When people talk about estate planning issues, in the media or in discussions with financial advisors and insurance representatives, the usual questions focus on the following:
- How much money will be left at death?
- Who will receive what assets or specific belongings?
- How much tax will be paid?
- How to avoid probate costs?
- What legacy does one want to leave?
These are all excellent questions to consider, but they are not enough. Too often, they blindly lead to product recommendations, such as life insurance – but an estate plan is not synonymous with a product recommendation. These questions ask “what?” and “how?” and they fail to uncover the deeper reasons that led to the product sale. The greatest question that must be understood is “why?” With this knowledge, we can address the primary issue that underpins all estate planning: continuity of intentions.
Often when we plan with couples, we will hear differing opinions, for example, with regards to leaving funds for children. Here is a typical exchange we might encounter.
Joe: “We must absolutely leave something for the kids!”
Sabreena: “I’d rather enjoy my retirement and not worry about the kids. We worked hard to build up this nest egg and I want to enjoy spending some of it while we are healthy.”
It would be easy to dismiss Joe’s concerns and to encourage Sabreena’s point of view. But the question that needs to be asked of Joe is why he feels he needs to leave money to his adult children? He might surprise you by telling you that his life journey was very difficult and that, had his parents left something for him, he would have had an easier time. Or he may reveal that he is very concerned about the world and his grandchildren’s future. He would feel a lot better setting money aside for their education to give them a better chance to succeed.
With the right conversation and plan, we can satisfy both Joe and Sabreena’s conflicting why’s, and ensure that continuity of intention drives their estate-planning decisions.
This same issue arises with every element of estate planning. It is great to want to save taxes and/or to avoid probate (which can be costly and take time) but it is imperative to have a plan that aligns with intentions. We have seen many individuals with great plans set-up for the explicit purpose of avoiding probate only to find themselves causing all kinds of unintentional issues. Joe and Sabreena, for example, could consider putting some of their assets in joint name with their children to avoid probate at death. However, this could create some deep legal issues. Would the children gain control of the assets while Joe and Sabreena might still need them? What happens to the claims on these joint assets if their married children separate from their spouses?
The key to a successful estate plan is to fully understand intentions. There are many pitfalls in estate planning, and it is important to have enriched conversations about your intentions and possible consequences. Even the best estate plans do not always manage to avoid all potential issues, and plans should consider flexibility as circumstances might change.
When was your estate plan last reviewed? At Tall Oak Private Wealth, we look forward to working with you to make sure there is continuity of intention in your estate plan.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
