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Matters of Estate

Don Nilson recently has added a “TEP” designation to his credentials and has been admitted to the Society of Estate & Trust Practitioners. There are 2,000 members in Canada and 10,000 members world-wide, spread across 33 countries. This initiative is both evolutionary and strategic for our firm, as we strive to continue meeting the evolving needs of our clients, many of whom have been with us for 20 + years.

Don will be leading this business unit in our practice, and he will work in concert with Stephanie on the investment management side of our practice and with Diane on the personal financial and tax planning side of our practice.

Don started this new unit by creating an “Estate Planning Primer” course, which he delivered in October to 110 accountants at the CGA Burnaby chapter. Starting with this article, we will be writing more extensively on estate planning issues, and these articles will build in our Insight Library. We also will be initiating estate planning discussions with clients over time.

While it occasionally happens in this fashion, estate planning ought not to be a death-bed exercise. Many people put off the drafting of a bonafide will, perhaps because of the unpleasant nature of the matter involved or perhaps because they are confused and undecided about how to distribute their earthly wealth. A 2006 research study by a Canadian mutual fund company observed some interesting stats on the lack of will preparation, including: 68% of estates with minor children, 40% of estates with advanced degrees and 31% of estates worth in excess of $500,000.

Before we address issues related to the legacy of financial wealth, I think it is important to think about one’s other legacies, particularly to one’s offspring. These ones require advance planning well before a will needs to be drafted… and they are of the “soft” variety and perhaps the most important.

First, from an early age, a parent’s stewardship in establishing good values is critically important, and “Do as I say, not as I do” doesn't cut it. Second is a parent’s contribution to a child’s attitudes towards money. I believe that these values form between the ages of 10-15, and they can become quite entrenched values. The young generation of today has grown up in the deepest and widest (in the Western world, anyway) enjoyment of wealth in the history of this planet, and they are the third generation that has grown into this comfort. The baselines of entitlement to a certain lifestyle rise high and are almost sacrosanct. I continue to recommend that young people read “The Millionaire Next Door” by Stanley & Danko. This is not a how-to-get-rich-in-the-stock-market book, but instead looks at the other side of family finances – the spending side. You can read a review of this book in our Book Reviews section.

Estate planning is a process, not just a thing to get done. Most people define “estate planning” as getting their will done. For many people, this indeed may be sufficient; however, that will probably needs to be revisited and tweaked over a life time, and perhaps sometimes simply restarted from scratch.

Your will may require a rewrite when any of a series of events occur:

• You add children, natural or adopted
• Your children pre-decease you
• Death of spouse or other beneficiaries
• A beneficiary experiences financial difficulty or emigrates
• You are approaching mental incapacity
• Divorce
• Marriage or remarriage
• A significant asset is disposed while living
• Your executor predeceases you or becomes mentally incompetent or emigrates

The diagram (below) provides a broad schematic of the ways to distribute your assets:

Ways to distribute your assets: While alive or dead
or from inside or outside your will

You may give away assets while you are alive, either directly or with strings attached through a trust. On death, assets which transfer through your will incur provincial probate fees, while others do not if you designate a beneficiary whilst alive. You may create trusts in your will to serve particular purposes and these trusts may be long lived.

Examples of circumstances which may merit more complex estate planning include: having disabled children, having spendthrift beneficiaries, having no direct heirs, leaving under-age beneficiaries, carrying a large death tax on your estate, having non-resident beneficiaries or executors or leaving a surviving spouse with “yours-mine-and-ours” children.

In future issues, we will look at these various life circumstances that exist and what estate planning options may be suitable to achieve goals.