By Heather Compton and Dennis Blas
Pulling On a Thread
Regular readers will know that Dennis and I recently moved to a new home. The move is just one aspect of our conscious strategy to simplify our life and reduce our footprint on many levels Have you noticed that whenever one thing changes in your life it reverberates and affects many other aspects? Dennis teases, “there goes Heather pulling on a thread again”. Everyone knows what happens when you pull on a thread – other things may “unravel” or at least show up and demand our attention.
Our decision to “simplify” started out with our move but it also precipitated taking a look at our investment strategy and an estate planning review. Not so simple this “simplifying”!
An estate planning review sounds pretty formal doesn’t it? A review should include reviewing the terms of three very important documents – your Will, plus Powers of Attorney for Property and for Personal Care and any beneficiary designations made on property not dealt with by your will such as life insurance policies or perhaps TFSAs.
Documents should be reviewed every five years or less or any time there’s a change in circumstances. A change in circumstances includes a move to another province or country or even across the city, a change in your health status or mental capacity, children reaching adulthood and no longer needing a guardian, the birth or death of a spouse or an heir, the sale of a business or other asset referred to in the will or tax, legal and social changes.
It’s tricky to discuss estate planning in an article intended for all Canadians, because estate legislation is provincially regulated. Keep this in mind should you make a decision to move to another province (or country).
Our objective is to get you thinking about these issues, but please seek knowledgeable, professional assistance. I tease attendees in our retirement seminars that my accounting and legal comments are worth the amount they are paying me directly for them – nothing, nada, zero!
Not having a valid will should not be an option for anyone yet some studies show that to be the case for close to 50% of Canadians! Some jurisdictions will accept as valid a will in our own handwriting. This is called a “holographic will.” Don’t think you can type this out on your computer and print it off – it must be in your own handwriting. While witnesses are not required, some jurisdictions will require it to be signed. This is an unsophisticated will open to misinterpretation and our affairs would need to be very straightforward for this to do the job. I certainly don’t recommend it.
I’m not a fan of “will-kits” either. Typically, they are the “will-kit for Canadians” and our legislation is province-specific. A will-kit can, however, provide a useful outline to guide your discussion ahead of an appointment with a lawyer. If we are going to arm wrestle over who the “alternate executor” should be, let’s do it at home and not on billable time!
A will prepared by a lawyer might run up to $500 for most couples with an uncomplicated estate. A more complicated estate could certainly cost $2,000 or more, but for most of us that’s a small price to pay to ensure our assets are distributed as we’d like. I also want a lawyer with estate expertise, not the lawyer I used for my last real estate transaction!
Executor, Guardian and Trustee
Key players in our will include naming an executor and possibly a guardian (for children under the age of majority or adult children unable to care for themselves) and trustee (to manage our financial assets until distributed to beneficiaries).
The executor is our personal representative and s/he has a very long laundry list of duties, including locating, valuing and distributing our assets as we have directed. S/he will also cancel credit cards, subscriptions, utilities, healthcare cards and notify the government. We can appoint one or more persons or appoint a trust company. Often one spouse will name the other but we need another choice should they die together and a second alternate is named in the event the first declines the role or dies first. Our executor must live in our country and it is best that s/he lives in our province.
When we name someone for any of these roles we need that person’s permission first. We are asking them to take on a serious responsibility and a time-consuming obligation. We want to be sure they are of a mind to do that.
Power of Attorney for Property
A POA for property assigns authority to someone else to take over our financial affairs. As the donor, we decide the range of powers we are assigning. These can be temporary while we are out of the country or can cover specific issues such as banking or real estate or a general POA that allows broad powers. Typically, the authority terminates if the donor becomes mentally incompetent; on death, it terminates with the will coming into play.
To survive incompetency, an Enduring POA is required. My mother, now in her 90’s, has named two of us as co-attorneys with quite broad-ranging powers; however, we can act only when two doctors agree she has lost her marbles!
Power of Attorney for Personal Care
In some provinces, a POA or EPA can assign authority to another for non-financial decisions. In other provinces, a Personal Directive, Healthcare Directive or living will must exist. We create this document while we are still physically and mentally able in order to define the extremes of care we would want healthcare professionals to go to if we couldn’t make our own decisions. Where allowed, we would name the individual responsible for making decisions. A copy of this directive should be in the hands of the attorney, close family members and doctors.
The Business of Living
On our incapacity or our passing, our family and/or our executor needs to know where these key documents are, where we keep our tax files, who our lawyer and accountant is, where we keep instructions for our burial and whether there are pre-paid funeral plans and so on. Communicate to others where this information can be located.
One of my clients kept very up-to-date information. Our only challenge was that he kept it password protected on his computer. That’s not useful! Make a habit of regularly burning a new CD with current information. On the back of the CD, note the password and tuck the CD, the keys to the safety deposit box and perhaps a copy of the will and funeral instructions in a readily identifiable location that you have made others aware of. Then get on with the business of living!
About the Authors: Heather Compton has presented seminars on financial and retirement lifestyle issues for over 30 years. She retired as Vice President and Senior Investment Advisor with a major financial services company. Heather and husband Dennis Blas co-present retirement seminars for a variety of corporate clients and are the co-authors of Retirement Rocks! Canadian Boomers Invest in Life. You can find their book, online or in independent bookstores. See more of their advice at Retirement Rocks.