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Canadians appear to be thinking about estate planning more than ever before. The fears around COVID-19 – and extra time spent at home during pandemic lockdowns – played a role in getting families to create and update their wills and power of attorney (POA) documents.
A 2021 LegalWills.ca survey found COVID-19 influenced more than half (53 per cent) of participants to write or update their wills over the previous 12 months. It also showed two-thirds (66 per cent) had been putting off the process for a while.
Canadians also have more access to information about estate planning, inspiring them to get their affairs in order, says Margaret O’Sullivan, founder and managing partner of O’Sullivan Estate Lawyers LLP in Toronto.
“People are more sophisticated about the different estate planning issues,” she says. “Often, they come to us with a planning idea because they’ve read about it in the media or elsewhere.”
Globe Advisor spoke with Ms. O’Sullivan, whose firm recently published the book, Trust and Estate Essentials: Achieving Success in Family Succession, Second Edition, about how advisors should approach estate planning with their clients.
How has estate planning evolved in recent years?
Families look much different today than they did just a few decades ago.
There are more blended families and family members are spread out geographically, with people living or working in other countries. More people also own their own businesses. Estate planning is also more complex with changes in laws and taxes. All these evolving circumstances have an impact on estate plans.
There’s also more wealth, which means more opportunities to do different types of planning such as philanthropy. I am also seeing more people talk about ethical wills, which means including statements about your values in your will as a guideline for your children. It’s not just about leaving assets but a legacy you hope they will carry on.
As estate planners, we need to keep up to date, change with these trends and ensure people have a plan appropriate to their circumstances.
What are some common questions you get from clients about their wills?
At the end of the estate planning exercise, many people wonder, ‘Who should I tell about my estate plan? Should I tell my children? Should I give them a copy of my document?’ That’s always a delicate conversation. The answer depends on their situation.
For example, if someone has a business, they should be sharing certain key pieces of information with their advisors, management and business partners. When it comes to children, it depends on who needs to know and how much they need to know. For many, it’s a good idea to have a family meeting to communicate the estate plan. It puts people at ease and gives them a basic understanding of your wishes.
People are also concerned about how to leave their assets to their children so that it’s protected if their child goes through a divorce. Another big topic is how to minimize probate fees, which, for some, can become a rather hefty wealth tax.
What advice do you have for advisors helping clients with estate planning?
Advisors need to have a holistic approach, balancing the repercussions of not just tax issues but also legal and family law issues.
For instance, sometimes people transfer property without considering all the legal or tax implications. Another issue we see is people directly holding U.S. securities and not understanding the exposure to U.S. estate taxes.
There is also a lot of apathy about updating estate planning documents. People feel that once they’ve done it, they can set it aside, but it’s an evolving process as life changes. Another issue is not dealing with major life events on a timely basis such as divorce. Advisors should encourage their clients to stay on top of their planning.
Advisors can position estate planning as a rewarding experience. Once the plan is updated, the client has the satisfaction and peace of mind that their wishes will be taken care of.
- This interview has been edited and condensed.
- Brenda Bouw, special to The Globe and MailMust-reads from Globe Advisor this week
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Investor beware – financial markets are laden with conflicts of interest
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Where active management has shone in a volatile year
When times are good, index or passive investing is a slam dunk. However, when times are bad, some investors may seek solace with active managers who might be able to exploit market opportunities brought forth by volatile conditions. Ian Tam of Morningstar Inc. uses the company’s tools to look for actively managed exchange-traded funds (ETFs) that have succeeded in this regard on a year-to-date basis. He screens the universe of 1,300 ETFs from Canadian-domiciled fund companies, then further screens on those where the manager has discretion on trades as opposed to those that openly follow a predefined index. Here’s what he found.
– Globe Advisor Staff