More than half (54%) of Canadians believe that the potential for conflict among family members after the death of a loved one represents the most serious drawback of not having early and ongoing estate planning conversations, according to a new report from BMO Wealth Institute.
The new report has urged Canadians to move beyond traditional estate planning. While traditional estate planning typically focuses on estate administration, tax considerations and having the proper legal documents in place, the report calls on Canadians to consider enhanced estate planning – including having conversations early on – to address the emotional impact on those left behind and alleviate family strife.
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Other issues identified with putting off having such discussions include:
– Unpleasant surprises after death of a loved one (42%)
– Legal complications (37%)
– Financial/taxation issues (33%)
– Administrative complications (22%)
Amy D’Aprix, life transition expert with BMO Financial Group, said: "The death of a loved one can be stressful for all concerned, and the anxiety can be exacerbated by a lack of understanding of the deceased’s wishes regarding financial and personal assets. Hurt feelings and damaged family relationships can be avoided by having the necessary estate conversations with family members and other intended beneficiaries while you’re alive and well."
According to the report, 82% of Canadians with a child at least 40 years of age have had at least one conversation with their adult child about their legacy goals and estate plans.
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By GlobalDataThe report found that 64% of adult children with parents who are at least 60 years of age have had at least one conversation with their parents. However, only about one-third characterised these conversations as detailed.
Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group, said: "Make sure you have comprehensive estate planning conversations prior to going to lawyers and accountants to gain an understanding of what is important to your heirs. Though they may not necessarily agree on everything, the conversations will provide information to build a more robust estate plan with fewer potential surprises. This, in turn, will help to create a legacy that loved ones will remember fondly."
BMO offers four steps that are essential to the preparation of a well-thought-out estate plan:
Meet as a family: By sharing the thoughts, wishes and goals to be achieved by an estate plan, it is possible to give beneficiaries an understanding of the intentions on which the plan is based.
Establish or update will and powers of attorney: When changes are significant, the will may not provide for the distribution originally intended. Not only might assets no longer be available, but intended beneficiaries may have predeceased, new potential beneficiaries may have been born (such as grandchildren) or changes in family circumstances (such as divorces) may not have been considered. Powers of attorney should also be kept up-to-date. If an attorney moves far away or is no longer available, the power of attorney may be unusable.
Get insured: Insurance provides a financial safety net for loved ones and can be used to replace earned income that is no longer provided. It also provides liquidity to pay off debts or pay for final expenses and taxes.
Appoint an executor: Consider appointing a corporate executor to administer the estate, especially if there are concerns regarding the significant investment of time required and the high level of knowledge required to perform the role effectively, or if there are concerns about being at the centre of family conflicts.
"Proactive planning and advice go hand in hand when it comes to effective estate planning. A financial professional can guide you through these important conversations and help you to enjoy greater peace of mind," Buttigieg added.
In order to encourage Canadians to think more about estate planning, BMO is offering a seminar called Creating Good Will which aims to inspire people to think about the personal and relationship issues associated with estate planning.
