last will and testament waiting to be filled and signed
wisitporn/123RF

As clients head into retirement, they’re more inclined to want to enjoy the fruits of their labour rather than begin planning how to distribute their assets upon death. This explains why just 49% of Canadians have a will in place and only one in six Canadians have one that’s up to date, according to a study from the Angus Reid Institute released earlier this year.

Clients, even those who are in their 50s and 60s, often believe they’re too young or that they don’t have enough assets to need a will. But a well-planned will can save an enormous amount of money in taxes and ensure important estate-planning decisions aren’t left up to the government, says Kathryn Bennett, senior regional sales director with Desjardins Insurance in Toronto.

That’s why encouraging clients to have an updated will as they enter their twilight years is especially pertinent for financial advisors. “Dying without a will can cause a lot of litigation, heartache and grief for family and friends,” Bennett adds.

In many cases, your clients’ circumstances change over time. Clients can find themselves in new relationships or suddenly have grandchildren enter the picture.

To ensure your clients and their families are prepared for a smooth transfer of wealth, here are some important considerations:

Location must be current

Sometimes, a client’s retirement offers the perfect opportunity to move closer to family or to a city with a lower cost of living. But each province has different rules pertaining to wills and inheritance, Bennett says, so your client’s will must be updated accordingly.

Update beneficiaries

In the absence of a will, who inherits a decedent’s assets is determined by the laws in the province in which the deceased lived, Bennett says. For example, in Ontario, common-law couples are not legally entitled to inherit assets in the same way married couples are. Likewise, if your client has stepchildren, their names will need to be drafted into the client’s will if they’re to receive an inheritance.

Determine how beneficiaries will inherit the assets

Your clients may want to reconsider whether to distribute an inheritance outright or set up a trust for certain family members. A trust gives your clients a way of controlling how their money will be distributed.

For example, if a relative is listed as a beneficiary and develops Alzheimer’s disease, your client may want to change how money is handed over to that family member. Similarly, if a client becomes concerned about a child with marital relationship difficulties or substance-abuse issues, a trust can be useful, Bennett says.

Conversely, when children and grandchildren aren’t minors anymore, your client may wish to terminate a trust and give these family members money directly through the will with no strings attached.

Update the executor

Many clients use a spouse or a parent as their executor when they create a will in their younger years, says Vanessa Benedict, lead investment advisor with Benedict Wealth Management Group in Oshawa, Ont., which operates under the banner of National Bank Financial Ltd.

But, as a client enters retirement, his or her original executor may no longer be alive or have the capacity to handle the responsibility.

Verify charities

Clients who wish to leave gifts to charities should check with the Canada Revenue Agency’s charities directorate to determine whether the charity of choice is registered “if [clients] want the tax savings,” Bennett says. There has been litigation in cases in which the legal name of a charity wasn’t correct.

Bring in other professionals

Aside from communicating with a lawyer regarding your client’s will and estate plan, involving other professionals, such as accountants, also is a good idea.

An accountant can make your client aware of certain tax implications, such as for different beneficiary designations for RRSPs, RRIFs and TFSAs, Benedict says. Namely, there will be tax consequences if a client names a child as the beneficiary of an RRSP rather than the client’s spouse.

In addition, Bennett says, an accountant can point out certain measures that could relieve some of the tax burden for your client’s estate, such as designating charities as beneficiaries.

Discuss the estate plan with your client’s family

Some clients may not want their children to know about the will and estate plan until they receive their inheritance, but this often can lead to confusion and litigation among family members.

To ensure a smooth transfer of wealth, Benedict and Bennett suggest clients hold a family meeting to share their plans.