Partners in Prospecting
Intergenerational Wealth Transfer Part II : The Kids Are Alright
In our last blog post We Are Family, we discussed three specific ways Advisors could get to know their clients’ children. After publishing that post, we had some requests to expand this topic to include the key documents clients need to obtain for estate purposes. When it comes to Estate Planning, most Advisors say that their clients’ most common concern is ensuring their families are taken care of upon their death.
As an Advisor, you don’t have to be an estate planning expert, but as a holistic Advisor, you can help your clients assess whether an estate plan crafted by an attorney lines up with their financial goals.
Having the Estate Planning Conversation
Take the opportunity, when you have your client on the phone or are conducting their review, to broach the topic by stating, “Based on your financial plan, it is possible that you’ll have substantial assets when you pass away. What would you like to see happen with this money and property? Do you have concerns?” As people generally love to talk about their families, this could be an opportune time to clarify and address their fears.
From there, you can delve deeper, asking questions such as, “Have you thought about the legacy you will leave your children, grandchildren, or community? What values and beliefs have you developed during your life that you’d like your family to embrace when you’re gone?” Keep in mind that this could be the first time the client has approached estate planning as something other than the tax-efficient transfer of money and property. They may appreciate your effort to refocus the conversation on guiding and inspiring the next generation to use their inherited wealth wisely.
At this critical time in your conversation you can find out if your client has a lawyer. Your clients’ lives may be too complicated (divorce, blended families, etc.) for purchasing an “out of the box” last will and testament. Preparing a will requires a lawyer and if the client doesn’t have one, you should consider having a few lawyers with whom you’ve developed relationships and feel comfortable recommending.
A good place to begin is Revenue Canada’s Estate Planning Checklist. This jargon free document is an excellent way to introduce estate planning concepts to your client.
Now let’s move onto the most important documents required when estate planning. It is by no means an exhaustive list, nor is this comprehensive advice. Financial Advisors should work closely with the client’s counsel to ensure appropriate legal protections are afforded to clients based on all of their wishes: financial and otherwise. However, simple or complex your client’s plan is, it is likely that these three items below will form the basis of the plan.
1. Last Will and Testament
The last Will and Testament is the keystone of any estate plan. Properly executed, it allows for the orderly distribution of the deceased’s assets. This entails appointing an executor. Choosing an executor is an important decision, as he or she will manage any challenges against the will through the provincial probate process and will ensure probate fees are covered. (Note: Not all property is subject to probate. Where the property has a designated beneficiary built-in, such as life insurance death benefits and RRSPs, they are not subject to probate). In many circumstances, particularly those involving multiple properties or the ownership of a business, it may be a good idea for your client to tell the concerned parties of his or her plans. If one heir is more suited by temperament and inclination to assume control of the business, for example, your client may wish to consider “estate equalization’ and allocate investment proceeds or life insurance benefits accordingly.
Without a valid will, you are considered to have died intestate. When that happens in Canada, the province you lived in decides how your assets are distributed, without regard to your wishes. Following the laws of intestacy, the province typically distributes the first $50,000 of value to a surviving spouse, then divides up the rest between the spouse and children. If you don’t have a surviving spouse or children, your parents are next in line to receive your assets, followed by any brothers and sisters.
Dying without a will also leads to delays and extra expenses. The court appoints a bonded administrator to serve as an executor of the estate. In addition, any assets distributed to children under age 19 must be passed along to a bonded guardian or to the Public Trustee. The process of appointing these administrators is both expensive and time-consuming. It may also create situations where assets are disposed of without any planning for tax considerations.
2. Power of Attorney for Personal Care (“POAPC”)
Your clients will need a Living Will to ensure that their medical wishes are honoured. This legal document sets out how your client should be cared for in an emergency or if otherwise incapacitated. Their POAPC sets forth their wishes on topics such as resuscitation, assisted suicide requests, desired quality of life and end of life treatments including treatments they don’t want to receive. My husband and I have a Living Will and we tried to be as specific as possible in this document, realizing that we can’t account for every possibility, and this is why the next document you should have your client create is the Continuing Power of Attorney for Property.
3. Continuing Power of Attorney for Property (“CPOA”)
The CPOA is not to be confused with a “non-co Power of Attorney” or the Power of Attorney for Personal Care. The Continuing Power of Attorney for Property gives the person of your client’s choice the power to manage their financial affairs if they become incapable of managing them themselves. It gives this person, designated as their agent or attorney-in-fact, the power to handle such day-to-day tasks as:
- Paying bills
- Filing tax returns
- Opening mail
- Banking
- Talking with accountants, lawyers and you as the Financial Advisor
- Looking after pets
- Voting on their behalf
Without a power of attorney, their spouse has no legal authority to perform a variety of important tasks for them if they become incapacitated.
Please note that a POAPC is not required for property that is jointly owned, i.e. Joint Tenancy with Right of Survivorship (“JTWROS”). Assets held in a single name however, will require a CPOA for any transactions to be executed during a period of the owners’ incapacitation.
No one looks forward to Estate Planning and the issues that it addresses. However, a comprehensive, up to date plan will go a long way to assist bereaved families and business associates in a difficult and confusing time. You, as the Financial Advisor, can lessen the load by providing support, suggestions and other professional partners to help. Be sure to speak to a lawyer and/or accountant in your jurisdiction to learn more about these critical documents.
As usual: There is a song title in this blog post. Did you find it?
About Jennifer Kuta
For more than 25 years, I have worked with Advisors helping them build their businesses. My commitment to you is to partner with you in your practice and offer solutions to help build your business.
The contents of this blog are the personal views of the author and not necessarily the views of Caldwell Investment Management Ltd. The contents are provided as general in nature and should not be relied upon nor construed to be the rendering of advice. Readers should consult with their own compliance/legal advisors for advice on their specific circumstances before taking any action as sales and prospecting activities are subject to regulatory oversight.
Vice President, Business Development and Sales
