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Avoiding un-necessary complications at the worst of times

Avoiding un-necessary complications at the worst of times

In our role as corporate executor and agent, we often see the same scenario – a long term marriage where the husband works outside of the home while his wife left the work-force to raise their children – followed by the husband’s unexpected death.  At the time of passing, their financial assets and liabilities are predominately in the husband’s name with his wife having limited access to her own financial resources – things like credit cards are connected to his.

When reading the Will, it seems everything passes to the wife – unfortunately this can take time.  When financial institutions are notified of the passing, bank and brokerage accounts are frozen until documents can be produced, and the husband’s credit cards are cancelled together with her companion card.  If probate is required, the legal process can take months even for the simplest of estates.  This puts the widow in the unfortunate position of having limited access to funds to pay day-to-day expenses and monthly payments such as the mortgage and utilities.

We have found banks can be quite compassionate, but it’s a bit of a hit and miss.  If the husband has funds or secured credit facilities, the bank will usually allow for the disbursement of death payments such as funeral costs, and possibly some home expenses.  Probate can be an issue – on a $2M estate, probate can be $28,000 (at $14/$1,000).  Your bank may advance probate funds immediately prior to filing, but isn’t their general policy, and would be assessed on a case by case basis.

Then comes the mortgage which typically is approved and supported on a cash flow basis.  (Note that there are a few financial institutions that will approve an equity only mortgage).  If the mortgage or a line of credit is supported by cash flow, a renewal may not be possible, which could eventually force the liquidation of assets, or worse, the family home. 

Some solutions

Ok, we told you about all the problems that are clearly not needed at the worst of times.  Unfortunately, solving the mortgage problem is hard to plan for.  However, some simple steps could help the survivor buy some time until matters get sorted out.  Here are a few simple ideas:

  • Each spouse should have a bank account in their sole name with enough funds to last 4 to 6 months.
  • If the credit cards are companion, each spouse should get a separate personal card (consider a different financial institution for diversification).
  • Life Insurance policies are paid quickly when presented with a Death Certificate (be prepared to ask for about 5 certificates as lots of institutions will be looking for them).  Confirm that the named beneficiary is the right person.
  • RRSP/RRIF/TFSA – these accounts as well have a named beneficiary that should be confirmed.
  • A Joint-Spousal Trust, or other type of trusts set up during one’s lifetime that avoid the whole probate process can be useful tools for the transfer of assets.

There has been a lot written recently about joint survivorship where a joint account and its proceeds pass immediately outside a person’s estate to the survivor without probate or estate administration.  This strategy requires legal advice – joint ownership can make things faster and easier – but it could create tax and family law issues with extremely negative consequences.

We have blogged a fair bit in the past about joint partner and alter-ego trusts that can help with probate and other issues.  Have a look at https://cvtrustco.com/planning-with-trusts-as-we-age/ 

The best solution

Again, communication wins the prize – it’s the easy solution to many avoidable problems.  Have a discussion about financial assets and obligations so that both spouses are well informed and know what things are and where.  If simple changes will help, make them early, long before there is a problem.  We know this sounds a bit crass, but how about walking through a dry run – you will be amazed about the things that pop up.

So, this ends our 3rd quarter blog.  Looking forward to blogging you around year end.

September 24, 2019 0

Planning to give it away

Planning to give it away

In our last blog, we spoke about increasing the odds of building a successful Continuity Plan with the core premise for success being “communication”. Unfortunately, one of the conversations that is often forgotten centers around philanthropic interests.

How many people wait to leave something for a cause or organization they care about only in their will? Often, there is no family discussion about the importance of the cause to the deceased – the donation is often a huge surprise when the will is read.

A great way to promote togetherness and communication within families today is to give funds during your lifetime. So, communicate and don’t wait to donate! (more…)

July 9, 2019 0

Evolving a Succession Plan with a Simple Idea – Talk

Evolving a Succession Plan with a Simple Idea – Talk

In our last blog, we discussed the idea of Continuity Planning; how it can differ from the traditional definition of Succession Planning, and how the Family Enterprise Advisor (FEA) program and designation can help advisors guide their client families through some of the non-technical (or soft) issues.

The problem with not dealing with the soft issues

Tax and legal solutions to Succession Planning like insurance, estate freezes, etc. unfortunately only deal with the technical pieces and completely ignore the family and their non-technical concerns. Remember when it comes to the family piece – failing to plan is planning to fail.

So, let’s get into it – what is the main tool that takes a technical Succession Plan and evolves it into a well-rounded Continuity Plan.

The Discussion

What we often see is a family that has worked hard, either through a career or a business they have built, created wealth that is more than they will need in their lifetime, and have two core issues:

  • How do I effectively pass this on to my children and/or grandchildren without ruining them; and
  • Who is going to take care of all of this when I’m gone, and how?

On top of these two issues are things specific to each family: maybe a child has some health challenges that will impede their ability to make decisions; a soon-to-be ex-spouse; estranged family members, etc. Specifics also change over time, so the plan you make today may not work when needed.

How to get to a solution

If the lack of communication often leads to a doomed Continuity Plan, then by logic, the converse – lots of communication – should lead to a successful Continuity Plan.

If you’re worried about them knowing the amount of their inheritance (or not) or who will be running the family business, not having a conversation will not stop them from being unproductive or unengaged. If they have these tendencies today or are prone to them, what makes you think their behaviour will be any different when they receive their inheritance?

Which scenario has the higher likelihood of success when an heir loses their family member:

  • A child has an inheritance windfall, much larger (or much smaller) than they were guessing and magically becomes capable of managing it or dealing with it on top of dealing with the emotions of family loss; or
  • As above, but with discussions held in advance, preparations made for and introductions to good advisors etc. without magnifying the emotional challenges by suddenly having money or a business handed to them they weren’t ready for?

One doesn’t have to share a dollar amount with an heir, but if there’s a range, or an expectation set in advance (not just an expectation of dollars, but also the why’s and how’s, etc.), the likelihood of success goes way up. By increasing the likelihood of success, you also increase the probability that your legacy will last longer, and be a positive one…not a burden on those left behind.

Next up – give some of it away

Speaking of Continuity planning, a financial legacy is often overlooked. As a parting thought, we wanted to touch on philanthropy, and specifically, and to give an early plug for Leave A Legacy Month, which is in May.

This movement was started by The Canadian Association of Gift Planners (CAGP) and their members to remind people that when you’re creating your Continuity Plan, to remember the charities you’ve supported through your lifetime, and to remember them for when you’re gone.   Have a conversation with your family and advisors about what’s important to you, and if there are specific bequests you want made on your demise, either through your estate, or “in honor of” contributions after the fact.

We’ll get deeper into the philanthropic conversation in a future blog.

A Blog Note

Going forward, we are going to blog quarterly and post on LinkedIn more frequently as we see things of interest. Our testing shows that this gets us greater interest and readership.  To stay up to date on CV TrustCo, follow us on LinkedIn

 

April 2, 2019 0

Continuity Planning – The Evolution of Succession Planning

Continuity Planning – The Evolution of Succession Planning

In our August blog, we wrote about Steve Ivacko’s recent receipt of the Family Enterprise Advisor (FEA) designation, via the Family Enterprise Xchange and the Sauder School of Business at UBC.  This program helps families in business (and the advisors to those families) to get a better handle on the unique challenges they face.

This month’s post will focus on what typically happens in the context of succession planning, and how this exercise is evolving into continuity planning.  If you want to understand this evolution, please read on! (more…)

October 29, 2018 0

My Executor’s Executor is now my Executor!

So, what is the blog title referring to? Quite simply, if the stars align (or mis-align, as it were) your executor may not be the person you picked to do the job. How can this happen? What we’re talking about is the scenario of something happening to your executor while they are in the process of administering your estate. The job then becomes their executor’s! Confused yet? (more…)

September 17, 2018 0

Leave a Legacy Month

Leave a Legacy Month

In April, we wrote about “Make a Will Week”, and now, May is “Leave a Legacy Month”.  In the financial services industry, many people talk about “legacy” mostly in financial terms. But leaving a legacy usually means more than leaving financial assets to family.

This month’s post explores the concept of leaving a legacy and the various forms a legacy can take.  If you’ve got your legacy figured out a la Ray Charles, no need to read further, but if you are struggling like most of us, this post may provide a thought. (more…)

May 23, 2018 0

It’s Make a Will Week!

It’s Make a Will Week!

April 8 – 14 is Make a Will Week in British Columbia.  A 2014 report noted that only 55% of British Columbians had a will.  I would venture that from what we’ve seen in our business, for those who have a will, a very large percentage of them are in desperate need of an update.  We saw one will where a guardian was named for a child, who is now over 50; that means the will was written over 33 years ago, and we’re guessing a few things changed in those 33 years.  If you need any help in understanding why you need a will, with a bit of insight, or if you just want to understand why we started with an Abe pic – Read On (more…)

April 9, 2018 0

Estate Planning Council Roundtable Discussion on Corporate Fiduciaries

Estate Planning Council Roundtable Discussion on Corporate Fiduciaries

Our Steve Ivacko recently presented at the Estate Planning Council, Vancouver Chapter, together with BMO’s Lisa Finden.  The topic they were tasked with was ‘The Benefits of a Corporate Trustee’.  As expected, there was a bit of a back and forth on using a large bank as opposed to a local independent corporate trustee.  To not sound too biased, we thought we would post what both presenters could agree on – the 7 benefits of using an independent fiduciary.

(more…)

March 13, 2018 0

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