The lives of most Canadians are full of watershed moments as they progress through their 40s and 50s. They see their children become adults, graduate from college and get married. Some become grandparents. Some buy a cottage at the lake or a condo in Florida. Their wealth increases. Change, as they say, is the only constant.
The backbone of an estate plan is the will. Individuals and couples in their 40s and 50s must review their wills from time to time to make sure that it's keeping pace with the changes in their lives. When couples make their first wills, their focus is on protecting young children. As they transition through the next phases of their lives, their priorities begin to shift.
A challenge that crops up more frequently than most of us would care to think about is divorce and remarriage. These events will devastate whatever estate plans are already in place for the individuals involved. Their assets will have to be divided and there is often a negative impact on lifestyle, at least temporarily. The individuals will change the beneficiary designations on their RRSPs, losing the tax-advantageous rollover opportunity in the process, which changes their tax picture. If they sign a separation agreement, it has to blend well with the overall estate plan.
The parties getting remarried must all of a sudden figure out the balancing act of leaving one estate among what are essentially two families (the pre-divorce family and the post-divorce family). The rights of the new spouse must be balanced against the needs of children from the first marriage.
Marriage revokes a will automatically, so those remarrying need new wills. They will have to rethink their choice of executor as they probably don't want their ex named in that role. They start to consider their children for various roles such as executor and attorney under a power of attorney.
In terms of wills, the focus for the majority of parents becomes treating the children fairly. Most families consider the traditional equal split to be fair. Parents need to keep their wills up to date on issues such as loans made to their children, as often the parents will help the kids out with large purchases such as a home or business. Part and parcel of the fairness issue is the desire to minimize disputes among siblings.
Parents of disabled children must realize that once the child reaches adulthood, the parents will be required to apply to the court to become guardian and trustee. As part of their long-term planning, they must decide who will become guardian of the disabled child once they are no longer around. These parents must set up their wills in such a way that the disabled child will be well provided for after the parents pass away and, if at all possible, continue to receive provincial government benefits.
Parents who are also business owners will often take adult children into the business with them. They'll begin the process of grooming a successor to take over one day. Once these plans begin to firm up, they need to be backed up by a well-drafted will. The business owner will need to learn about estate freezes and family trusts. It's no longer enough to make a quick trip to the lawyer's office for a basic will. By now, business owners may find that they also need to bring their accountant in to advise on estate planning.
In this age bracket, it's also a good idea to revisit insurance coverage. Perhaps when the life insurance was first bought, it was intended to cover a mortgage or replace income. Those may not be the individual's or couple's goals any longer, now that their financial picture has changed so much.
Couples and individuals in their 40s and 50s should create - and regularly check in on - a comprehensive financial plan that takes into account current lifestyle, retirement funding and goals, business succession planning, cottage succession planning, life insurance, other insurances such as long-term care insurance, pensions, savings, planning for possible incapacity and, of course, tax planning.
Lynne Butler has worked in estate planning and law for more than 20 years and is the author of several books about estate planning, published by Self-Counsel Press .