need a complicated, expensive process to start. Here are the practical steps:
Step 1: Write down what you own.
Make a list of your assets: home value, bank accounts, investments, pension, life insurance, car, cottage, anything valuable. Also list your debts: mortgage, credit card balances, loans. This takes an hour. It’s not glamorous, but it’s the foundation.
Step 2: Name your beneficiaries.
On every account that allows it—RRSP, TFSA, life insurance, pension—name a specific person or people. Review these regularly. Update them after major life changes.
Step 3: Create or update your will.
If you have dependents or meaningful assets, get a will. You can do it online cheaply for simple situations. However, if you have kids or own property, talk to a lawyer. It’s worth the investment.
Step 4: Name an executor.
Choose someone responsible and ask them first. Let them know what role they’d play. If your estate is complex, consider a co-executor.
Step 5: Assess your insurance needs honestly.
Talk to a broker about what type and amount of insurance actually makes sense for your situation and budget. Don’t buy coverage you don’t need, and don’t skimp on coverage you do need.
Step 6: Document where things are.
Write down where important documents live—your will, insurance policies, account numbers, passwords. Tell your executor where to find these. Make their job easier.
Step 7: Review every 3–5 years.
Life changes. Update your plan accordingly.
This isn’t about perfection. It’s about clarity. Your family deserves to know what you wanted and where to find the documents proving it.
Key Takeaways
Here’s what to remember about understanding your estate:
- Your estate is everything you own, and someone has to manage it when you’re gone. Better that person knows your wishes.
- Estate planning prevents probate delays, excess costs, and family conflict. Even a simple will is infinitely better than nothing.
- Capital gains tax is real and significant, especially on appreciated assets like cottages. Plan for it.
- Life insurance is one of the most efficient estate planning tools, but only if it matches your actual needs. Don’t overpay for coverage you don’t need.
- Your insurance and estate plan need to work together. Named beneficiaries, a clear will, and appropriate insurance coverage should all align.
- Common mistakes are avoidable—lack of a will, not updating documents, wrong executor, ignoring taxes, and misaligned beneficiaries. Each one has a simple fix.
Final Thoughts
Understanding estates does not have to feel overwhelming. It is about deciding what happens to what you own. Then, make that decision clear to the people who will manage it. It is writing about things down, naming the people you trust. And where appropriate, make sure you have the right insurance in place. This way, your family isn’t burdened with unexpected costs. They won’t face difficult choices.
I have seen how much peace of mind comes from having a clear plan in place. Families stress less. Executors make better decisions. Beneficiaries feel respected. The cost of sorting it out beforehand is far lower than the cost of confusion afterward.
If you’ve been putting this off, I encourage you to take one small step this week. Make that list of assets. Update one beneficiary designation. Call a lawyer or broker and ask questions. Small actions build momentum.
Your family’s financial security and your legacy are both worth the effort.