Estate planning in the pandemic year

Plan for peace of mind

Financial planning is all about preparing for the future. That covers a lot of ground, of course, from retirement planning to estate planning. Even in the best of times, it’s prudent to have a solid estate plan in place, so that your estate doesn’t end up in the hands of the government and the courts to divvy up your assets. That never ends happily. So with heightened awareness now about the health risks associated with the potentially deadly COVID-19 virus, it makes sense to make a plan to ensure peace of mind for you and your family. Take a look at what elements of estate planning you have in place, and what you might need to re-visit or set up from scratch.

Here are a few key items to consider when thinking about an estate plan.

The will. The will is the primary legal document that directs how you wish your estate is to be handled after your death. Your “estate” is basically all your assets, including all bank accounts, cash, investments, real estate, safety deposit box contents, and goods and chattels to which you have legitimate title. Your will is the instrument by which you direct who gets what. It can also be used to establish guardianship of your children. Currently, the execution of wills is somewhat problematic. In Ontario, for example, two witnesses must be present at the signing of a will – there is at present no alternative. So if you need to create a will or power of attorney, or update an existing one, contact your lawyer to make arrangements that satisfy the requirements for safety during the pandemic.

Powers of attorney. A power of attorney for property is a legal document that names someone you trust to handle your financial and business affairs is you become incapable of making financial decisions owing to accident or illness. A power or attorney for personal care (sometimes called a “living will”) specifies someone to make healthcare decisions for you, and can be used to direct levels of care near death. We often don’t like to think about this part of estate planning, but such provisions can relieve loved ones from having to make unpalatable, but necessary, decisions.

Life insurance. Yes, life insurance can be a financial cornerstone of a solid estate plan. A properly designed insurance plan can provide your family with income if you die suddenly, and also cover immediate expenses, including taxes, mortgages and other debts, as well as funeral expenses. In addition, you may specify the beneficiary or beneficiaries of life insurance, and the proceeds of life insurance are not subject to tax or probate fees.

Trusts. For estates that are larger or more complicated, and thus attract a larger tax hit, a testamentary trust (one that takes effect on your death) may be worth considering. The trust is taxed at the same rate as an individual taxpayer, and taxes may be paid by either or both the trust and beneficiaries. This can create some lucrative income-splitting opportunities.

Joint ownership. This is another tactic for minimizing probate fees. Assets held jointly will pass directly to the survivor spouse (if a right of survivorship exists). Think assets like bank accounts, principal residence, summer home, investment accounts, and so on.

Registered plans. In all provinces except Quebec, you can name a beneficiary or beneficiaries for your RRSP, RRIF, and TFSA right in the application document. There’s no legal need to do so, and you may simply name your estate as beneficiary. However, by naming a beneficiary right in the plan, tax reporting could be simplified, and probate taxes could be minimized. Beneficiary designations are not locked in and may be changed later by filling out the appropriate forms with the plan sponsor. Note also that there are various rules about how registered plans are dealt with on the death of the planholder, depending on the beneficiary. Consult your financial advisor on the ins and outs of these sometimes complex rules.

Where’s your plan? It’s prudent also to have a list of key information related to your personal finances, which will help family members navigate your financial affairs in the event of incapacitating illness or sudden death. Such a list should include contact information for all your financial, legal, and medical advisors. It should also contain a comprehensive itemization of all your assets and liabilities (including real estate, insurance, investment, and pension plans, business information, loans, mortgages, and lines of credit, and so on). Don’t forget to list digital assets and how to access them, including images and documents in secured cloud accounts, and any cryptocurrency accounts with a private key (without this and without specific direction, those assets will be lost to family forever).

With each of these tools, you’ll need the help of both a financial advisor and a lawyer with expertise in estate law, especially for the more complicated items, like trusts, where contentious issues often arise in extended family situations. Contact your lawyer for information. Also, it’s essential to have advance agreement of key individuals for powers of attorney and as executors of your will.

The COVID-19 pandemic and attendant restrictions on movement and gatherings can make the creation and execution of some of these estate-planning elements challenging. However, many lawyers have made contingency plans that will allow the safe and secure execution of key documents that require the physical presence of witnesses. With the right help, these building blocks will form the basis of your estate plan, ensuring peace of mind that your wishes are met and your family provided for.

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.