Among Canadians, statistics indicate that more than half of individuals have close relationships with at least five family members. In addition to the family network, just over 50 percent of Canadians report having five or more close friends. Combining these statistics, Canadians on average therefore possess a personal network of support and companionship that totals approximately 10 people.13 In applying that information within the realm of estate planning, a main question that should be addressed is who of those individuals need to be aware of your intentions, as well as who outside of that close network should also know your wishes. While historical thinking and practice for many was not to disclose anything until the reading of a Will, and though some still favour this traditional mentality, there are distinct advantages and necessities when it comes to communicating with certain family members and other key individuals regarding specific aspects of the overall plans.
Individuals named in a Will
When putting together an estate plan and Will, there is often a great deal of time and thinking behind each of the decisions made. With the support and guidance from qualified legal, tax and wealth advisors, selecting the approaches and structures that best suit an individual’s needs and situations is so central to the ultimate realization of the intended outcomes; ensuring the family is taken care of according to your wishes, and to assure a legacy is left in the manner you want it to be. When you consider all that goes into planning in this regard, and the careful and thoughtful mapping that takes place, it begs the question as to why some individuals overlook the importance of open lines of communication with the receiving end to ensure those intentions and objectives are identified and understood. Regardless of the level of complexity or situation, the point to be made is that when the right plans have been structured, and the right people are informed of those plans, the stage is better set for a smooth and successful wealth transfer process.
In the family
A key area some individuals may tend to overlook is the importance of ensuring a spouse is fully informed and up to date regarding plans, documentation, and account information. Some individuals may assume their spouse already knows all of these details, but there are often scenarios in which only one spouse handles certain accounts, investments or assets, for example. A very beneficial and important starting point is to ensure you and your spouse do a collective inventory and compile a comprehensive list of information pertaining to your family’s accounts (banking, investments, etc.), advisors, assets, pension information, and insurance policies.
Doing so will help ensure that all assets are accounted for. Each spouse should maintain his or her own list to share with each other, and it may prove worthwhile to discuss the details with one another as a method to become more familiar with what to expect and also to remove any sense of uncertainty for how to access or manage those components.
Further to a spouse or partner, the most crucial family members to inform about your plans and intentions are children, along with other individuals who will be the recipients of any inheritance or assets. Depending on circumstances and family dynamics, there may be feelings among some that disclosing wealth transfer information ahead of time may come with certain risks, and this is a discussion that will be covered more in depth in the following section of this report.
A common question among some is whether to include relatives through marriage, such as in-laws, children’s spouses or stepchildren in discussions about estate plans. Often times, it comes down to personal preference and the particular family dynamics in those situations. A beneficial approach to consider is consulting with your qualified legal, tax and wealth planning advisors regarding any complexities that exist in your family situation, and the potential advantages and disadvantages of including non-blood relatives in the communication, as well as the level of information to be shared.
Methods to consider
There is understandably a range of comfort levels in discussing estate plans with family members, but the key aspect to recognize is that there is an approach to meet every need and every individual. For example, some individuals favour keeping information to a minimum and only let their children know that they have taken steps to plan for the future of their estate, that they’ve treated them equitably, and where the crucial documents can be found. At the other end of the spectrum, some individuals believe in full disclosure, having regularly scheduled family meetings with children and other close relations and ensuring each family member has a copy of the Will. While these represent vastly different approaches, there are a number of strategies or options that may work for different families.
One of the most effective communication approaches to consider is scheduling and maintaining annual or semi-annual family meetings, either in person or via phone or video conferencing. In these meetings, consider designating a family member as the note-taker, where notes then get distributed and filed. Doing so helps ensure information is accurately documented and decreases the likelihood of conflicts over inconsistent memories or forgotten details. The main benefits of this ongoing form of communication is open dialogue and improved levels of understanding among family members, along with keeping family members updated as to any potential changes or adjustments to your plans or pertinent documents.
The role of executor
An executor is an individual (or institution) appointed to administer the assets of an estate (called a liquidator in Quebec). The executor is legally appointed in the Will, and this is a role that demands a great deal of time, energy and attention to detail. With such a large responsibility and undertaking, an executor is central to the success of the estate administration, but unfortunately there are certain elements that some individuals overlook both in how they select their executor and the information they share with them.
In general, the administration of an estate includes preparing an inventory of assets and liabilities, paying off the liabilities, and distributing the remaining assets as required under the terms of the Will. The executor must settle the estate in a timely and even-handed manner according to the intentions stated in the Will and must also comply with the provincial/territorial laws governing the estate.
With that in mind, when choosing an executor, individuals should carefully consider both the importance of an executor’s duties, as well as their willingness, knowledge and ability to act practically and effectively. In blended family situations, selecting an executor may become an even more challenging decision, as some individuals may be faced with choosing among a spouse, children from their prior relationship, children from their current relationship, or a combination. Given the scope of the executor’s duties, it’s crucial to examine how well those individuals will be able to work cooperatively or consider the potential benefits of choosing a third party. For more details about choosing an executor, third-party services, or acting as an executor, RBC Estate & Trust Services offers some valuable information on the RBC Estate & Trust website.
One of the unfortunate realities among executors is that many are unaware of the scope of the role to which they’ve been appointed, and in some cases, executors aren’t even aware they have been named as such until the reading of a Will. When either of these scenarios occur, it opens the door for significant stress, confusion and conflict. As such, it is so important to ensure the executor you choose is aware of the demands of the role, and is always updated and kept in the loop as to any changes or modifications to your estate plans and where your Will and other documents and information is stored.
Power of Attorney
With the increasing life expectancy within Canada (which is currently averaged at 81.2 years),14 it is beneficial to proactively think about and plan for the potential of incapacity as part of estate planning. This is where selecting a Power of Attorney comes into play. There are two types of Power of Attorney (in Quebec, it is referred to as a “Protection Mandate”). In general, a Power of Attorney for Property is a person, persons or trust company appointed to make decisions about the property, finances, assets and investments on an individual’s behalf in the event that the individual becomes incapable of making the decisions himself or herself. A Power of Attorney for Personal Care is appointed to make personal care and healthcare decisions on an individual’s behalf. It may also include instructions for doctors and other caregivers as to the kind of personal or medical care the individual may want, or does not want, should they ever become incapable of making those decisions. In some provinces or territories, the two Power of Attorneys are separate legal documents and they may or may not appoint the same person as attorney.
Much like an executor, being appointed as a Power of Attorney entails a large amount of responsibility and time, so individuals should be very mindful and conscious about who they appoint. It is also important to consider whether the choice will create any potential conflict within the family or whether there are constraints such as geographical distance, if they have their own family responsibilities to tend to, if they are also acting as your executor, and potential stresses or emotional burdens associated with choosing a certain family member or close friend.