You may not want to, but it's time to talk about your death

Martin Pelletier: Three areas to consider as starting points when it comes to reviewing your will

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Making arrangements for one’s mortality isn’t an exercise that often makes it to the top of the to-do list when it comes to planning, but it should be, especially for those starting a family or those in retirement.

Having a properly drafted will is essential to ensure your wishes are fulfilled, since not having one can expose your family to a whole bunch of risks, such as allowing the government and legal system to decide who gets what.

A will should be updated following major life events as well as reviewed every three years to ensure it is current. For example, legislation may have changed since the will was drafted. Income tax act changes are quite common and can be significant.

It is equally important to use a lawyer who specializes in wills and estates in order to avoid any mistakes or nasty surprises. That said, financial planners, such as those with a Trust and Estate Practitioner (TEP) designation, can often assist by drafting up some ideas ahead of a meeting with legal counsel, which could save you time and money by doing the upfront preparation work.

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Here are three areas to consider as starting points when it comes to reviewing your will.

The executor

The executor is the person named in the will who will undertake the fulfilment of your instructions. It is, therefore, a very important role, so ask yourself if he or she has the knowledge, expertise and willingness for such a responsibility. Having a back-up plan, such as an alternate, is also important in case your first choice is unable to act.

If your estate is complex, you will want to make sure the executor’s powers will be sufficient to properly administer the estate, which could include running an operating business, borrowing money, hiring advisers, undertaking in-depth tax planning, etc.

Spouses and children

If there are dependent children involved, you will need to determine if the executor will also be able to act as the guardian or if that duty will require a different person. The location of the guardian can impact whether the children will have to change schools, cities or even countries. Also, there should be discussions about whether the money should be left directly with the guardian or placed within a trust.

If a trust is set up, this leads to questions about whether the guardian should also be the trustee, since they would technically be supervising themselves for cash disbursements. In addition, decisions will need to be made around how much money needs to be put into the trust and how long it should remain there before being distributed directly to the children.

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If the will was drafted during a previous marriage, the former spouse may still be listed as an executor. There could now be new children or stepchildren to consider, while also providing for and protecting children from a prior marriage. In addition, you cannot leave one’s spouse or any dependent children out of a will, because they will be able to challenge the will if they are not properly provided for.

Tax and insurance

There may be insufficient liquid assets to both cover tax liabilities and provide for various beneficiaries, so having the right type of insurance can really help. Insurance can also be a great tool as a top-up and for certain tax minimization strategies, especially for those with large assets within a corporation.

Finally, the estate should be optimized in a tax-efficient manner. Planning can often be done ahead of time to minimize tax within the estate through a number of different strategies. This is one area not to cheap out on, since sophisticated estates often require a tax accountant/lawyer specializing in advanced tax planning.

Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.

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