Finance If you own a business, you’ll want to make sure that you address succession issues with your family as well. Is it your assumption that the next generation will take over the business? If so, who do you have in mind? Will everyone else be OK with the decision? How do you plan to address that issue − if at all? Again, there’s no rule which says that you have to come to complete consensus with your family about your succession plan. But without prior knowledge, family members could feel left out of the family business, or initiate legal challenges to your will. Probably not what you want. Step 3: Prepare your will and other important documents After you talk things over with your family members and heirs, you’re ready to prepare the formal legal documents that will be the foundation of your estate. Your will is the obvious first priority here, but there’s also your power of attorney document, your statement of wishes regarding personal effects, perhaps a representation agreement or similar document that provides clarity to family and health-care workers regarding your health wishes, and so on. To be honest, this stuff is dull, unexciting, technical work that puts most people to sleep. But it’s important to get it all done. If you die without a will, for example, your assets will be divided according to a strict government schedule that may or may not reflect your current family situation. Without a power of attorney document, your spouse or family members will be powerless to act on your behalf if you become mentally incapacitated. Without guidance about your personal effects, your family will be left to guess what you wanted. And without an understanding about your health wishes, the doctors will decide things for you. How much will all of these documents cost? Budget for several hundred dollars to consult with an experienced, veteran estate-planning lawyer, and potentially more if you have business assets, if your estate plan involves the creation of trusts, if you have cross-border real estate or if you have particularly complex financial affairs. That’s probably more than what you’d spend if you used some kind of “will kit” which you picked up at a bookstore, or a note that you scribbled down on a scratchpad, or a bare-basics will done by a lawyer who’s an expert in an entirely different area of the law. But it’s an investment that will pay off for your heirs in fewer hassles, a minimum of ambiguities and a generally easier time managing and distributing your assets after you’re gone. Keep in mind that writing a will isn’t a “one and done” kind of activity. Because finances and family situations change (to say nothing of taxes and other government legislation), it’s important to keep your will and other estate documents up to date. Budget about 30 minutes every couple of years just to make sure that all of your i’s are dotted and your t’s are crossed. Of course, if your individual circumstances change dramatically sooner than that (divorce, death in the family, significant change regarding your finances, etc.), it’s a good idea to invest a little more time. Step 4: Clearly outline roles and responsibilities No doubt about it: crafting an effective estate plan is a lot of work. But being an executor and managing all the “to-dos” of an estate is often a lot more work. Even the most basic estate requires heirs to spend a good deal of time and effort securing legal certification, filing documents and keeping interested parties informed of what’s going on with the estate. In short, it’s not the kind of work you want to spring on someone as a surprise after the fact. That’s why it makes sense to let executors and heirs know about their respective responsibilities well in advance. Want a close family member to be your executor? Make sure that they know exactly what’s required before they sign on – often, it can take as much time as a part-time job to do it right. Want your executor to work with a co-executor? Make sure that both parties know that they’re expected to work closely together, and come to a joint agreement regarding important decisions. If you’d like close family to divvy up your personal effects (clothes, jewellery, art and personal mementos), give them some advance notice about that task before you lay the job at their feet. If your estate is large and involves a family trust or a charitable foundation, make sure that all stakeholders know how things will work. Not only is this kind of advance notice common courtesy, it can go a long way toward helping smooth out the transfer of wealth from you to your heirs. If everyone knows what they have to do before they have to do it, they can hold each other accountable for doing the job right. That way, you stand a much greater chance of actually getting the job done the way you want it. Step 5: Investigate tax liabilities (and solutions) Pardon the pun, but your death will likely be an expensive...“undertaking.” And, while we Canadians are fortunate not to have a true “estate tax” on our assets at death (unlike our American cousins), there are still plenty of taxes, fees, payments and other costs associated with winding up an estate and passing on the proceeds to heirs. Which makes tax planning a vitally important part of an effective estate plan. Fair warning: this is one of the most complex areas of estate planning. There are a lot of strategies, tactics and options available, some of which will be appropriate to your personal situation, and others that won’t be. Making the job even more difficult is the fact that some of the “strategies” youmight read about on the internet aren’t really effective (or even legal). So it makes sense to consult closely with a qualified tax professional before taking any action to minimize estate taxes. This is especially important for those snowbirds who have assets in another jurisdiction − a vacation home in the Sunbelt, for example. The tax implications of crossborder estates can be very complex, and can take a long time to sort out if you’re a grieving family member who has no idea who to call or who to speak with; consult with a qualified cross-border accountant or tax lawyer and get things figured out before your passing. One final point about taxes: you should absolutely do your best tominimize the taxes, fees and other costs associated with your estate. But taxes and fees should never be the driving forcebehind your estate decisions, or stand in the way of accomplishing your estate goals. Sure, making your estate tax efficient might save a few bucks for your heirs. But if it comes at a cost of compromising or derailing your goals or intentions, is it really worth it? Maybe it will be to some people. But, for most of us, it won’t. 30 | www.snowbirds.org
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