Statistics from various sources show that six out of 10 Canadians don’t have a retirement plan, and even fewer have an estate plan. This could expose loved ones to financial risk and potentially create familial conflict that could otherwise be avoided. The topic may not exactly be water cooler material – but it should be – because we’ll all be affected by it some day.
Given that the instance of people who have an estate plan in place is so low, you should consider it a major accomplishment if you even have a Will. But you should also be cautious of some common estate planning mistakes that may nullify your efforts to put your financial affairs in order. Here are five of the most common mistakes I’ve seen when reviewing the Wills of new clients.
1) The Will and powers of attorney were executed 30 years ago. Chances are that your children were mere toddlers at the time your Will was first drawn up, but are now married and have children of their own. These adult children can almost certainly now step in and be executors or powers of attorney, alleviating the burden placed on aging parents who were initially selected for that role.
2) Not updating a Will after a divorce or second marriage. People who have just been divorced or are on their second marriage tend to have slightly more complicated estate plans – especially if there are new children with the second marriage. The Will needs updating to ensure that everyone’s wishes and needs are met.
3) Not planning for disability. An unexpected or long-term disability can often have great consequences on your personal and financial affairs. Decisions such as who will handle your finances, raise your children, or make healthcare decisions on your behalf are extremely important. Therefore, it may be necessary to appoint a power of attorney to work on your behalf if you become unable to make decisions for yourself. Often, estate lawyers will automatically insist on powers of attorney for property and personal care to go along with the Will – but I have seen Will’s with no designated powers of attorney.
4) Not meeting with an experienced legal, financial or tax professional. Not meeting with an estate planning lawyer or other professional is probably the most common mistake I see. The person who contracted your house may have been a real estate lawyer who had a semester of estate law while in law school – but it’s not their area of expertise. They usually aren’t up to speed on changes in trust laws and tax rates etc.
5) Lack of Communication. Coaching hockey isn’t personal, I tell the kids. What happens on the ice, and decisions that are made, are ultimately best for them and the team. If this is communicated to all the players, then there are no problems. Estate planning needs to follow the same model. This is your estate plan – it’s about how you want your assets handled and distributed. Communicate this to your executors, guardians and beneficiaries and everything will be fine.
Planning ahead is important. Far too many families argue about the smallest details at the worst possible time – when everyone is emotional. Talking about death and money isn’t easy, but having open communication about it, can help you create an estate plan that is.
Terry Willis has almost 20 years’ experience in financial services, with particular expertise in working with professional athletes. He understands that the earnings potential of most athletes is often short-lived, and helps young athletes put financial plans in place from their earliest money-earning playing days. Terry provides these players with ongoing financial counsel right through their sports careers and into post-retirement careers.
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