Yes, Virginia, you really do need a will or estate plan

The author of the attached article, Mary Anne Rees, talks about why many people need estate planning advice as opposed to do-it-yourself wills. She raises a very important point - that people believe their affairs are simple when they are not. I sometimes think that people are wilfully blind to the potential problems because they don't want to spend money on a lawyer, or because they suspect they are being tricked into believing simple things are complicated. Or perhaps they don't want to think about how awful it could really be for their families so they pretend everything is alright.

Click here to read Ms. Rees' article, which contains some common sense ideas about will kits as well as other estate planning matters.

In my opinion, will kit wills can be just fine, as long as they are used by the people for whom they are designed. Will kits are not meant to be used by people with blended families, or business owners, or those with insurance policies, rental properties or investments. If your estate contains only a bank account and you have an obviously good candidate to be your executor, you can probably use a will kit.

If you're using a will kit because you're too cheap to pay for legal advice even though you have assets or family members that could create issues, so be it, but your family will pay for this short-sightedness after you pass away.

The attached photo of Ms. Rees is credited to Jonathan Marrs and was found at www.bizjournals.com.

The importance of leaving a will

In this article from www.estatedebate.com, Toronto lawyer Ian Hull says that many  people don't have wills either because they are making excuses why they haven't gotten around to it, or they are making false assumptions that they don't need one. Which are you? Click here to read the article.

The best estate plan in the history of the world

That's a pretty ambitious title - "the best estate plan in the history of the world". Whether or not you agree that the estate plan set up by its originator, James, is the world's best is really a matter of personal philosophy.  His plan involved leaving none of his millions of dollars to his four children, and leaving it all to charities except for $3. I'm attaching an article from the Farm and Ranch Guide, which tells James' story. Click here to read it and decide for yourself whether this is a good way to deal with your estate and your children (and to find out what the $3 was for).

The basic estate planning documents that everybody needs

The term "estate planning" sometimes makes people think of millionaires who live behind wrought iron gates with a butler at the door. But all it really means is that you've put plans in place to deal with your eventual passing and for the possibility of losing your mental capacity. Estate planning isn't just for the wealthy. Everyone with a family needs to think about estate planning.

Most people know they need a will, even though a good half of Canadian adults don't have one. Even with a valid will in place, you haven't fully prepared yourself to protect your family and your assets. Your will does nothing to help you or your loved ones if you are alive but unable to make decisions due to dementia, illness or injury.

Here are the basic documents that everybody should have:

1.  A valid will that is kept up to date to reflect changes in your life. The will should be prepared as part of a bigger estate planning picture that takes into consideration your joint property, your designated beneficiaries on policies and plans, your insurance coverage and of course your plans for your family members left behind. All of these things must be co-ordinated so that your documents don't contradict each other or create confusion that will end up being sorted out by the courts.

2.  An Enduring Power of Attorney, which is also called a Continuing Power of Attorney, or a Power of Attorney for Property. This document allows you to appoint someone to make financial decisions for you if you should be unable to do so for yourself. Most commonly this document is used when a person develops dementia, but it may also be used if you should be severely injured in an accident or become very ill.

3.  An Advance Health Care Directive, also called a Personal Directive or Health Care Proxy. The person you name in this document will be able to make decisions for you about medical issues, health care and personal issues. The document should also contain your instructions on end-of-life decisions.

The above three documents are usually sufficient for individuals whose estates are not complicated. Business owners may find that they need additional estate planning documents, such as:

4.  Shareholders' Agreement, sometimes called a buy/sell agreement. While not solely an estate planning document, a shareholders' agreement should address what is to happen with shares of a privately held company if the owner should pass away or lose mental capacity.

5.  Life insurance to fund the buy/sell agreement.

6.  A written business succession plan that sets out who is to take over the family business, and how that plan is to be implemented financially.

7.  A holding company may be needed to funnel excess cash out of an operating company to improve the potential tax situation.

Individuals differ, and so do their estate-planning needs. You may find that you have specific goals that will require additional documents to be made. For example, you may wish to leave a Memorandum of Personal Effects that gives certain items to specific people on your passing. You may wish to leave a Letter to Executor that leaves personal messages, gives further explanations or expresses wishes to your family members.

Start by making sure that you have the first three documents in place and keep them up to date. An experienced estate planning lawyer can help you decide what else you might need or want to protect your loved ones.

8 estate planning lessons from "Downton Abbey"

Downton Abbey is a huge hit, and I'm one of its most devoted fans. As an estate-planning lawyer, I've always secretly loved the fact that the main story line for this show derives from a derailed estate plan. So far, the fall-out from Lord Grantham's failed estate plan has taken up three seasons!

I was pleasantly surprised to find an article today talking about the estate planning lessons we can learn from this wonderful show. Hopefully the lessons to be gleaned from it will help the rest of us wind up our own estates in less than three seasons.  Click here to read the article from www.lifehealthpro.com .

Photo credit: AP Photo/PBS, Carnival Film and Television Limited 2012 for MASTERPIECE, Nick Briggs.

When to make a marriage agreement part of your estate planning

I recently came across this article from Donna Neff, a lawyer in Ontario. It very clearly talks about how a marriage agreement can help a married couple meet their estate planning goals. The issue that Ms. Neff addresses is how the husband and wife can ensure that should one of them pass away, the other won't make unilateral changes to their estate planning. Click here to read the article.

Estate planning checklist before you travel

I hope you all returned safe and sound from your Christmas travels. November and December are often extremely busy months for estate lawyers because so many people realize right before they travel that they haven't yet put their wills in place.

Getting your wills done before you travel is a good thing. Peace of mind is important, whether you're the one traveling or the ones left at home. However, there is more to it than just a will. Check out the following article from www.estateplanning.com that provides a checklist of estate planning items to get organized before you travel. Click here to read it. The article is American but still applies in almost all aspects.

Why you should make estate planning a priority in 2013

Estate planning isn't really about money. Many people jokingly tell me that they haven't done any estate planning because they don't have much of an estate. I understand that not everyone has tons of assets, but what is being missed is that your marriage or divorce, your joint account with your kids, and your insurance policies are all big parts of your estate plan. When you pass away, what assets you do own are going to change hands, and perhaps not in the way you anticipate or would like.

The National Post has a recent article that discusses some of these issues and the way they impact our lives. It makes a lot of sense, and applies to each and every one of us who has a spouse, divorce, children, life insurance policy, RRSP, TFSA... you get the point.  Click here to read the article.

Crafting a will is sensible planning when you're young

There's a widespread idea that estate planning is only for older people. I personally believe that is incorrect, and that anyone regardless of age needs a will once they have a spouse, children or assets.

I was interviewed along with a few other people who work in this area of law about that very topic not long ago by a reporter. I hope that those of you in the 18 to 40 age range will check out the article to see what all of us had to say.

This article was published in the Vancouver Province on October 28, but for some reason I didn't spot it until today. Click here to read the article.

Don't take these shortcuts

I'm attaching a link to an article by Elaine Blades of Scotia Private Client Group, which I especially like because Elaine speaks in a straightforward way that really gets her point across. In this article - click here to read it - she talks about two things that people tend to do with their estate planning because they think they are shortcuts. Unfortunately, the shortcuts tend to backfire in ways that people just didn't foresee. I bet you anything that when you read this article you'll recognize them as things you or your parents have done or you were thinking of doing with your own planning. One involves joint property and the other involves keeping things too simple. I highly recommend reading this one.

Why is it so hard to talk to my parents about estate planning, and how do I overcome that? Part I

Some topics have unwritten values attached to them that we react to without consciously realizing it. For example, some life events are generally agreed upon as being good news for those who are involved, such as weddings, promotions at work, or winning the lottery. Other life events are generally agreed upon as being bad news, such as divorces and bankruptcies.

Unfortunately, almost all aspects of estate planning fall within the "bad news" category. It's almost impossible to characterize life events such as dying or becoming critically ill as anything else. Without even having to consciously understand or articulate the reasons, we know that talking about estate planning will involve talking about unpleasant subjects. This is the challenge you are facing when trying to get your parents to talk about estate planning.

Everyone agrees that it's hard to bring up a sensitive topic such as asking your parents to plan for their eventual passing away. It's even toughter to bring up planning for mental incapacity. In most families, talking about money is also taboo. Many people who fully understand the need for planning to be done still delay doing anything about it because they simply don't want to open up emotional or controversial subjects with family members.

If you're uncomfortable talking about death, particulary with beloved family members, you're certainly not alone. Avoidance is a very natural reaction to unpleasant topics. This is why in most conversations about estate planning you will not usually hear an individual say "when I die"; instead you'll hear the person say "when I pass away", "when my time is up", "when I'm gone", "when I kick the bucket" or most commonly "when something happens to me".

Our society has several euphemisms for dying, and for good reason. You don't want to frighten, sadden, or upset your listener, but you strongly suspect you will do so when you bring up certain topics. Euphemisms help to keep a little bit of distance between yourself and the idea of dying. This is certainly understandable; nobody wants to be the cause of tears or sleepless nights. If a family member is terminally ill or shows signs of dementia, the task of bringing up estate planning seems impossible. Take comfort in the fact that almost everyone feels the same way.

Added to the discomfort of the topic itself is the worry about setting off sensitive family dynamics. Almost every family has at least one or two individuals who have had disputes with relatives, or personalities who clash with others. Sometimes getting along with certain family member is a matter of delicate balance. If harmony has historically been hard to achieve in your family, it might seem to go against the grain to disturb it now by talking about difficult issues. In other words, it's just easier not to start a fight by bringing up a sensitive topic.

Often people think that talking about death and money in the same conversation is distasteful. They worry about looking greedy if they ask their parents if they've made a will. However, estate planning and incapacity planning are not just about money. They are also about looking after each other, protecting loved ones, making provision for minor children or grandchildren, and showing respect for the wishes of those doing the planning.

*Coming up in Part II: Overcoming the negative view of estate planning*

*This post was excerpted from my book "Estate Planning Through Family Meetings (Without Breaking up the Family)".

Begin end of life planning now with your aging parents

This article from Rev. Dale Susan Edmonds at http://www.stillvital.com/ is packed with good ideas for talking to your aging parents about their planning, even when the parents tell you they've got "everything taken care of". Click here to read the article.

The attached photo of Rev. Edmonds is also from that site.

Don't make a law firm a beneficiary of your estate

This article from the Financial Post is an excellent discussion of how estate planning can accomplish what you want and prevent family disputes. Click here to read it. It contains several excellent tips.

Brits turn to the net for estate planning

Where do you get your estate planning information and advice? The fact that you're reading this blog puts you in the group that turns, at least in part, to the internet. According to the attached article, more people in Britain use the internet to research and plan their estates than use any other source other than lawyers. I don't know of any statistics about Canadian users but wouldn't be surprised to see similar numbers.

The internet can be a fantastic source of information, particularly if you are short of time or work odd hours or are not very mobile, because the internet is available at all hours. There are some drawbacks though.

The first drawback is the quality of the source. Let's face it, anyone can put up a webpage and call themselves anything they want. Any time you use an internet source you should evaluate the source as fully as you can. For example, there is one blog that I checked out a few times because the topics interested me, but the posts themselves appeared to be written by a child. One thing I noticed is that they referred to "anointing" a trustee rather than "appointing" one. Other posts had similar mistakes and they did not appear to be translation errors. It's no big deal if a client use the wrong word now and again, but a person putting himself or herself forward as an expert in something should know what the words mean.

The second drawback is the applicability of the information. Are the contents of the webpage applicable to you specifically? For example, Canada, the US and the UK have very different tax systems, so it is a mistake to rely on information from a source outside of your geographical area.

A third drawback is understanding how the information impacts you. There are some webpages and blogs I've read that are so technical and intimidating, they make my eyes glaze over. It's easy to misunderstand whether something applies to you if it's full of legalese or industry jargon.

Even though I am one of the people who puts information out there on the web for people to use, I still recommend that people see a lawyer for estate planning unless their estate is absolutely straightforward. This means that you should talk to a lawyer about your planning if you have children, a handicapped family member, a business, a blended family, land in a foreign jurisdiction, jointly owned property with anyone, or dual citizenship. If you want to leave money to a minor, a handicapped person or a charity, or you are considering any kind of trust, you should speak to a lawyer. If you are doing anything unusual such as treating your children differently or cutting someone out of the will, you should speak to a lawyer. I recommend this so that you will end up with a document that will carry out your wishes.

I always hope that the people who read my blog (and thanks to each and every one of you for coming back so many times!) will use it as a source of ideas, and a way of deepening the knowledge they have found elsewhere.

Click on the link below to read the article.


Brits turn to the net for estate planning Easier

Simple estate planning may not be so simple after all

This article from About.com discusses home-made estate planning such as putting kids' names on your assets. I agree with the author that this may not end up being as simple as you think. Sure, it's simple and easy to actually put it into place, but the outcome is often far more complex and expensive than you ever thought possible. Click here to read the article.

Elizabeth Taylor's careful and organized estate planning

For once a celebrity estate is a good news story rather than a distressing debacle for the family left behind. This story talks about the estate planning Ms. Taylor took care to arrange in advance. Impressive. Click here to read the story from The New York Observer. The attached photo of Ms. Taylor is also from that story.

Can I name my sister as the beneficiary of my RRSP?

As I've said before, the question is never "can I?" when it comes to legal and financial decisions; it is always "should I?"

A reader asked me whether he could name his sister as the beneficiary of his RRSP. To answer this question for a customer, I'd want to know a couple of things first. I'd want to know who else is in the picture that he might name. I'd want to know what other assets were available. And I'd want to know if there was any specific reason for leaving this asset to his sister.

All of these factors work together. One outcome that is affected by the choice of beneficiary is taxation. Money put into RRSPs is not tax-free; it's tax-deferred. That means that the tax is paid when the money is taken out of the RRSP. If the reader names his sister as the beneficiary of the RRSP, tax must be paid at the time he dies and she receives the money. But if he had named his wife, the RRSP could roll over to the wife without any tax being paid.

Let's look at how this affects his estate. If he had an RRSP with $250,000 in it, and rolled it over to his wife on his death, the wife would receive the entire $250,000 and no tax would be paid. If he named his sister, on his death the sister would receive the entire $250,000. However, his estate would have to pay the income taxes on the money, which could amount to as much as 40% of the money.

This means less money for someone else in the estate. If the reader was trying to create an equal distribution among a group of people, say his siblings, he would have accidentally messed up his own estate plan.

There is always the possibility that the reader asking the question doesn't have a spouse, but if he does, he should be aware of the effect of naming his sister rather than his wife.

If the reader's goal is to give some financial help to his sister, there might be another asset that could be given to her with a better tax result. For example, he could leave a life insurance policy to his sister without triggering any tax to his estate.

When making decisions such as who should be named as a beneficiary of a specific asset, the entire estate must be looked at as a whole to make sure one decision isn't adversely affecting another.

Trial and Heirs' top tips for 2011

This story was posted on a blog called http://www.probatelawyerblog.com/ which features celebrity estate fights. It looks back on celebrity estate mistakes of 2010 and gives some suggestions for planning in 2011. The tax information is American, but the tips are still worthwhile. Click here to read it.

How does forgetting about tax upset an equal distribution?

Whenever you meet with an estate planning lawyer, part of your discussion should be about taxation. You need to have a pretty good idea of what tax liabilities are going to rear their ugly heads once you pass away. If you don't, your assets might not end up the distribution you hoped for.

One of the main reasons that problems arise when tax must be paid on death is that people don't understand where the tax payment is going to come from. As always, making assumptions about what you think the law might be is dangerous and you should consult an accountant or estate planning lawyer.

Taxes and expenses are paid from the residue of the estate. If you simply leave the residue of the estate to be divided equally, you may not have a tax issue. Taxes will be paid before the beneficiaries are paid, with the resulting effect that all of the beneficiaries are treated equally.

But many people who make their own wills tend to list individual assets that they want to leave to their children. This often leads to tax trouble. For example, let's say that George makes a will with the idea in mind that he will treat his three children equally. He has a cottage worth $350,000 that he leaves to his daughter, Eleanor. He has about $350,000 in his RRIF, which he leaves to his daughter, Fran. His cash, his home and the rest of his assets are worth about $350,000, so he leaves the residue to his son, Gavin.

George may think he has treated the kids equally but in reality, he has not.

The cottage that Eleanor inherited is subject to capital gains tax. For the sake of this example, let's say that the amount payable is $75,000. Since taxes are paid out of the residue, the $75,000 comes out of  Gavin's share.

The RRIF that Fran inherits cannot be rolled over to her as she is not George's spouse. Therefore the tax has to be paid on that when George dies. Let's say the tax owing is $125,000. Again, this comes out of Gavin's share of the estate.

This means that Gavin's share pays Eleanor's tax ($75,000), Fran's tax ($125,000), the cost of the funeral ($10,000), all of George's outstanding bills ($10,000) and all expenses relating to probate and administration of the estate ($10,000). He is left with $120,000. This is hardly the equal distribution George had intended.

This is only one example. There are several other scenarios in which the testator's plans could be disrupted.

This is not to say that wills made by lawyers don't include gifts of certain assets, because they often do. However, if a lawyer helped you make a will like this, he or she should be offering you ideas on how to avoid the disruption of the equal distribution (if an equal distribution is what you want).

One way of avoiding this lopsided distribution is to state in the will that taxes are to be paid from some other source than the residue, or that each beneficiary must pay the tax arising from his or her inheritance. Another idea is to buy life insurance that will top up the residue, making extra cash available for payment of the taxes. Your estate planning lawyer will work with you to discuss options.

No excuse for no estate plan

In Forbes, Ashlea Ebeling provides a short list of the minimum things you must have in place as an estate plan. Though the article is American and therefore refers to American taxation, the rest of the article is very relevant to us here in Canada. I've certainly heard of people flying in separate airplanes as Ms. Ebeling mentions. Read it here and see if you recognize yourself in the story.