COVID-19 has created an environment where concerns for our loved ones’ health and economic well-being are both top of mind. It’s also made many of us appreciate that we’re not invincible, and sometimes we can’t control the future. This resonates closely for families who have either lost a family member or are concerned about an elderly person in their life.
With that in mind, we are seeing an increase in questions about how to create a will and how to protect your family’s financial well-being. The other dynamic right now is that many people are at home, some with much less to do than normally, especially for retirees who might otherwise be travelling away from Canada. Interestingly, for many people, one of the key reasons for delaying the creation of an estate plan is lack of time. However, if you do have time, and are spending more time with loved ones – whether at home or virtually – we are at a unique inflection point where people are both motivated to think about estate planning and have the time to actually do something about it.
If I’m thinking about succession planning, where should I start?
In many cases people begin by talking to their family about what they think might be best, and that’s often a good place to start. That said, it’s a prudent idea to approach these sensitive discussions with some knowledge in your back pocket, before getting too specific with your plans. For example, people can go through exhaustive conversations with family members about who will act as executor under their will, only to find out that the person they originally asked to act will probably not be able to, because they are a non-resident of Canada. So, it is helpful to know some basic principles, tax and common laws in your province before starting the process.
Is there any difference in how women approach estate planning?
Estate planning is very personal, and it’s difficult to generalize based on gender. For most mothers, however, first and foremost they want to ensure their children are “taken care of.” As children get older, the concern often revolves more around family harmony. This is another instance where it might be a good idea to speak to an estates expert before creating too specific a plan. There are situations where people have invested a lot of time in deciding which child will receive which piece of land or which personal effect, only to learn that generally tax and estate experts don’t recommend getting too specific with “things” in a will. From experience, we find that the best way to preserve family harmony after parents pass away is to treat children as equally as possible.
Although “fair doesn’t always mean equal” – if children feel that one sibling has received assets worth more than another, there is a very high likelihood of resentment. The other problem with getting too specific is that if you sell an asset that’s meant for one child but keep an asset that’s supposed to go to another, you could cause significant after-tax inequities. So, we usually recommend to simply divide an estate equally between children if that’s feasible, but then make sure the estate is large enough to ensure that they can each take what they want from the estate. If one of children is going to want a particularly valuable asset (e.g. a vacation property), then you need to ensure there are sufficient funds for the other child or children, sometimes by insuring the difference.
I’m concerned about my elderly parents these days, especially my mother. But it’s an awkward conversation to have. How can I break the ice?
Some suggested openings for the conversation could be:
- I’ve been reading a lot about long-term care facilities, and I want to make sure that if you ever need to go into one, you’ll have the money to afford the type of care you want – have you reviewed this issue with your financial planner? Have you projected how much it will cost to get the type of care you’ll need?
- If you were to become incapacitated, do you have a power of attorney in place so that someone will be able to act on your behalf? Do you have a POA for Dad in case he loses capacity first?
- Have you reviewed your insurance? Mom, if Dad were to die first, would you have enough to support yourself?
- Have you both reviewed your wills? Have they been reviewed by an estates lawyer?
Ultimately, the important thing to keep in mind when having these conversations is that it’s your parent’s money, and for the most part, they can do whatever they want with it (so long as they have met all legal obligations to their spouse or dependants). And in most cases, you don’t need to ask to see their investment statement, so you don’t need to pry too much. But if they haven’t done anything about it, your questions may prompt them to think about it.
A proper estate plan covers many additional considerations than what we’ve shared here, and every family situation is unique. It's important to speak with an experienced tax and estates lawyer, especially for more complex family dynamics, such as blended families. However, if you’re concerned that you don’t want to start “running the clock” per se with a lawyer, a great place to begin the discussion is with your financial advisor.
Contact your IG Consultant for more information and background materials on estate planning.