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Adrian Mastracci, fee-only portfolio manager at KCM Wealth Management, says “The cornerstone of your estate plan is a well-crafted Will. Review it every couple of years. Legislative changes and life events may change your objectives." |
Vancouver, BC (November 14, 2006): Planning your estate is more than just attending to your Will. Much more.
An old Burmese proverb goes like this, “In time of test, family is best”.
Adrian Mastracci, fee-only portfolio manager at KCM Wealth Management in Vancouver says, “A well thought out estate plan ensures that your family is cared for should anything happen to you. It’s one very important pillar of wealth management.”
Estate planning develops and implements your action plan that achieves two things. It preserves your family wealth and distributes it to your beneficiaries according to your unique wishes.
It’s wise to integrate your estate with retirement aspirations, investments, risk tolerance, income tax and business planning. Ask this question, “What is important to you about planning the estate?”
There are many answers. Preserving the family wealth; providing for the spouse and children. Seeking more quality time with the family; transferring the reins of the family business.
Minimizing probate fees and income taxes. Funding education for the children and grandchildren. Leaving a legacy to a charitable cause and to loved ones.
It can be a difficult topic as it encompasses our own mortality. Talking openly about it with family helps in getting started.
I divide the process into four phases:
1. Prepare the way
If you die without a Will, your assets are distributed according to Provincial legislation. This may result in a loss of control. It may also necessitate additional time and fees to settle your estate.
Anyone getting married, separated, divorced, re-married or having children, is wise to go over the current Will. Provincial legislation affects its provisions and validity.
Start with the big picture: a detailed list of your assets and liabilities. Look at your tax positions and desires for the disposition of each asset. Pay special attention to a family business and cottage.
Review your family's needs and ability to maintain lifestyle if something happens to you. Check beneficiary designations for your RRSP, RRIF, RESP, DPSP, IPP, pension plan and life insurance.
2. Consider the options
Become aware of how Provincial legislation (say a Representation Agreement Act, or a Wills Variation Act) may affect your desires. Particularly, if you’re governed by two or more Provinces.
Examine whether to leave your estate to the beneficiaries either outright or by trusts created by your Will. Also, mull over whether a portion of your wealth should be dealt with while you are living.
Your goals while living may benefit with an alter ego trust or joint spousal trust. The passing of a family business or farm may involve an estate freeze and the $500,000 capital gain exemption.
Paying the least tax is always popular. Assess the implications of individual or joint ownership of assets for income tax and probate purposes. Sometimes they are at odds.
A spouse, child or other dependent may have special needs. US citizens living in Canada, and Canadians with US property or business holdings, should review their US estate tax treatment.
3. Appoint the doers
Take great care in appointing capable representatives, powers of attorney, executors and trustees for your estate. They have similar powers as you do in dealing with your accumulated wealth.
Choosing the right guardians for minor children is vital. Your guardians and trustees may have duties lasting up to 18 years, or longer, depending on the children’s ages and the life of the trust you create.
Appoint two qualified people for every position. Ideally, one should be younger than you and live in the same Province. Grant them sufficient leeway to perform their duties as you would.
Be certain each appointee wants the often thankless job. Being an executor is no picnic. I counsel clients to provide the appointees a detailed letter of instruction to make their tasks easier.
4. Get it done
The process from thinking about the estate plan to implementing it may involve a team of professionals. I find that gathering your team in one room is quite effective.
Say the investment advisor, tax practitioner and lawyer. Perhaps, one of them will take the lead and become your quarterback.
Make sure everyone understands your objectives. Then instruct your team to put the personal plan in place that reflects your wishes.
The cornerstone of your estate plan is a well-crafted Will. Review it every couple of years. Legislative changes and life events may change your objectives.
Your estate plan requires commitment. It’s worth knowing that the framework is right for your desires.
I welcome your questions, comments and opinions.
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