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Thursday, May 12, 2011

The difference between a will and an estate plan

This morning I met with a client to review his current will and talk about his estate plans. His goal was to ensure that if he passed away before his wife and she then remarried, his children would still inherit at least a large portion of his estate. Given that his estate is almost $20,000,000, I can see why he's concerned. To achieve his goal, his will says that if he dies first, his wife gets half of the assets and the children get the other half.

But what he wants is not going to happen. It can't. How do I know? Because almost everything he owns(home, vacation home, investments) is held jointly with his wife, giving her a right of survivorship. His RRSP names her as the beneficiary. Therefore she is going to get all of those assets automatically when he dies, no matter what his will says.

So what is he leaving to his children? Only about $50,000 using his current will. This doesn't come anywhere close to achieving what he wants.

This situation is a perfect example of the difference between a will and an estate plan. It's all very well having a will in place, but it's essential that you talk it through to make sure it really does apply properly and fully to your assets and goals. Everything has to work together, otherwise a will is just a piece of paper. In this client's case, his joint property and beneficiary designations are working against his will.

When this client and I are finished, he will have a proper estate plan. This may involve changing ownership of some assets or creating a family trust or one of several other options. It will take a few more hours of talking and considering and building. When the new will is signed, it will be just one part of a comprehensive plan that ensures my client's goals for his wife and children are reached.

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