Estate Planning - Some Non-Tax Considerations

Estate Planning — Some Non-Tax Considerations

By Mark Hunter, CPA, CA, Partner Tax , Taylor Leibow LLP

We all know that tax planning is an integral part of Estate Planning. From knowing the potential tax exposure to planning to mitigate that exposure, individuals tend to place tax planning high on the priority list. There are, however, many non-tax considerations that should be discussed when preparing a well-thought-out estate plan.  The following are just few of the many items we have come across in our estate planning practice:

  1. Wills
    • Is there a Will? Yes, an obvious one, but many Canadians still do not have a Will and die intestate. Not having a Will means that the courts will apply provincial legislation to dictate how the Estate is to be distributed.
    • In Ontario (and some other provinces) a Will is rendered void on marriage. If recently married, a new Will needs to be prepared so the spouses don’t die intestate.
    • Would the individual benefit from dual Wills? Many estate planners have horror stories of clients passing away without a second Will to cover assets not requiring probate. One case I was involved in was related to a business owner who was dying and did not take the advice to use dual Wills, even though the benefits were discussed.  On his death the executors of his estate were told that probate fees on the private company shares would be $140,000! If the individual had taken the lawyer’s advice, this cost would have been avoided. Faced with this significant cost, the executors decided NOT to probate the Will.  By not probating the Will, they were never appointed as the Executors.  Fast forward to the present, we were asked to prepare a restructuring of their company’s shareholders.  When we sent our instructions to the lawyer we were surprised to find out that there was no legal representative who could sign any of the legal documents to complete the reorganization!  As a result, years later, the executors still needed to get the Will probated and pay the $140,000, plus interest.
    • Does the Will cover specific monetary bequests? We have seen situations where the specific monetary bequests that at one point where considered minor now “eat up” the Estate, leaving nothing for the residual beneficiaries. Be sure to routinely “run the numbers.”
  2. I have recently been involved in a complicated Estate where the individual was diagnosed with cancer and was, as he put it, “cramming for his finals.” We spent many hours reviewing his wishes and making sure we had documented his intentions (sometimes referred to as a letter of wishes). We also made sure the family legal counsel was aware of his wishes. After documenting the individual’s wishes, I strongly advised him to have a meeting with his family members AND executors to make sure they were aware of the details. There is nothing worse than executors not truly understanding the decedent’s wishes. Advanced warning can be crucial.
  3. Prepare a detailed list of assets, including insurance policies. This can be an enlightening exercise that can highlight potential concerns, such as the need for a valuation of artwork, how to deal with sensitive assets such as a collection of firearms, or legal issues related to foreign assets. This also allows the executor to know what the assets are and where they are located so that the estate can be administrated more efficiently.
  4. Prepare a list of online accounts and have them provide their user names and passwords. There is no reason to allow Netflix to continue to charge when the individual has passed away!
  5. Document the details of any private safes, including the safe’s location, where keys are kept, or what the combination is.
  6. Last, but not least, put all of the relevant information in an organized manner someplace safe (but maybe not in the safe, unless the combination is given to someone already!).

The estate plan is not just about tax planning. It’s more about getting people to review what their wishes are, what concerns executors may face, and making sure the process goes as smoothly as possible.