ANALYSIS: The recent passing of the award-winning artist Prince has raised an important component of a financial plan that most of us really don’t like to talk about – estate planning.
Chances are you have thought about saving for your child’s education, paying down your mortgage and even saving for retirement. But no one really likes to think about planning their estate. The sad truth is 60 to 70 per cent of North Americans have neglected to write a will. Here might be why: Some think their assets are too puny to worry about, some think the costs of writing the will are too high, others believe their children will never fight – they will, while some think completing a will it will bring on their demise that much sooner. Clearly that won’t happen. But whatever the reason you don’t do it could potentially cost your estate in the long run.
You may not have Prince’s estimated US$300 million net worth, but regardless of the size of your estate, if you die without a will in place, you die intestate. That means the government will step in and distribute your assets according to a provincial formula, which may or may not be what you had intended. I have seen and heard so many stories where a sudden death caught couples and families totally unprepared. They can be filled with confusion, inequitable treatment and, often, real tragedy. Men and women who struggled to put aside a large enough financial cushion to take care of their loved ones forgot the key element — an up-to-date will.
I’ll declare my bias. I tend to favour corporate executors because of their experience, skills, impartiality, global reach and the fact that, unlike third-party executors, they are certain to survive the individual in question. Plans should be updated regularly as financial, tax policy and personal circumstances change. A new spouse, a new child, grandchildren, the premature death of an heir or significant financial gains or losses become the trigger to revise that estate plan.
Finally, the key to creating a sustainable legacy is ensuring that your family understands your wishes. I was speaking with a woman at a cocktail party recently about the importance of communicating your thoughts with her family and she said to me, "I don't need to do that. I always tape my will to my fridge because even in periods of despair, my family will want to eat and they will find it." Posting your will in the kitchen is not estate planning. Have "the talk" with your family about what you would like to have happen once you are gone. Share what is important to you and explain how and why you have made the decisions you have. This eliminates all of the second guessing and ensures your legacy is in fact your legacy.