The Canadian Guide to Will & Estate Planning: A Review

A lot of newspaper space has recently been devoted to financial literacy and the lack of planning with regard to retirement preparation. The average Canadian seems to be facing issues with debt management, retirement income planning, not to mention just staying gainfully employed. And that’s the short list.

These kinds of distractions can create even bigger problems, resulting from unanticipated events. We all like to think that we’ll live long healthy lives and die peacefully, knowing that our wishes are being handled precisely as we envisioned. In reality, for most people, this is a pipe dream. And to add insult to injury, now we’re being bombarded with warnings that we are likely to experience cognitive impairment if we are ‘lucky’ enough enter old age !

As with many things in life, we typically fail to address these issues early on, due to procrastination, ignorance (I am being kind), denial, indifference, or a combination of the above. But we cannot blame our inaction on the lack of information or tools to prepare for the inevitable. And, with the third edition of The Canadian Guide to Will and Estate Planning (WEP), authors Gray and Budd have provided an invaluable map to getting the show on the road.

The only way I can do justice to this book, is to highlight the lessons provided, rather than regurgitating the specific content. While the book is not (and cannot be) a thorough guide on every facet of estate planning (it still runs 416 pages in total), it does an excellent job of listing the most critical elements in getting a plan in place. The four page table of contents is proof enough. As I read through WEP, I composed a list of these valuable lessons provided by the authors. I call it my “C” list.

Consideration

The sad reality is that almost half of our population does not have a formal will on file, not to mention the appropriate power of attorney documents. Selfishly, some of us just assume that someone will ‘figure it out’ on our behalf if we should die early, or become disabled (mentally, or physically). The settlement of an estate, or the process for assuming control over a disabled person’s affairs, is riddled with complications, legally, financially and otherwise. So its always best to arrange your affairs by thinking about the people who will actually have to execute the plan on your behalf.

Complexity

Few of us understand the potential problems associated with estate management. Without consulting a lawyer or financial planner at the earliest possible time, we leave ourselves open to unforeseen legal roadblocks. Perhaps you’ve remarried. Perhaps there are children involved and you want them to have the peace of mind that they will be taken care of properly. Perhaps you are a small business owner and want to ensure that your current partner assumes full control of the business. Perhaps you want someone to inherit your house, while others will split your equity portfolio. Now multiply this list by 10 and you’ll begin to understand that there is a significant benefit in utilizing the skills of a competent lawyer and tax specialist. Estate planning is NOT instant coffee. Want proof ?  Just read the chapter covering Probate Process – that chapter alone is worth the price of admission.

Complete & Comprehensive

The authors cover a wide range of topics in this third edition of their guide. They include estate planning, will plans, POA, Trusts, Probate (more on this one below), Taxes (always a favourite), U.S. Assets, vacation properties, family businesses, charitable giving, Insurance, and the often forgotten step of funeral planning.

As you can see, there is a lot to be done to prepare for the inevitable outcomes in life. Estate planning does force one to confront one’s mortality, so it’s easy to see why it’s predictable for people to procrastinate. But a real plus in the WEP guide is the comprehensive checklist in the Appendix. It really does cover most information requirements. In fact, there are even checklists related to the selection of retirement residences and nursing homes. I know exactly what you’re thinking: “they’ll never put me in one of those places”. Yeah, right.

My only regret with the checklists, is that they do not appear as a Word document or PDF somewhere on the web. Perhaps a value-add somewhere down the road for the guide purchaser?

Current

Estate planning is a component of an overall financial plan. And like a financial plan, it is a dynamic process. There are simply too many variables that can change as life progresses. Your marital status can change; the size of your family may change; you may acquire possessions with significant value. And despite the reality that the government moves at glacial speed, legislation, tax laws  and practices can change. The fact is, even the best plans must be revisited regularly. Some suggest will reviews every four years or so.

Clarity (Intent)

At times, we all seem to have a pretty good idea of what we think needs to be done, if the worst should happen. The kids will get this. Mom and dad would get something else. A good friend will get another item. It goes on. The problem is that these wishes are often locked inside a brain and not on a piece of legal paper. More often than not, if  your estate settlement ends up in court, the judge is going to focus on what you intentions were. If they are not written down somewhere, well, then everything is up for a challenge. Everyone has the right to complete a hand written will (holographic) or a will kit document

if they wish. But experience shows that it’s good to involve legal counsel to ensure that your intent is properly documented. This is especially relevant if you wish to include charitable giving in your estate plan.

Children

The wedding bells have rung, you’re back to work, the mortgage and car payments have commenced and it’s nine months until a new face joins the household. Your parents have suggested something about life insurance and you’re thinking about the costs of education down the road. But nothing has been done as yet. Fact is, changes in the family have major ramifications for estate planning. Having proper life insurance in place is an often overlooked step. Knowing what will happen to the kids if mom and dad don’t make it back from their Mexican holiday is another consideration. Children change everything, and that’s why estate plans have to be updated regularly. Also part of the consideration point made above.

Communications

This is one of my favourites. I don’t know how many times I have read cases studies related to dysfunctional families (especially the affluent ones), who refuse to discuss their estate planning goals with family. Nothing is as dangerous as introducing emotion into the financial planning process, and any experienced financial planner will acknowledge this fact. But the reality is that emotions will inevitably enter discussions, leading people to clam up and simply avoid the issue. Anyone with children and a cottage will understand this.

Even if you do a thorough job of documenting your wishes in the will (or Power of Attorney – POA, etc), it’s always a good idea to at least discuss your hopes with the family. You never know, with the clarity provided by communications, you just might need to revise the documents with some input from the family.

It’s especially useful to discuss the plan with the intended executor/executrix. Nothing provides a shock, like finding out you’re handling someone’s estate without any prior warning – part of the consideration point made above.

CRA (Canadian Revenue Agency)

Discussions about taxation can certainly make the blood boil. Although we complain about providing more than enough revenue for the government to squander, we often avoid the available

(and legal) avenues to minimize the taxes we pay. Nothing provides the government with windfall opportunities like bad estate planning. Whether it’s probate taxes, our ignorance about the value of trusts, a lack of planning around recreational properties, poor beneficiary designations, etc., there are simply too many opportunities for the government to profit from our missteps. Most people have no idea about the tax requirements related to the year of death, but this is covered in detail in the book.

Case Study

The authors provide some very handy examples (referred to as Planning to Protect) to clarify the points they make covering specific topics. A very strong reference tool, as the reader revisits the chapters.

In the next edition of WEP, I think it would be great if the authors could add a complete case study covering a moderately complex estate plan, especially one that includes the actual execution of a testamentary trust.

Conclusion

The Canadian Guide to Will and Estate Planning is a valuable tool, and comes highly recommended.

Gray and Budd (one a lawyer, the other a chartered accountant) have done an excellent job of providing an updated, planning framework that is both easy to follow and comprehensive.

The authors point out that the book cannot provide the depth that is provided by professional resources such as financial planners, estate lawyers, accountants and tax specialists. That is why there is a specific chapter focused on the selection of Professional Advisors.

Remember that there are more than 400 pages of information in this book. It demands that you have a highlighter pen at the ready, to mark the important passages that will support your estate plan. Sure, it seems like a daunting task to put such a plan in place, but refer to the point covering Consideration, above. As an added bonus, doing your homework and being very clear on your goals, helps to minimize the number of hours required to confer with your legal counsel (another C – costs !!).

If you don’t feel you can benefit from the guidance in this book, at least buy a copy to leave with those who have to deal with the inevitable on your behalf.