Estate planning may be the most difficult topic people need to raise with their families. Many avoid it altogether, believing that everything will sort itself out, and that loved ones will understand their intentions even if they aren’t explained in detail. However, talking about estate planning may be one of the most important conversations a family ever has. It can prevent the surprise and confusion that, in the most extreme cases, starts family feuds and destroys relationships among siblings. You and your clients have probably heard the stories of estate planning gone wrong. An elderly widow may be forced to sell the family home to pay taxes and probate fees due on her deceased husband’s estate. Children may be disinherited by poor planning that leaves everything to a second or third spouse. Close families may be torn apart by animosity and lengthy court battles after the reading of a Will. Failing to develop comprehensive estate plans, and to communicate intentions to every heir, may have disastrous consequences. On the other hand, you have a tremendous opportunity in this area to work closely with your clients, their accountants and lawyers to ensure that their intentions are carried out and that their beneficiaries receive as generous a legacy as possible. Take the lead and encourage clients without estate plans to develop them now. Also urge clients who already have a plan in place to keep it up to date. And emphasize to all of your clients the importance of keeping everyone – especially family members – informed throughout the process.
The Right Person
Many people think that a close relative or friend is the best choice. Certainly, in simple estates a trusted brother, sister, son or daughter may be a good option. However, even in estates that are fairly straightforward, the executor’s role can be complex. So the first thing you should consider when selecting an executor is whether that person has the necessary skills and temperament to handle the responsibility. You might want to think about where a prospective executor lives – are they close, geographically, to your heirs? Are they willing to take on the role? Do they have experience handling and distributing assets? How old are they? Does their overall health make it likely that they will survive your clients? Think also about the simplicity or complexity of the estate and the family
Dynamics, and ask clients whether the beneficiary’s interests might be better served by a neutral professional trustee, such as a trust company.
For example, ten years ago, just after they got married, Laura and Adam appointed Adam’s brother, Sam, as the executor on both of their Wills. He was trained as an accountant and seemed like the best choice at the time. In the following years, Laura and Adam had two children together; however, the marriage broke down and their divorce was finalized three years ago. When Laura’s current financial advisor asked her who her executor was, she admitted Sam may not be the ideal executor for her today. She remarried a year ago and has a daughter with her new husband, and she worries that Sam may not look out for the interests of her new family. Her advisor recommended that she choose an executor she feels confident can provide unbiased support to all of her children, from both marriages. Laura agreed, and because blended families have the potential to produce serious interpersonal conflict, she opted for a professional trustee. Laura’s advisor also helped her work with her lawyer to change her beneficiary designations to include her new husband, and set up trusts in her Will for all three of her children. The end result is that Laura knows her heirs can count on the objectivity of a professional trustee’s services – and Sam is relieved of the tremendous burden of balancing family loyalties against the needs of Laura’s new daughter.
This checklist is a starting point for every executor; the specifics will, of course, depend on the estate the executor is handling.
- Find the Will
- Find out if there is a prepaid funeral plan or arrange to pay funeral expenses
- Engage a lawyer
- Identify, value and arrange for the safekeeping of all of the deceased’s assets
- Identify insurance policies, arrange for payments to beneficiaries and cancel or change coverage where necessary.
- Identify all debts and pay outstanding bills
- Contact all service providers and cancel or change services where necessary
- Locate creditors and make a list of claims against the estate
- Follow the Will’s instructions concerning guardianship of minor children and investment of assets.
- Contact each beneficiary, notify them of their bequest and consider distributing a small portion of the estate’s assets to cover their immediate needs
- Deposit income and benefits due to the deceased into a bank account opened for the estate
- Report the death to Canada Revenue Agency and file the final tax return
- Distribute the assets of the estate to the beneficiaries according to the Will’s Instructions
For further information, contact John Klotz. John can be reached at (416)-783-PLAN (7526) or email at firstname.lastname@example.org