What happens when the children grow up and they are no longer dependent on their parents? What happens to your partner’s assets and your joint assets when your they pass away? Have you considered who will make the difficult medical decisions for you when needed? Estate planning for mature families and retirees can bring up a number of issues including family dynamics and harmony. One of the most difficult conversations is around fair or equal distribution of assets. Do all your children, or even your partner, want or need an inheritance? Do you want to leave an inheritance to them, or to a charity, or to both? Does your will reflect this?
Before you begin putting a plan in place, we always encourage open conversation and a family meeting between the parents and children to provide context behind decisions, help minimize any surprises, and to provide an opportunity for children to express their concerns.
We’ve put together an infographic checklist that can help you get started. We understand this can be a difficult conversation so we’re here to help and provide guidance.
- Fair vs Equal (also known as Equitable vs Equal) – such as what’s considered to be fair may not necessarily be equal. For example…Should the daughter that’s been working in the family business for 15 years receive the same shares as the son who hasn’t worked in the family business at all?
- Are the adult children responsible enough to handle the inheritance? Or would they spend it all?
- We encourage open conversation with parents and their children so context can be provided behind the decisions, there are no surprises, and it allows the children to express their interests and concerns.
- Facilitate a family meeting with all generations affected, this will help promote ongoing family unity after death and decrease the chances of resentment later.
Assets / Liabilities
- What are your assets? Create a detailed list of your assets such as: Home, Family Business Interest, Real Estate, Investments- Non registered, TFSA, RRSP, LIRA, RDSP, RESP, RRIF, Company Pension Plan, Insurance Policy, Property, Additional revenue sources, etc…
- What are your liabilities? Create a detailed list of your liabilities such as: Mortgage, Principal, Recreation, Rental, HELOC, Loans (personal, student, car), Line of Credit, Credit Cards, Other Loans (payday, store credit card, utility etc.)
- Understand your assets-the ownership type (joint, tenants in common, sole etc.), list who the beneficiaries are for your assets.
- Understand your liabilities- are there any guarantors, cosigners, leans, or trusts?
Make sure you have a will that:
- Assigns an Executor / Executrix
- Has a personal letter of direction which provides specific instructions for distribution of your assets.
- Has power of attorneys (POA) appointed.
- Specifies specific personal items to specific people in writing, , in a codicil, or in captioned photos.
- Is reviewed every 3-5 years.
- Always choose 2 qualified people for each position and communicate your intentions with them to ensure they’re up for the responsibility.
Taxes and Probate
- How much are probate and taxes? (Income tax earned from Jan 1 to date of death + Taxes on Non Registered Assets + Taxes on Registered Assets)
- Are there any outstanding debts to be paid?
- You’ve worked your whole life- how much of your hard earned money do you want to give to CRA?
- Do you want to leave money to charity and create a tax deduction?
- How much money do you want to give to your children while you’re living?
Consider the following:
- The use of trusts.
- The use of an estate freeze or crystallization if you wish to gift while you’re living.
- Once you determine the amount of taxes, probate, debt, final expenses and gifts required, review your life insurance coverage to see if it meets your needs or if there’s a shortfall.
- Are you leaving an inheritance, do you want it to be tax-free?
It’s good to review the considerations above but it’s also necessary to implement an estate plan.
Here’s a list of the individuals that can help:
- Financial Planner/Advisor
- Estate Planning Specialist
- Insurance Specialist
- Accountant/Tax Specialist
- Chartered Life Underwriter (CLU)
- Chartered Executor Advisor (CEA)
There are definitely unique situations in many families and things can get complicated so please use this when you feel it’s applicable.