Common questions for future goals and five answers to start building a plan

As individuals progress through various life stages, a number of changes or experiences can add layers and complexity to our personal situation and possibly impact our final future goals and intentions.

While these events and experiences can remind us of the importance of planning for the future, the reality is that many still avoid or overlook Will and estate planning-related decisions.

There are a range of statistics that paint a clear picture of the generally low levels of success that families have with intergenerational wealth transfer.

According to research by The Williams Group1 that took place over a 20-year period, of the families who were part of the study, only 30 per cent of estate and wealth transfers were successful.

When you pair this with the fact that more than half of Canadians don’t have a signed Will, and almost three quarters don’t have an up-to-date Will, it becomes clear that the majority of individuals are not giving this topic the attention and forethought it requires.

With this in mind, I am sharing the most common questions we receive at RBC Dominion Securities regarding Will and estate planning, and the points we use to answer them:

1. What should people consider when deciding to give wealth during their lifetime versus through their Will at death?

• It is a very emotional time, for you and those loved ones around you;
• There can be discomfort discussing death and the potential conflicts with family members;
• Ensuring the handling of your Will and estate will meet the deceased’s wishes and intentions;
• A lack of knowledge or understanding on how to proceed with your estate planning.

All of these reasons are why it is important to work with a professional.

2. With a variety of ways to transfer your wealth, varying from the complex and restrictive to the simple and quick, what are some of the options individuals may want to consider?

Every family and every situation is different, so understanding the range of approaches is important. In general, trusts are considered an effective method for distributing assets in a way that helps solidify a particular outcome, while also creating the ability to tailor to individual preferences. Complex trusts include Inter Vivos or Living trusts which are established during one’s lifetime. Examples include Alter Ego and Joint Partner. Testamentary & Testamentary Spousal trusts come into effect after death. Understanding the pros and cons and how they relate to your specific intentions will be the determining factors on the type of trust to use.

3. When giving to multiple beneficiaries what is the difference between fair and equal? Are there specific considerations for business owners?

While people sometimes use the words “fair” and “equal” interchangeably, the definitions are more distinct in estate planning scenarios. Fairness often falls into more of a subjective or situational realm, and equal is qualified more objectively and concretely. Potential challenges in focusing on fairness as the priority in estate planning may rest in the fact that what is deemed to be fair by an individual may not necessarily translate to equal, and the giver’s interpretation of what’s fair may not be in sync with the children’s or other beneficiaries’ points of view or expectations. These inconsistencies can lead to resentment or challenges to a Will if someone feels they have been slighted or have not been adequately provided for.

4. Outside of legal Will appointees, who should know what about your wishes and intentions?

There is a three-step process in communicating who and how to express your intentions and wishes:

• Identifying all individuals named in your Will and estate plans and who outside of that network may be impacted by your plans.
• Determining your comfort level with how much information to share with that group and the method for doing so.
• Ensuring those identified family members and key individuals remain in the loop on an ongoing basis.

5. What should heirs know when it comes to your estate plans?

Effective communication is a key part of effective estate planning. Let your family know when these documents are updated or these events occur:

• Updating of the Will or drafting of a new Will.
• Divorce, separation or remarriage.
• Death of a spouse.
• Changes to account information/details or where accounts are held.
• Opening or closing of accounts.
• Change in professional (lawyer or accountant, for example) or working with a new professional advisor.
• Insurance policy changes or cancellation.

(This article is supplied by Christopher D. Burns FCSI, FMA, CIM, BSc, BA, Portfolio Manager and Wealth Advisor with RBC Dominion Securities Inc. and a member of CIPF. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. Please contact Chris if you are interested in a complimentary webinar with him and his team. He can be reached at 416-289-4150 or 1-888-440-7680 and [email protected].)