This Blog was written by Suzanna Walter, Estate and Trust Consultant with Scotia Wealth Management
On July 9, 2020, I wrote about the importance of road testing your incapacity plan. I would like to outline a similar road test for your Estate Plan.
For most people the cornerstone of their Estate Plan is the Will. However, when road testing your estate plan, it is not enough to review just your Will because the Will is not the only vehicle to transfer wealth on death.
The following are often used to distribute assets outside of the Will.
1. Assets with a named beneficiary(s) such as RRSP, RRIFs and TFSA, and life insurance products.
2. Assets held in joint name with rights of survivorship.
3. Assets held in a Trust such as a Family Trust or an Alter Ego or Joint Partner Trusts.
While using the first two vehicles can be deceivingly simple, there can be many potholes on the road if not properly planned. (joint property: see Corina Weigl’s blog on January 18, 2019, Brittany Sud’s blog on January 19, 2018, Steven Frye’s blog on June 6, 2017, and Corina Weigl’s blogs on July 29, 2016 , and Nov. 11 2010,; beneficiary designations: Demetre Vasilounis’ blog on July 17,2020; Isabelle Cadotte’s blog on Oct. 3, 2019)
Here is a checklist for road testing your Estate Plan:
1. Goals of Estate Plan: The first step is to consider your Estate Plan goals which may include safeguarding the inheritance of a beneficiary.
2. Review distribution of assets passing outside of your Will: Does the distribution of these assets dovetail with your Estate Plan and your Will? If you have different beneficiaries for these assets than your Will, make sure you have a good understanding as to who is responsible for paying the tax liability on these assets as it may not be the beneficiary of the asset.
3. Review your Will (s):
a) Review Executor(s)/ Trustee(s): Some attributes you should consider: trustworthiness, age and health, willingness to act, competency, impartiality, ability to get along with other family members and Canadian residency. Complex assets and strained family dynamics can make Trust Companies a good option. (see Paul Fensom’s blog 2, 2010, Steven Frye on June 15, 2018)
b) Your appointed Executor(s)/Trustee(s) are in a good position to start administering your estate because they:
i) Have agreed to act.
ii) Know Your Funeral wishes or arrangements.
iii) Know about your financial affairs, assets and liabilities, the names of your tax and legal advisors, and insurance agents.
iv) Know the location of your original Will(s) and important documents.
v) Know how to contact all of your beneficiaries.
c) Would your Estate Plan benefit from multiple Wills: This may be the case if you have assets outside of Canada or if you live in a jurisdiction such as Ontario, where you can reduce Probate fees by having multiple Wills.
d) Testamentary Trusts: If one of your goals is providing financial security and protection for a vulnerable beneficiary, do you have the appropriate Trust and trustee in place for this beneficiary?
e) Personal Belongings: Have you made any provisions on distribution of Personal Belongings? It no longer surprises me when I learn of the breakdown in family relations due to arguments over items of little or no value.
4. Have you considered other vehicles, such as Alter Ego/Joint Partner Trust as part of your Estate and Incapacity Plan?
5. Get proper tax and legal advice: Estate and incapacity planning can be complex, and there are many traps for the unwary so getting proper legal and tax is essential for a smooth, and trouble-free road trip.
ShelleySeptember 10, 2020 - 3:26 pm
Very complete checklist Suzanna. Easy to follow with great reference material sourced to support. I will definitely be sharing this with clients and branch teams alike.
Mary Catharine LawlorSeptember 10, 2020 - 7:27 pm
“items of little or no value.” While the advice is good, it’s been my experience that lawyers fail their estate trustee clients by not clarifying that while items have little market value, they may have significant emotional value to the beneficiaries. By ignoring the possibility of significant emotional value, estate trustees who just make trips to the thrift store bring upon themselves the ugliness that paying regard to beneficiary sensibilities would have spared them.