Transcript: Where there’s a will, there’s a way to disburse client assets

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Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about estate planning with Wilmot George, managing director of tax and estate planning with Canada Life. We talked about having tough conversations with clients, the dangers of dying intestate, and we started by asking how he defines estate planning and why it’s so important.

Wilmot George (WG): Estate planning is a broad term that covers many aspects of asset management, and it can be defined in different ways. But at its core, estate planning is the process of establishing a plan and a collection of documents to define how assets should be distributed in the event of death. It also includes establishing how financial and health care decisions should be managed in the event of incapacity while an individual is still living. The estate planning process allows us to chip away at that unsettling feeling that we typically have when our affairs are not in order, to bring peace of mind for both the person with the plan and family members who might inherit.

Taxation at death

WG: For whatever reason, Canadians don’t like talking about death. I certainly understand that. It’s not typically the conversation at the forefront of people’s minds when they sit down to discuss their wealth. And there are many Canadians who haven’t even really thought about taxation at death, but it’s important to understand that when they pass away, they’re deemed to have sold their assets just prior to death, which can lead to a large taxable income for the year of death, and taxation at top tax rates. So as a part of any financial plan, not only should we be thinking about rates of return, we should think about estate planning as well to ensure that we protect and preserve those assets when the time comes to distribute those assets to beneficiaries.

Intestacy

WG: The importance of having a will is well discussed. According to a survey done by the National Institute on Ageing in 2023, 16% of Canadians indicated that there are no consequences, or they don’t know the consequences of not having a will. Dying without a will, formerly known as dying intestate, can lead to a number of issues that go beyond not clearly communicating one’s preferred distribution strategy. Dying intestate can lead to automatic probate and probate fees, unintended distributions, entitlements for minors may require consent from the public trustee, which can result in delayed access, children might inherit directly, which can be an issue for minors, spendthrift children or children with disabilities, and taxation is often accelerated for assets not transferred to a surviving spouse or common law partner. In other words, while there is a process in place to distribute estate assets, in the case of intestacy, unintended things can happen which can lead to delays, added fees, frustration and conflict amongst family members. Financial advisors are well advised to have the estate planning conversation with their clients. And step one, quite often, is to ensure that their clients have a will.

And finally, what should financial advisors bear in mind with regard to estate planning?

WG: The estate planning conversation involves many different things. There’s many different aspects, many different components to estate planning. We can talk about the estate and what taxation looks like to the estate at death. We could talk about probate fees. We could talk about named beneficiaries on insurance contracts and registered plans. We could talk about what happens to the cottage at the time of death. We could talk about the importance of life insurance and where that fits in the estate planning conversation. Powers of attorney, documents is another component. So there’s many different aspects to estate planning. I think that financial advisors broadly and generally understand the importance of having the estate planning conversation, but that conversation can go down many different roads, depending on the unique circumstances of the family that we’re talking about. In today’s environment, where there is downward pressure on fees and messaging that suggests that there is little to no value in financial advice, estate planning is an area where financial advisors can further demonstrate their value. Financial advisors who are well positioned to service this market will do their client families tremendous value. And in doing so, referrals and retained business across generations will often be the result.

Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Wilmot George of Canada Life. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.

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