Financial Planning

Discussing these issues can save your clients trouble in the long run

By Leah Golob |

 

Conversations between advisors and clients usually focus on investments. But you should also be talking to your clients about wills and estates, says Kathryn Bennett, senior regional sales director at Desjardins Wealth Management in Toronto.

"If the focus is strictly on investments and taxes and capital gains, etc.," Bennett says, "it's not a holistic approach."

To help ensure that your clients are protected on all facets of their financial matters, you should also discuss their estate plans. Estate planning is a broad and complex topic, but you can start by asking these three key questions:

1. "Where were your born?"
A client's citizenship might seem obvious, but roughly one in five Canadians are foreign-born, according to the National Household Survey, released by Statistics Canada in November 2016. So, Bennet says, "There is a very high probability that the person you're talking to may be an immigrant to Canada."

If your client is also a citizen of the United States, or has a green card that has not been properly surrendered, he or she may face U.S. income tax and estate tax issues.

"Make sure [clients] get the right kind of advice from professionals who are qualified in cross-border tax and estate planning," Bennett says.

2. "Do you have any children with special needs?"
You should know about any adult children your client has who are unable to manage their finances, Bennett says. Similarly, some clients may be caring for parents who struggle in managing their finances.

Planning for a family member with a disability, Bennett says, requires special arrangements. Your client's estate plan must include measures to accommodate these family members' needs.

"You can use life insurance, for example, to help fund a trust for a family member with a disability or an inability to manage finances," Bennett says, "in the same way that you can use life insurance to fund a trust for your [client's] minor children."

3. "Do you hold any assets jointly?"
Some clients think putting assets under joint ownership with their adult children is a smart way to avoid probate fees, Bennett says. But this strategy has the potential to cause problems from both a tax and legal perspective.

"Transfers between parents and children can trigger capital gains taxes," Bennett says, which are usually much higher than probate fees.

Further, if the child has significant debt, the assets held jointly with the child could be exposed to the child's creditors, even while the parent is living. There also has been an increasing number of court cases disputing whether an asset owned jointly by a parent and child goes into the deceased parent's estate or directly to the child, Bennett says.

As an advisor, you can be an "order taker," and simply follow instructions from your clients, Bennett says, or you can ask these sometimes difficult questions to save your clients trouble in the long run. 

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