Talking with Your Parents about Planning, Documenting and Meeting on Their Estate

Let’s be honest, talking with your parents about estate matters can be a very uncomfortable discussion. In my experience, this process sadly starts in many cases, when a parent becomes sick or has a terminal illness. This is very unfortunate and not the best time to start estate planning.

This parental discussion has a fair bit to unpack, as there are three component pieces. The planning component, which some parents do not undertake. The documenting element, which is often not done or incomplete. Finally, there is the family meeting which occurs infrequently. I will discuss each of these factors separately below.

How to Start the Planning Conversation

Many parents (I will use the plural parents throughout this blog post, but the discussion will apply equally to the "singular" parent) plan their estate without prompting. Others think it will magically plan itself or they just procrastinate as they do not want to contemplate their ultimate demise. In many cases, parents do not think it is their children's business to even discuss their estate planning. 

 

So how does a child/children raise the estate planning issue without causing their parents to think they are greedy, nosy or rubbing their hands in anticipation of an inheritance? Here are some suggestions I have gleamed from various articles and from my personal experience.

1. This may seem crude, but use another person’s poor planning as a way to start the discussion. Your parents may provide the opening when discussing “the mess their friend Mrs. Smith left her estate in”. Alternatively, you may bring up a bad situation one of your friend’s parents had or use an article in a newspaper or publication that discusses a messy situation caused by poor estate planning.

2. Set-up a scheduled time to meet with your parents and siblings to discuss their wishes for the estate, so that you and your siblings can support their desires. This meeting will hopefully make your parents feel that they are not being ambushed and feel there is a family consensus. Let your parents know specific dollar amounts do not have to be disclosed, which can sometimes be an impediment.

3. Directly ask if your parents are working with a planner. This may lead to an opening and request for a referral, or they may get their back-up. If the latter, don’t pressure them. It is very important to be patient and empathetic. Try again at a later time, maybe when one of the opportunities in #1 present themselves.

4. Flip the situation around and say you are working on your own planning and your advisor has asked is there anything your parents can share with you so that it can be built into your planning. Alternatively, where your parents may not be financially secure, the siblings can say they want to ensure they can help, but need to be able to plan for the assistance (or if the assistance will not be available, they want to help you minimize these financial concerns by planning in advance for such things as a reverse mortgage).

There is no magic bullet to get the discussion started. Maybe one of the above strategies will work for your family dynamics. In any case, ensuring your parents have started their estate planning is beneficial for them and you and your siblings, especially if the children are executors of their estate.

I suggest proper planning includes most of the following:

 

• preparation of wills (should not be finalized until the family meeting discussed below)
• personal care and financial powers of attorney
• personal and possibly corporate tax planning
• estate and probate planning
• introductions to your parent’s key financial, insurance, tax etc. advisors

Documenting Assets and Wishes

Having your parents complete their estate planning is a huge first step. However, if they do not document their assets, wishes, digital passwords etc. they will leave you and or your siblings and the executors a huge mess and a morose game of hide and seek at a time of mourning and distress. I therefore suggest strongly you get your parents to complete an estate organizer or listing of their assets and location. 

The listing will include at minimum the following:

 

• location of important documents like will(s) and power of attorneys
• where the safety deposit key and jewelry can be found
• details of all bank, investment and real estate information
• location of insurance policies and details of the policies
• a summary listing of financial advisors' names and contact information
• details of digital information from cryptocurrency to Facebook passwords
• details of any prepaid funeral arrangements and/or wishes in regard to their burial 
  

There are several estate organizers on the internet or if you have a financial advisor, they will likely have one.

In 2012, I wrote a blog post A Tale of a Fathers Selfless Act of Love. This should act as your guide to the ultimate in planning and documentation. The link to the actual article noted in the blog is here.

Setup a Family Meeting

If your parents have planned and documented, then the final and penultimate task would be a family meeting (if not done as part of the planning). 

 
Some people suggest a family meeting have a formal agenda, others a less formal tone. In any event, the meeting’s objective is to ensure your parents' choices and decisions are heard in their voice by the family, so there is never a dispute to what you really wanted. 

 

Your parents can accomplish the following by having a family meeting:

1. Share their spiritual and personal values and hopes for the future of their family (see this blog post I wrote on ethical wills).

2. Discuss their healthcare wishes for all to hear. This would be the time to clarify who the power of attorney is for healthcare and their views on the right to resuscitation and even assisted death. For anyone who watches the TV show This is Us, in a recent episode Rebecca (the mother who has early onset Alzheimer’s) calls a family meeting to discuss who will make her health care decisions and how she expects her family to live and carry on once her Alzheimer’s progresses. I thought this was a great example set by the show.

3. Share their draft wills to determine if their thoughts on asset distribution are aligned with what their children want. Some parents will be open about the will, some will disclose certain information without actual financial details, and some will not want to discuss the will. If your parents have an open discussion about their planned distribution of assets, they may be surprised their perception is not reality. For example, they may have thought the children would want to share the cottage, but only one child even has interest in the cottage and they don’t have the financial means for the upkeep. This discussion can result in changes to the draft will.

4. Discuss any possible perceived or actual inequalities in their will(s) and their rationale. The rationale does not have to be accepted by all, but everyone can now at least understand these were not arbitrary or punitive decisions and could save significant family dis-harmony after their passing.

5. Identify who will be named executors. Most children have no idea of the responsibilities and the burden of being named an executor of the will. Your parents can explain the duties of the executor and determine if the children or child they wish to be an executor(s) are/is willing to undertake the position.

6. Indicate their burial plans and desires.

These are some of the key issues a meeting can address, but the agenda is only limited by what your parents wish to discuss. In the end, the meeting provides a forum for your parents to discuss their wishes for healthcare and asset distributions in their own words and voices; which leaves no room for speculation upon their passing.

 

Talking to your parents about planning, documenting and meeting on their estate is a tall order. However, whatever you can accomplish from the above list will be beneficial for the estate, your parents and siblings and the executors. 

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

The Taboo Of Money - I Will Not Talk About It- Part 3

As discussed in my blog post last week, I suggest you consider a frank discussion with your beneficiaries about your will. Today I conclude that discussion with the final four reasons you may wish to consider holding a family meeting.

The Benefits of Having a Family Meeting

The following are the final four benefits of having a family meeting about your will.

5. Giving the Kids what They Really Want

We all have a tendency to assume we think we know what assets our children want. In many cases we are correct, however, in others we are way off base. A family meeting allows you to discuss individual assets to ensure the assets are given to the child who really appreciates and wants the asset. That is not to say that whatever a child wants they will get. In some circumstances more than one child may want the same asset and if you intend to equalize your will equally, the equal proportion may be distorted by allocating assets according to your children’s likes and dislikes.

The determination of the wants of family members will often revolve around larger assets such as cottages.  Some children may have an attachment to the family cottage while others may not; or maybe you are not sure whether any child would want to take over the property when you pass. A meeting provides the opportunity to raise the issue for your children to decide amongst themselves if they will want to sell the property, share the use, or have one child inherit the property. Sometimes the meeting may bring you to the realization that the issues surrounding the second property are so divisive that the prudent decision would be to sell the property.

Don't forget to sweat the small stuff! I have spoken to many corporate executors from the big banks over the years, and they often comment that family disagreements are as likely to occur over personal and sentimental items as they are over large assets such as cottages or even money.

Many wills do not properly address personal and sentimental assets. The reason for this is typically twofold:

1. The parents assume naively that the children can deal with these assets, especially where there is little real value to them.

2. Where personal assets such as art and jewellery have significant value, the parents do not wish to pay income tax on the disposition of these assets or, have no idea of the tax consequences of disposing of these assets. Consequently the assets are ignored in the will. This creates future problems as the executor is required to report the value of these assets for both probate and income tax purposes and may face penalties if he/she does not report the assets and pay the taxes.

It is thus important for you to discuss these items at the family meeting or at a separate informal meeting. Where there is no clear agreement over who should get a personal asset, you can have the beneficiaries’ rank the assets one to ten and the assets are then allocated to the beneficiary with the highest ranking. Alternatively, you can undertake a lottery and the assets will be distributed in your will according to the lottery results.

The key is that you should address these personal items, as if you leave them unaccounted for in your will, the possibility that they could become contentious is very large.

6. Succession Plans for the Family Business - Keeping it Going

Where there is a family business, the succession of that business is one of the most important issues facing the family. The value of their estate and hence the value of the assets in the will are directly correlated to the value or succession of their business.

In my opinion, the succession planning decision is so large in importance with the potential to be so divisive that it should not be part of any family meeting discussing your will. For family succession issues, is it often best to bring in outside specialists to work with the family.

However, if all the children will be given equal shares in the business, the topic can be brought up as part of the family meeting. If you have already made it known to your children that you had decided to leave the business to one child or only some of your children who work in the business and that you plan to equalize the other children with cash or other assets, the topic should be broached.

However, parents must understand that the value of the business can fluctuate wildly over the years, with the result being that the child(ren) who inherit(s) the shares may in essence have inherited a significantly larger asset than the other child(ren). Alternatively, the shares of the company may prove to be worth substantially less than the assets distributed to the other child(ren) if business conditions cause the value of the business to diminish. The parent will have no control after their death on the potential disparities in value. I have seen situations where asset distributions were equal at the time of death, but the inherited business grew astronomically and the children who did not inherit the company shares felt wronged by their parents. Consequently, this topic needs to be discussed and explained at the meeting. You need to make it absolutely clear to your children that the company value could go up or down and that they must understand these valuations are beyond your control and that is one of the uncertainties of your will and an issue that may continue on beyond your death.

­7. Helping your Kids plan their Future

It is also a kindness to your beneficiaries to let them know, generally, what they can expect as an inheritance. Even if it is not your intention to gift money or assets over to them while you are alive, at least they can get a sense of what their financial position will be so they can arrange for their own lifestyle and retirement planning. If you are aware that your child is expecting a large inheritance, and you are planning to leave most of it to charity, it is only fair to let him know so that he/she does not overextend himself financially on the assumption that he will someday be wealthy. On the other hand, if your child is living very frugally in order to save for a retirement, and you know that you will be leaving her enough that she will be well off in retirement regardless of her savings, it is fair to her to let her know so she can "live it up" a little! This is a very contentious issue that I wrote about previously in this blog post.

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8. Children's Roles in Administering the Estate

A side benefit of a family meeting is that you can broach the topic of your executors. Assuming you wish one or more of your children to be your executor(s), you can use the meeting to discuss the responsibilities and the burden of being named an executor of the will. You can explain the duties of the executor and determine if the child you wish to be an executor is willing to undertake the position. If he/she is not, you will then have to consider whether you hire a corporate executor or name family friends or business associates.

You could also take advantage of the opportunity to discuss whether you wish a family member to be your power of attorney of your assets if you become incapable of managing your affairs, and whether you wish to appoint a child to be responsible for your medical affairs or living will, should you also become incapable of making medical care decisions.

A meeting provides our children with some clarity towards their inheritance. Obviously the clarity is still somewhat murky, as there are several variables such as life expectancy, health, re-marriage, changes in wishes etc. However, it still provides some direction for your children’s own financial planning. If you intend to provide partial inheritances while alive, this is very important information for the children to be aware of, if these partial inheritances are significant.

This concludes this mini-series (excerpts from my abandoned book). I hope it provided some food for thought.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

The Taboo Of Money- I Will Not Talk About It- Part 2

As discussed in my blog post last week, I am going to post small excerpts of a book I was writing on money taboos which I have abandoned. Last week I suggested you consider a frank discussion with your beneficiaries about your will. Today I discuss four of the eight benefits I see in having a family meeting to discuss your will; I discuss the final four benefits in next weeks blog post.

The Benefits of Having a Family Meeting

The following is a brief summary of what I believe to be the main benefits of having a family meeting about your will:

1. Avoiding Future Conflict - and Litigation!

Fans of Charles Dickens' Bleak House will of course remember the fictional case of Jarndyce and Jarndyce in which generations of family members fought over a large estate until the estate was completely consumed by legal fees. If you don't discuss your will with your children, any perceived actual or perceived inequalities in your will cannot be explained rationally to them, and conflict and estate litigation might well result. Of course, the kids might "lawyer up" despite your best efforts, but at least you have done your best to avoid it!

One of the key reasons for even considering a family meeting to discuss your will is the opportunity it provides for you to outline in a rational manner and hopefully in a calm setting why you have left certain assets to certain children, to charity or to whomever else you have decided to leave assets. It is a bit of a guessing game whether you will have properly perceived what your children perceive as inequalities; but in most cases, it will be obvious.

2. Explaining Intentional Inequities

An example of an obvious and deliberate inequity is where you have left more money to one child than to the others. Where you have left more money to one child (perhaps he or she makes less money than the other children), you can use the meeting to explain why and explain that it has nothing to do with loving that child more, you are just helping him since they have not been as fortunate as the other siblings.

The fallout on this decision may come from two sources. Most of us are familiar with the biblical parable of the prodigal son, in which the first son asks for his inheritance from his father early, blows through all the cash and then goes back to his dad for more. Rather than telling his son to suck it up and support himself, the dad then dishes out even more to the prodigal son, leaving his hardworking younger son angry. Remember that there may be reasons why the children are not equally successful - perhaps the least successful one is also the laziest and most unmotivated of the children. The others may question why they are being penalized in your will for their sibling's lack of performance. It is your right to give your money to whomever you wish, of course, but you should expect at least some resentment from the other siblings should you wish to proceed with this course. Be prepared to justify your decision.

Secondly, and more surprisingly, fallout may not come from the children who are not receiving equal inheritances, but from the child receiving the additional money. They may feel insulted that you feel they have been less successful, and embarrassed by your desire to give them extra help, rather than regarding the extra allocation as compassionate recognition that they require some additional financial assistance.

3. Avoiding Unintentional Inequities

There may be less obvious inequities. There may be consequences arising from your legacies that you did not anticipate, creating unintended conflicts between your family members. For example, in striving to be fair, you may bequeath a cottage or other secondary property to all your children equally, without realizing that doing so actually creates a burden on those of them who do not want the cottage but will be required to pay for its upkeep. You may also miss the opportunity to consider other ways of disposing of your assets, perhaps by intervivos gifts that will ultimately minimize taxes.

4. Clarification of Prior Gifts and Loans

Many of my clients have wanted to help out their kids during their lifetimes by providing them with a little (or a lot) of extra cash. The money might be used for a down-payment on a property, for education or to bail out a child who hits a bad financial spot. The most important thing is that the child must know whether the money was a gift or a loan and whether that money was expected to be an "advance" on the inheritance. How to intend to characterize these gifts or loans is an important issue to discuss in the family meeting, especially where you want to avoid an unintentional inequity if you were to die without making your intentions down and where one child has already received a significant portion of your estate.

The above issue can often be dealt with by utilizing a “hotchpot clause” in your will. Over the years, a legal concept now commonly known as a “hotchpot clause” has evolved to deal with the equalization of the beneficiaries of an estate, where one or more of the beneficiaries have already received money during their parent’s lifetime. When a hotchpot clause is inserted in a will, the clause will prevent a beneficiary (typically a son or daughter) from “double dipping” where the parent intended any money advanced during their lifetime to be considered a pre-payment of an inheritance, rather than an advance over and above an intended inheritance. See this post I had on the hotchpot topic for more information.

Next week I conclude this series with the final four reasons to consider a family meeting.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

The Taboo Of Money - I Will Not Talk About It -Part 1

As discussed in my blog post last week, I am going to post small excerpts of a book I was writing on money taboos which I have abandoned. Today and next week, I write on the taboo of discussing your will with your children, either individually or in a family meeting, while you are alive.

The Taboo

One of the biggest money taboos people have is discussing their will openly with family members.

People hate talking about their own death. People hate talking about their own money. People hate conflict within their families. Combine all of these hang-ups and a perfect storm of neurosis results, creating a virtual tsunami of taboos involving openly discussing one's wealth, one's death and disclosing one's personal opinion about family members. Many people view the thought of this discussion with horror, but my advice is simply - "get over it and do it!"

Reasons for the Taboo

In a 2016 Google Consumer Survey conducted by Legalwills.ca, the survey found 62% of Canadians do not have wills. The survey also noted that 12% of Canadians have an outdated Will (most never updated their Wills once they married and/or had children), which means that 74% of Canadians do not have an up-to-date Last Will and Testament.

I suppose the most common, although rarely admitted, reason for this is, that people are in denial that their lives will eventually end and that their lives will probably end at a time that they cannot control. Understandable, but foolish. None of us get out of this world alive, so get a move on and arrange your affairs so that all of the money, jewelry, collectibles and personal items you have worked for will ultimately be distributed in the most beneficial and tax-efficient way possible.

Once someone has faced up to the necessity of drafting the will, why then the fear of discussing its contents with family members - those who are actually going to benefit from the will? I have heard both rational and irrational reasons for avoiding the discussion. Here's a sampling of some reasons/excuses I have heard over the years for people not discussing their wills/estate planning with their beneficiaries:

1. It is none of their business.
2. My parents did not discuss their will with me, so why should I discuss it with my children.
3. It is bad luck.
4. If my children know what is in my will, they will be hovering over me like the Angel of death waiting for me to kick the bucket.
5. Discussing our intentions will just cause tensions amongst my children.
6. My will does not split my wealth equally among my children.
7. My children are not equally responsible and I have a trust for one child; I don’t want them upset at me while I am alive that I don’t trust their judgement.
8. I am leaving a substantial sum to charity, my kids will “freak” when they find out.
9. I have no idea how long I will live, my assets may be depleted by the time I pass away and the kids will be expecting certain assets that may not be in existence.
10. I have not drafted a will (see above).

Consequences of adhering to the Taboo

If you do not discuss your will with your children while alive, the following are possible

consequences:

1. Perceived or actual inequalities in your will that can be explained rationally while you are alive will never be explained. 
2. You may create unintended conflict amongst your children.
3. You may not have an accurate understanding of which assets your children truly want.
4. Income taxes may not be minimized.
5. Estate litigation may result.

There is no doubt that money brings out the worst in some people and a full disclosure of your family assets and planned distribution may cause problems in your relationship with your children and in their relationships with each other. But it is my belief that it is better to know the problems, confront the problems and solve the problems before you die and this can only be done by a full and frank discussion with your beneficiaries.

Next week I will discuss the benefits of having a family meeting to discuss your will and estate planning.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Having the "Talk" about your Will

In my blog post on Monday “Is it morbid to plan for an Inheritance,” I referenced a recent survey undertaken by the Investors Group that stated that 53% of Canadians are expecting an inheritance, with over 57% of those, expecting an inheritance greater than $100,000.

In the press release announcing the survey results there was a paragraph on “Having the talk” which discussed the lack of communication between parents and children in respect of inheritance issues and, more specifically, wills. As I noted on Monday, my most read blog post by far is now One Big Happy Family until we discuss the Will which discusses this exact topic.

In that blog post, I suggest that where a family discussion can be held without creating World War 3, the benefits of such a discussion include allowing parents to (a) explain possible perceived inequities in the will, (b) determine the wants and needs of the beneficiaries, (c) help in determining an executor, and finally (d) allow for full disclosure.

Admittedly, the one aspect lacking in my blog post was actual data in relation to what extent Canadians actually discuss their wills with their children. The Investors Group filled that void in their press release stating “the poll reveals that many families are not taking the time to discuss or deal with inheritance issues. Four-in-ten Canadians whose parents have a will (39 per cent) say they have not discussed the terms of the will with their parents while sixty-one per cent of Canadians with deceased parents who had a will, admit they never had the talk.”

While the Investors Group press release focuses on the fact most families do not have the "talk', a glass half-full view reflects that a significant number of families actually do discuss this sensitive issue. In the Investors Group press release Christine Van Cauwenberghe, Director, Tax and Estate Planning at Investors Group says "When it comes to wills in Canada, there's not enough action and certainly not enough talk," Christine goes on to say that "Broaching the sensitive topics of wills and estate details with loved ones can be daunting but having "the talk" early on can provide security for planning and make the process easier when the time comes."

Finally, in the press release, the Investors Group states “Interestingly, those who have discussed will and estate details with family members indicate it was not a difficult conversation. Three-in-ten (31 per cent) said the discussion was very easy while only three per cent said they found it very difficult.”

That the survey reflected many families are able to have this conversation without issue is heartening. However, I would speculate that these families are most likely families without a black-sheep child and their distributions are probably somewhat equal and not contentious.

Nevertheless, it is nice to have some statistics that reflect that some parents are having this difficult discussion, which allows for estate planning certainty and minimizes the issues for the executor(s) in administering the parent(s) estate.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.