Canadians in their 60s and 70s shift the focus of their estate planning away from accumulation of wealth for the first time. They now focus on strategic use and preservation of assets. Until this point, most planning has been for the future. In this stage of life, the future has arrived.
Most Canadians will retire or semi-retire during this phase of life, happily pursuing those golf games and Aegean cruises that were postponed in the name of work. It's the time when the initial plans made during your earlier years begin to bear fruit.
It's not that adults are no longer saving money at this age; it's more that income sources change. At age 65, you'll begin to collect Old Age Security and Canada Pension Plan benefits. Private pensions also kick in. By the end of the year you turn 71, your RRSP must be converted to a RRIF, which will provide income whether you want it or not. It's important to continue working with a financial planner to maximize these sources, minimize taxes and understand what will be available for retirement and to leave in your will.
The second major focus during this phase of life must be planning for incapacity. Of course nobody wants to think about it, but seniors will notice the uptick in the number of serious health issues happening among their contemporaries. Most people will already have health care directives in place and should take them out, dust them off and update them if necessary. This is the time to put serious thought into how one spouse will fare if the other loses mental capacity.
Health and money intersect, of course, and couples should consider the potential cost of health care that may or may not be needed in years to come. Have you thought about the cost of your spouse continuing to live in the family home if you must live in a long-term care facility due to incapacity?
Powers of attorney
In enduring powers of attorney and health care directives, you will name the person or people you want to put in charge of your decision making in the event you cannot manage it yourself. By the time adults are in their 60s and 70s, they generally want to rethink the previous appointment of friends and siblings and appoint their children instead.
The choice of representative is crucial. Financial abuse of seniors is rampant. Sadly, much of the suffering could have been avoided by a more thoughtful and critical choice of attorney under a power of attorney.
During the later years of this phase of life, some Canadians will be widowed. This carries its own set of emotional and financial challenges. The death of a spouse should bring about a complete review of the survivor's plans.
A majority of widows and widowers find it worthwhile to simplify their assets at this point. For example, a cottage that you're not going to use much now that you're a single rather than part of a couple might be sold. The large family home may prove to be too much of a handful for you alone, and you may wish to downsize to a condominium, apartment or smaller house. Joint investments and bank accounts are now solely owned.
Handing down assets
These are worthwhile steps to take as they can smooth potential estate problems. But as always, there are pitfalls. The process of simplification can end up creating as many problems as it solves if it is taken too far. A common homemade estate-planning strategy is to put assets into joint names with the children, which can make even the toughest estate lawyer or accountant wince.
The idea is to avoid probate fees and possibly "simplify" by avoiding the probate process altogether, but the cost is frequently disputes among the children, and in many cases, lawsuits to determine the true owner of the joint asset.
While it's not always advisable to transfer assets to the kids without advice, it is definitely a good idea to open conversations with your children about estate planning. Let them know who you have named as your executor, your attorney and your health care representative. Tell them where your documents are kept. Find out their thoughts on the family cabin.
And send them a postcard from Greece.
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 .