or incapacitated? Have you left clear instructions regarding the type of medical care you want if you can't make your wishes known?

These two important areas of financial and personal planning shouldn't be overlooked. While they may seem trivial when you're healthy, an illness or accident can put your financial and personal life in a state of disarray.

Power of attorney is your best defence. Power of attorney is a legal document that allows a person or institution you choose to manage your affairs when you can't. (In Quebec, this is known as a "mandate.")

Most people think of trusts as financial vehicles for the wealthy. But the reality is that many Canadians can use trusts as financial tools, particularly when it comes to estate planning.

Using trusts instead of a will to distribute assets can reduce taxes, lessen the potential for legal disputes and allow you to avoid the process of probate.

A trust is a legal entity created to hold assets. You give up ownership of the assets while you're alive, without giving up control. You (the settlor) transfer legal title of assets to another person or organization (the trustee) for the benefit of someone else (the beneficiary). The trustee manages the assets on behalf of the beneficiary, according to the terms of the trust.

Here's a look at some of the advantages of trusts:

Tax-efficient transfer of wealth: A trust can reduce capital gains and other taxes paid on your assets, putting more into the hands of your loved ones or other beneficiaries.

Avoid probate: A will is subject to probate, which can be costly and will make the details of your estate public. A trust lets you avoid the expenses of probate and maintain financial privacy.

Minimize legal problems: A will can be legally challenged. For example, a disgruntled child can ask a court to change the terms of the will. The structure of a trust offers more control over who gets what, and is less vulnerable to legal challenges.

There are many kinds of trusts. Two trusts that may help you achieve your estate planning objectives are the alter ego trust and the joint spousal trust. These types of trusts allow the tax-free transfer of assets.

This is a major difference from some other types of trusts, which can trigger taxes when assets are transferred. In these cases, property may be treated for income tax purposes as though it had been sold. That means capital gains taxes will be due on appreciating assets.

You can create an alter ego trust when you're 65 or older, for your exclusive benefit.

Until your death, nobody but you can receive or use the trust's assets or income. When you die, the trust distributes the remaining assets to your beneficiaries.

A joint spousal trust is similar, only it names both you and your spouse as beneficiaries during your lifetimes.

When the surviving spouse dies, the trust distributes the remaining assets to other named beneficiaries. To create a joint spousal trust, you must be at least 65.

A joint trust is more efficient than a will at ensuring your assets go where you wish. With a will, you can leave your assets to your spouse. But your spouse can pass along those assets according to his or her wishes.

By setting up a joint spousal trust you ensure the assets will go where you intend after your spouse dies. This can be useful if you want your children to receive assets and your spouse remarries. If you rely on a will, your spouse could leave the assets to a new partner when he or she dies, potentially leaving your children with no inheritance.

You can also specify in your will that a trust be created after your death. This is known as a testamentary trust, and is often used to provide payments to a beneficiary.

It can include guidelines on how an inheritance is to be used.

Your investment representative can help determine if a trust is right for you.

- Article produced by Edward Jones investment firm. Edward Jones is a member CIPF. In Barrie, call 792-6721.