The family estate Estate planning is a complicated area of financial planning for almost anyone. But for blended families, it can often be nothing short of a minefield: a mix of complex financial-planning issues, important tax considerations and no small amount of family dynamics which, if left unresolved, can result in a legacy of legal hassles, family strife and financial catastrophe. In a blended family, even the most straightforward decisions about who gets what can quickly bring up loaded emotional questions of responsibility, obligation and fairness. Without careful planning and clear communication, even well-intentioned estate plans can create confusion, conflict or unintended consequences for the people whom they were meant to protect. Here are some practical tips regarding how you can ensure that your estate and your family don’t fall victim to such problems: Update the will – such an easy thing to deal with, but such a disaster if you don’t. Many partners enter into a second or subsequent partnership with an outdated will ‒ often, one which names a former spouse or children of a former relationship as the sole beneficiaries of an estate. If that will is never updated, a new spouse may find him or herself legally entitled to … well, nothing. Check your beneficiary designations – the same goes for beneficiary designations of specific assets such as an RRSP or RRIF, a TFSA, life insurance or pension plans. In most provinces, if you’ve named beneficiaries for such assets, the bequests are legally outside of your estate (the rules are a little different in Québec), which means that designations made to previous spouses are still valid, even if you’ve updated your will. If that’s what you want, great. If it’s not, make sure to change it. Providing for stepchildren – for the purposes of inheritance, most provinces make a distinction between biological children and stepchildren; generally, the former are entitled to a portion of the parental estate, while the latter aren’t. Perhaps that’s not a big deal if you never formally adopted your new partner’s kids, or if they’re adults themselves, or if you and your partner made an agreement that you’d provide for your respective children out of separately held assets. But it’s something to be aware of; unless you legally adopt them or make specific provisions in your will to provide for them, any stepchildren will have no automatic inheritance rights. No surprises – the shocking “reveal” of surprising bequests, disinheritances or long-lost beneficiaries is a common trope in movies and Victorian novels. But it has no place in real life. In almost all circumstances, having a candid, explicit conversation about inheritance ‒ well before your passing ‒ about your wishes, your new partner’s needs and your heirs’ expectations is almost always a better way to avoid conflict and legal challenges. What about the “sentimental” stuff? – sometimes, the most valuable assets in an estate have relatively little monetary value, but deep emotional meaning: heirlooms; photos and paintings; jewellery; antiques; mementos and the like. Sometimes new partners fail to completely understand the connections which children may have to such assets, making the likelihood for disinheritance and subsequent family strife even greater. Make sure to have a conversation with your partner and your children about such assets and make sure that everyone understands your intentions. Dealing with the family home – as we mentioned above, in many blended family estates, the family home is the most significant asset and the source of the most significant squabbles. Having a clear idea of how the asset will pass to your heirs (your new partner, your children or others) is an important focus of any well-constructed estate plan. Depending on your circumstances, it may make sense to do the following: Finance 30 | www.snowbirds.org
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