Most of us have, at some point, thought about what might happen to our loved ones if we passed away. Some of us have even sat down to plan our estate and create a will. But as those who have experienced it will tell you, the process of settling a person’s debts and assets after they pass away can be slow and difficult – and full of unpleasant surprises.

“When it comes to settling an estate, there's a level of bureaucracy that almost always surprises people,” says Ian Hull of Hull & Hull, a Toronto law firm that specializes in probates, trusts and estate litigation. “It’s generally more expensive and more time-consuming than people would have hoped or expected.”

Knowing what challenges await your loved ones after you pass away can help you better prepare for the future – and protect the people you love from financial difficulties. Here are some useful things to keep in mind when making an estate plan:

• Cash may be hard to access
  Unless you share a bank account, your family member may not have immediate access to your money. Depending on a number of factors – such as the size of the account and your relationship to the person requesting access – a limited amount of money may be released to cover immediate expenses. “But the time between date of death and when beneficiaries receive the money can vary on each file,” says Hull. “That comes as a big surprise to a lot of people, who expect to be able to access the money sooner.”
  
  
• Debts must be paid first
  Whether or not you leave a will, all your debts must be paid first before your assets can be distributed to your beneficiaries. This means your family could end up with considerably less than what you had intended to provide. It also means they’ll have to wait until all your creditors are notified and paid before getting their inheritance.
  
  
• Those fees and taxes can really add up
  In addition to the debts that must be paid, the various taxes and legal and administrative fees can also take a big chunk out of an estate. Hull says the tax on capital gains can be especially shocking for many people. After a person dies, all assets which were not rolled over to a spouse are considered to have been sold and will be subject to capital gains tax. Hull says taxes typically eat up 20 to 30 per cent of an estate. “And taxes on death are payable within a year,” he says. “So if your family doesn’t have the cash, then everybody’s under great stress.”
  
  
• Settling an estate takes time
  Settling an estate is a slow-moving process that could take months, even years. Between the time a will is located and probated or confirmed by the courts – which could take anywhere from a few days to a few months, depending on where you live – to final distribution of assets, so many legal, financial and bureaucratic matters must first be sorted out. In the meantime, your family must continue paying the mortgage, household bills and day-to-day living expenses.

A measure of protection

To prevent debts from shrinking your estate significantly, and to help ensure your family won’t have to worry about your debts if you pass away, it’s worth looking into the benefits of creditor insurance. Available on most types of credit accounts – such as a mortgage, line of credit, credit card and loan – creditor insurance pays off the balance of your debt should you become critically ill or injured, or pass away. If you have a Scotiabank mortgage, line of credit, VISA or loan, click here to learn more about Creditor Protection from Scotia Insurance.

By taking steps now to preserve your assets and take care of your debts, you're helping to ensure your family’s financial security in the future. And you're providing yourself peace of mind knowing they’ll have less to worry about after you're gone.