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Monday, April 26, 2010

Can I maintain privacy during estate planning?


For many people making Wills, privacy is an issue, and rightly so. I often hear from parents that they don't want to let their children know how much money they have. Their dilemma is that if they have their kids involved in the estate planning process as they would like, they will have to divulge all of their financial information.

This brings many people to a standstill. They want the children to know what role they will be expected to play when the parents pass away. They want the children's input into issues such as who will get the family home or cabin or business. But they are just not comfortable revealing their net worth and other details.

I can see the parents' point. Some are worried that if one of the children is experiencing financial setbacks, that child might start pressuring the parents for money. Some are worried about word getting around the neighbourhood that they have a few bucks, leading to robbery or interference by neighbours. And some just feel that it's none of their children's business.

So is it possible to talk about estate planning without letting everyone know the numbers? Yes.

I would suggest separate meetings. One can be held between the parents and the lawyer only. In this meeting, all values and amounts should be disclosed by the parents. This is important because one of the things a lawyer will do during estate planning is give an idea of whether there is going to be a significant tax hit. As mentioned in other posts, distributing capital property such as real estate (not your principal residence) or shares of a private company may lead to capital gains tax. As part of planning, a person need to be aware of whether there are assets in the estate to pay for those taxes, or ways to minimize or eliminate the taxes. The lawyer needs to know approximate values to do that. Once they've dealt with taxes, the parents will be able to determine what is left to give to the beneficiaries.

Remember that lawyers are bound by client confidentiality and cannot and will not disclose information without a client's consent.

In the second meeting, the kids can be invited to attend. All of the issues that have an impact on them can be discussed. The parents can find out what is important to the children, and vice versa. In this meeting, they can talk about items or assets such as the family home, the cabin, or treasured heirlooms, without values being named. The parents can talk about the kind of assets involved, such as life insurance, pension or investments, without stating the values.

It's reasonable to say, should the children ask for specific values, that the point of the meeting is not to crunch numbers but to talk about issues and ideas.

I'm definitely in favour of families getting together to share ideas and input on an estate plan, but I'm also very much in favour of each individual maintaining a comfortable level of privacy.

I discuss this in more detail in my upcoming book, "Estate Planning Through Family Meetings".

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