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Canadians appear to be thinking about estate planning more than ever before. The fears around COVID-19 – and extra time spent at home during pandemic lockdowns – played a role in getting families to create and update their wills and power of attorney (POA) documents.
A 2021 LegalWills.ca survey found COVID-19 influenced more than half (53 per cent) of participants to write or update their wills over the previous 12 months. It also showed two-thirds (66 per cent) had been putting off the process for a while.
Canadians also have more access to information about estate planning, inspiring them to get their affairs in order, says Margaret O’Sullivan, founder and managing partner of O’Sullivan Estate Lawyers LLP in Toronto.
“People are more sophisticated about the different estate planning issues,” she says. “Often, they come to us with a planning idea because they’ve read about it in the media or elsewhere.”
Globe Advisor spoke with Ms. O’Sullivan, whose firm recently published the book, Trust and Estate Essentials: Achieving Success in Family Succession, Second Edition, about how advisors should approach estate planning with their clients.
How has estate planning evolved in recent years?
Families look much different today than they did just a few decades ago.
There are more blended families and family members are spread out geographically, with people living or working in other countries. More people also own their own businesses. Estate planning is also more complex with changes in laws and taxes. All these evolving circumstances have an impact on estate plans.
There’s also more wealth, which means more opportunities to do different types of planning such as philanthropy. I am also seeing more people talk about ethical wills, which means including statements about your values in your will as a guideline for your children. It’s not just about leaving assets but a legacy you hope they will carry on.
As estate planners, we need to keep up to date, change with these trends and ensure people have a plan appropriate to their circumstances.
What are some common questions you get from clients about their wills?
At the end of the estate planning exercise, many people wonder, ‘Who should I tell about my estate plan? Should I tell my children? Should I give them a copy of my document?’ That’s always a delicate conversation. The answer depends on their situation.
For example, if someone has a business, they should be sharing certain key pieces of information with their advisors, management and business partners. When it comes to children, it depends on who needs to know and how much they need to know. For many, it’s a good idea to have a family meeting to communicate the estate plan. It puts people at ease and gives them a basic understanding of your wishes.
People are also concerned about how to leave their assets to their children so that it’s protected if their child goes through a divorce. Another big topic is how to minimize probate fees, which, for some, can become a rather hefty wealth tax.
What advice do you have for advisors helping clients with estate planning?
Advisors need to have a holistic approach, balancing the repercussions of not just tax issues but also legal and family law issues.
For instance, sometimes people transfer property without considering all the legal or tax implications. Another issue we see is people directly holding U.S. securities and not understanding the exposure to U.S. estate taxes.
There is also a lot of apathy about updating estate planning documents. People feel that once they’ve done it, they can set it aside, but it’s an evolving process as life changes. Another issue is not dealing with major life events on a timely basis such as divorce. Advisors should encourage their clients to stay on top of their planning.
Advisors can position estate planning as a rewarding experience. Once the plan is updated, the client has the satisfaction and peace of mind that their wishes will be taken care of.
- This interview has been edited and condensed.
- Brenda Bouw, special to The Globe and Mail
Must-reads from Globe Advisor this week
Why investors are not fussed with top advisors’ fees despite down market
Advisor fees are often top of mind for clients in times of volatile markets and economic downturns. But some of the advisors on The Globe and Mail and SHOOK Research’s Canada’s Top Wealth Advisors 2022 ranking say that’s not the case because their clients know and value what they’re paying for, which goes well beyond investment performance. Comprehension of fees comes down to transparency when onboarding clients. The matter is discussed extensively and can be revisited as models change, says one advisor. Deanne Gage looks at how top advisors handle the situation with clients.
Elevated oil prices creating opportunities for ‘lean’ Canadian producers
Whether oil prices have stabilized, and what that means for energy investments are two big questions portfolio managers are contemplating in the wake of a substantial production cut from the Organization of the Petroleum Exporting Countries (OPEC) and its allies earlier this month as investors balance the prospect of sturdier crude prices against deepening recession risks. The outlook for Canadian producers is relatively stable with oil sands producers, in general, demonstrating a disciplined approach to capital allocation despite robust cash flow generation right now. Jamie Sturgeon speaks with strategists about what this means for investors and whether it’s a buying opportunity.
Do central banks have a credibility problem?
Are central bankers going to continue to raise interest rates aggressively into a highly levered dramatically slowing global economy when forward-looking, real-time data points to a dramatic decline in economic growth and inflationary pressures? All because of the flaws that exist in their old, antiquated forecasting variables? Inflation hawks may be right but for all the wrong reasons. The Fed’s own research suggests that two-thirds of the inflation we’re now experiencing is not being caused by an overheating economy but by the twin exogenous shocks of COVID-19 and the Russia-Ukraine war. James Thorne of Wellington-Altus Private Wealth Inc. looks at the economic indicators past and present to break down what lies ahead.
How to make charitable donations go further as inflation and interest rates rise
Canadians often make charitable donations toward the end of the year, both as a seasonal tradition and to take advantage of a tax deduction in the current taxation year. But, in the face of inflation, rising interest rates, market volatility and a potential recession, some may be scaling back their charitable plans. That makes it all the more important for advisors to point out strategies to their clients that make each donated dollar go further. Alison MacAlpine speaks to experts about the most tax-effective ways to give this season.
What you and your clients need to know
CI launches a new commodities fund – but is this the right time to buy it?
Where should you invest to make money in inflationary times? One of the traditional answers is commodities. Prices of raw materials, agricultural products and metals typically increase as the cost of living rises. That translates into higher profits for producers, which in turn pushes their share prices higher. The energy sector is an obvious example. Almost every oil and gas company has seen its stock price move sharply higher in the past 12 months. Gordon Pape of Internet Wealth Builder looks at opportunities in the space.
Investor beware – financial markets are laden with conflicts of interest
Financial markets are laden with conflicts of interest. Professional portfolio managers have them, as do analysts, rating agencies and some financial media. Investors must understand that. No one is watching investors’ backs; it’s their job to do so. George Athanassakos of Western University looks at how conflicts induce recognizable patterns of behaviour among all elements of the financial markets, not just analysts, and what effects this has on stock prices.
Where active management has shone in a volatile year
When times are good, index or passive investing is a slam dunk. However, when times are bad, some investors may seek solace with active managers who might be able to exploit market opportunities brought forth by volatile conditions. Ian Tam of Morningstar Inc. uses the company’s tools to look for actively managed exchange-traded funds (ETFs) that have succeeded in this regard on a year-to-date basis. He screens the universe of 1,300 ETFs from Canadian-domiciled fund companies, then further screens on those where the manager has discretion on trades as opposed to those that openly follow a predefined index. Here’s what he found.
– Globe Advisor Staff