Estate Planning: Questions from our Virtual Chat

Last week we hosted a fireside chat with Laura Ross, from Laura Ross Estate Consulting, that went beyond the tools and legal documents required for an effective estate plan and focused on the importance of communicating your plan to avoid family conflict. You can watch the video replay here.

To quote Laura “Death is the Elephant in the Room. It happens to all of us, but no-one likes to talk about it”.

Many great questions were asked during the event – with some common themes.  We have summarized some of these questions and answers in this blog post.

How do you choose an executor? Should there be more than one, should it be your kids or perhaps a corporate executor?

The work of an executor can be complex and is often time consuming. Most people will name a spouse as their primary executor and then, as a back-up, a close family friend or perhaps a child, depending on their age and capability. Ultimately, you should consider who would be best suited for the job. A few of the traits that make a good executor include good organizational skills, detail oriented, comfortable with numbers, business savvy and likely to be alive longer than you!

There is a misconception that if you have 3 children and you only name one of them as your executor you are not being fair to the others. This is not true. If you are considering one or more of your children, have a conversation with them and see how they feel about being executor or co-executor, and explain what will be involved. They do not need to do it all on their own. Accountants, lawyers and someone like Laura Ross can help navigate the process.

There are circumstances when multiple executors make a lot of sense. This is often the case with a second marriage, so that both the second spouse and children from the first marriage have representation on the estate. In situations with multiple executors, your will should include guidelines on how executors can be replaced and how a majority will be determined in order to avoid a stalemate.

There are situations where you need to turn to a corporate executor because there are no suitable family members or close friends, or because of the complexity of the estate – perhaps it includes business assets. Whatever the case may be, appointing a professional trust company as an executor could turn out to be the most sensible option.

Executors, whether corporate or personal, can collect an executor’s fee as compensation for the work performed. This fee is generally 5% of the value of the estate.

Are there any issues with adding my two children as joint owners on my non-registered account to avoid probate and ensure the account passes easily to them?

Many clients have success passing assets outside their will to their beneficiaries using joint accounts with a right of survivorship. This is especially true for passing assets to a spouse. But it can also work with adult children. Everyone’s circumstances are different.  So proceed with caution when it comes to joint accounts with the next generation, as there are a few serious pitfalls that could prevent you from achieving the desired outcome. First of all, joint means joint. Your kids have access to your funds and could make withdrawals at any time. If your child has credit issues, creditors could have a claim on your joint account. In addition, if your child has marital issues, your account could become part of their net family property. If there is a potential for problems, then don’t use a joint account. It’s better to pay probate and have assets pass through your will, as it absolutely provides a layer of legal protection.

If you are concerned about your accounts being frozen, it makes more sense to add your children to a joint bank account with only enough money in there to pay bills, funeral costs and any other expenses, rather than make them a joint holder of a large investment account.

There are other, more complex, ways to avoid probate that are outside the scope of this article.

Are there downsides to showing your family members your will, especially if some family members are treated differently?

Preparing your family members for what is included in your will in advance of your death could result in either understanding or bad feelings. But if there are bad feelings, at least you are alive to explain why you are doing what you are doing. The goal of communicating beforehand is to prevent conflict later on, after you are gone. Also, you don’t have to actually show the will document, but it’s a good idea to explain to them what is in the will and why. The ultimate goal is to avoid conflict later on when your family is grieving.

Can you comment on living wills?

Living wills fall under the category of advanced care planning, which is the process of planning for your future personal and medical care and includes such items as do not resuscitate (“DNR”) orders. They are an important component of documenting and communicating your wishes with your family and your power of attorney for personal care.

There are a few different ways your wishes can be expressed. You can use a detailed power of attorney for personal care, or you can have a separate document often referred to as a “letter of wishes” or “living will”. The document you use should include more than just end of life care. It should also include your wishes if you are no longer capable of making personal care decisions on your own. One major consideration is whether you prefer to stay in your own home for as long as reasonably possible, if you can afford it, versus a retirement home or other long-term care facility.

Estate planning is more than just dealing with finances. There should also be an emphasis on personal care issues.

How do you provide for children with special needs?

Providing support and care for children with special needs is complex as there are various available resources that provide assistance and specific planning tools that can used. Some of these include the Ontario Disability Support Program “ODSP”, Registered Disability Savings Plans “RDSPs”, disability tax credits and Henson trusts. It is important to understand how these different tools work and how they fit together, because if there is no coordination between them, there could be dire unintended consequences. Speaking to a lawyer or an accountant that specializes in planning for special needs is a good first step.

Does it make sense to use something like Everplan to organize your documents?

As luck would have it, Denys Calvin wrote a blog about Everplan back in 2017. Click here to be directed to the article.

Does the domicile of the “next generation” affect planning for transfer of Canadian assets?

It can and it will depend on how you plan to transfer those assets to the next generation. You need to consider the applicable tax laws in the country where your beneficiaries are resident. For example, if you leave assets in a trust through your will for the benefit of a U.S. person, depending on how the trust is structured, there can be adverse tax consequences for the U.S. beneficiary.

In addition, it is a good idea for your executor to live in the same province as you do. Not only is this practical from an administrative perspective, but there are also several issues to consider including: the impact on tax residency of your estate, foreign reporting requirements for a non-resident executor and bonding issues for the executor, just to name a few. If you have limited options for an executor, this is not insurmountable. But it adds even more complexity and you will want to get good legal advice.