In my past legal practice, I found that estate planning provided people with comfort, confidence and certainty. For some however, the mere mention of it causes anxiety.
Perhaps this is seeded in a superstitious belief that by contemplating your mortality, you might somehow bring it about. Or maybe it’s the anticipation of having to deal with tough decisions that may have no clear right or wrong answer, where logic and emotion must be delicately balanced.
Whatever the reasons, it is an area where people tend to procrastinate, and that’s risky both for you and for the people you care about. By instead tackling the process with a constructive mindset, you are able to de-stress it, and can turn it into a positive, reaffirming journey.
A people perspective
Estate planning is more than simply ‘who gets what’. It gives you a chance to think about who you are, what matters to you, and most importantly who matters to you. That means taking care of yourself, both now and in the future, and taking care of the people closest to you: now, in future and when you are no longer around.
Viewed through the principal lens of benefiting people and only secondarily as a distribution of things, estate planning emerges from the cold shadow of legality into the warmth of personal relationships.
As you may expect, this adds complexity to the decision-making, often calling for input from professionals beyond a lawyer alone. Commonly these will be financial professionals, but also may include guidance of a spiritual nature. The key is to have such advice coordinated so that the people are kept in focus, and the ultimate plan is legally sound.
The estate planning process
At least part of the concern for those anxious about estate planning is the prospect of dealing with paperwork. Undeniably, material must be reviewed and documents eventually executed. Along the way, however, there is much to ponder, to appreciate and to learn from. To turn a phrase from Marshall McLuhan, the method is the message.
The most effective estate planning involves you as a full participant. Just as your lawyer is an expert in the law, you are the expert … in you. Working cohesively, you will be able to uncover what is relevant, gauge significance, prioritize among issues, and explore options.
But the starting point is back with that candid look at where you are now, before you can decide where you are going. In a sense it is that simple, while at the same time not easy. It takes effort.
What's up (with the) docs?
In due course, that effort leads to the creation of documents that make it clear who is to benefit from your planning, and who has responsibility to carry it out.
Most people are aware that a Will allows you to direct who is to receive your estate property: your beneficiaries – and who is to manage the distribution of it: your executor. The technical term for an executor in Ontario is an Estate Trustee, which reflects the duty of that person to own and manage the property as a trustee who is legally bound to protect the best interests of your beneficiaries.
And while you’re still around to enjoy that property yourself, you can use a document called a power of attorney for property to name someone to manage it for you if and when you can’t. Similarly you can prepare a power of attorney for personal care to assure that someone can deal with your housing needs, health care and medical consent if you are incapacitated. In either case, taking this initiative doesn’t cause you to lose your own ability to decide, but rather extends authority to someone you trust.
These three documents form the foundation for the certainty we want.
Shortcuts and short circuits
Being confident that the core plan is there, your attention may turn to cost savings. That’s the priority sequence so that the prime purpose of taking care of yourself and those around you remains intact.
Of course, the classic cost savings target is the estate administration tax, or as it is more commonly known, probate. As with the priority of when to seek cost savings, keep in mind the proportionality of probate, which is no more than 1.5% of the value of estate assets.
Familiar techniques to reduce probate can range from keeping beneficiary designations on life insurance and registered plans up to date, to holding property in joint ownership with right of survivorship, and making gifts to people now rather than later. While each of these may result in reduced probate tax, they are not without their own costs and potential drawbacks, so again professional advice is critical.
Getting it all going
The best of intentions can be the worst of planning if you don’t get started. So when I say it’s go time, I’m not wishing you ill: I mean that it’s time to go to work on the estate planning. That means considering and recording what you have, who you care about, and how the two intermix.
While you do not have to use a lawyer, it’s the best way to bring the right expertise to bear. If you don’t know a lawyer, the Law Society in Ontario has a referral service, or you may prefer to get a recommendation from someone whose opinion you respect. Either way, ask and satisfy yourself that the lawyer has the necessary experience in estate planning.
Once underway, be sure that your lawyer is aware of all your professional advisors so their input can be included where and when appropriate. As well, to the extent that you are comfortable with it, it can be helpful to communicate with your family and others you care about that you are actively working on your estate planning. The decisions are yours to make, but considering their perspectives can help you determine if your plan will (or should) carry out as you desire, or if adjustments may make sense.
Finally, once you have put the planning into place through the decisions and documents, you need to monitor it. That runs along three lines:
- A prudent course is to schedule a follow-up with your lawyer no more than five years down the road to check whether changes in the law or other events outside your control might affect your plan.
- As well, having made an inventory of your property, you will now have a better sense of the implications if there are changes to it.
- Lastly, and most importantly, if there are changes in the people or your relationships with them, it may be time to revisit things to be sure you are taking best care of you and the people who matter most to you.
Speak to your Meridian Wealth Advisor for perspective on these important issues.