5 things to know when developing your estate plan

My partner, Kelly Willis, wrote a poignant post last week about the loss of her husband and the estate challenges she found in her path, all during a time she struggled with her bereavement. As a private client lawyer with many years of estate planning under my belt, I wanted to share some of the more frequent issues and misconceptions I have witnessed in dealing with families who were unprepared or had inadequate estate plans.

Estate planning is a little like pre-nuptial agreements for couples excited about their pending marriage…why talk with lawyers and plan for the end of marriage when all seems so perfect today? Wills are a bit like that….why think about death, loss and sorrow while I’m relatively young, healthy and the sun is shining? You know it needs to be done….but you rationalize that “I’ll get around to it.”

In the world of estate planning, it’s so very wise to plan for dark days while it’s bright and sunny. The consequences of not doing so are more profound than you might expect. If you think the law is designed to do what you would probably do in the “unlikely” event your family is caught off guard by your unexpected death without a valid will, or incapacity without a power of attorney, you should think again.

Here are 5 things to think about when developing your estate plan:

1. It doesn’t automatically all go to your spouse.
   Many people assume this: that if they die unexpectedly and without having gotten their will done on time, the law will ensure everything will go to their surviving spouse. If you leave kids behind, this just isn’t true. In Ontario, your surviving spouse will receive a preferential share ($200k) and then split the balance with your children (the split determined on how many kids you leave behind…if you have 2 or more children they will receive the lion’s share and your surviving spouse a minority interest). And if the children are minors and the government steps in to represent their interests…not a desirable scenario;
2. Estate planning is not simply “death planning.”
   It also means planning while you’re alive. So think of it that way because your professional advisors will. Strategically using family trusts and holding companies…developing proper shareholders agreements…marital agreements…preparing for potential incapacity (mental or physical) through powers of attorney….these are all estate planning issues developed while you are alive;
3. Don’t let the “tax/probate tail wag the dog” as many do. Determine your wishes, what is best for you and your family, all in the context of your unique circumstances, and then envelop those wishes with the most efficient tax and probate plan possible;
4. Be flexible….and ensure your plan is flexible. When you think it through, the estate you create through your will may go on for decades following your death as trusts are created for children and grandchildren. Your will is then rather biblical in nature for your family because it may govern your estate, and potentially impact lives, on an inter-generational basis. And just as it is impossible to count the number of angels on the head of a pin, so too is it impossible to foresee so far in advance for your family….so develop a flexible plan that allows your executors to adapt.
5. Your kids are all right…or are they?
   Most wills dole money (and big money) out to kids at defined ages without any thought as to whether they’re prepared to receive it. Why not develop your estate in a manner that helps prepare your child to receive a large amount (by, say, ensuring that your child participates, upon attaining majority, in the administration of his or her trust fund….requiring your child to deal with professional advisors, taxation, investment decisions and the like in advance of receiving his or her inheritance)?

Without a current will that is considered and strategic, that integrates all of your affairs…from your family trusts, to your company and shareholders agreement, to your cottage and second home outside Canada, to your life insurance and tax planning…you are certain to leave your family with a tangled mess and a challenging labyrinth of complicated issues they are forced to sort through “after the fact.” This mess invariably leads to increased professional costs, delays in distributions, frozen assets, increased tax & administrative fees, reduced estate values, increased likelihood of court intervention…and, regrettably, must be shouldered by those you leave behind…the ones you love the most. So speak to your advisor. Your sunny days are now.