The first stage of estate planning is requesting that our clients gather all the information they currently have in place. This is an important step as it enables us to take inventory of what our clients currently have in place with respect to estate planning. In the process we encourage our clients to review the documents they currently have in place. Creating an organized system, with all applicable documents, gives our clients piece of mind.
The main benefit of an organized system is the ability to share this information with the professionals our clients work with. It also ensures that they are leaving their Executor with as much detail and guidance to assist them with the administration of your estate. It is a good idea to maintain, and keep current, a database of your key contacts and important documents. We encourage our clients to develop a system that is communicated with the Executor you have chosen.
At the start of every client meeting, we review a summary sheet that contains high-level items which we think are important for our clients to understand and/or have in place. It is also important that our clients share and communicate information to us about these details as it assists us in providing Total Wealth Planning advice to them. To gather this information, we have our clients complete a Professional Checklist and return it to us either by email, mail, or at our next meeting. This Professional Checklist is our version of a new medical patient intake form. When working with a new medical professional, they first need to know you and your family’s health history before determining the best course of action. In a similar fashion, there is certain information we need to know to provide sound financial advice.
In this article we will discuss some of the information we obtain, and the importance of keeping it up to date. Not only can this assist your Portfolio Manager today, but it can help your Executor in the future. All the information we discuss below is pertinent information that can assist your Executor with the administration of your estate. Like our professional checklist, we recommend having a document that you keep up to date which can quickly and easily provide all the necessary information noted below to your Executor.
Accounting information
Do you prepare your own tax return, or do you have someone prepare your taxes on your behalf? If you have an accountant, then at a minimum we obtain the name of the individual(s) you work with, the firm name, mailing address, phone number, fax number, and email. We also like to know when the relationship began. If you do not have an accountant, then we would like to know how your return is prepared (i.e. software package, paper version, family member)? In conducting your estate planning, it is also important to ensure that this information is readily available to your Executor, as they will have to file your final tax return.
As part of the accounting information we gather, we ask all new clients to grant us Level 1 Canada Revenue Agency (CRA) access. With your consent, this enables us to get some background information and obtain all carry-forward limits. We obtain alerts from CRA when our clients get new mail (Notices of Assessments, Reassessments, Review Letters, etc.), and often we are able to review this information before our clients receive it. We have written an article about “Sharing tax information with your Portfolio Manager.”
For our corporate clients and incorporated medical professionals, it is important for us to speak at least annually, if not more frequently, with their accountants. We can provide the accounting firm with the information they require to expedite the preparation of corporate and trust returns. It also enables us to document the structure, shareholdings, and overall strategy with respect to tax sheltering, dividend payments, wages, etc. This information needs to be consistent with all the financial planning documents that we prepare.
We encourage our clients to understand the tax consequence, if they were to pass away today, especially when they have registered accounts (i.e. RRSP and RRIF) or significant funds within a corporate account. The strategies that we map out, with our client’s accountant, is designed to lower their overall tax bill. This often may means paying a bit more taxes today to avoid paying even more in the future.
Legal information
One of the sections on our professional checklist requests details regarding the lawyer(s) and notary(s) are clients work with. For our corporate and trust clients, they may have a different lawyer to help with the structure, records office, minute filings, etc. All clients should have a notary or lawyer that helps prepare their personal legal documents. This is perhaps the area where we must nudge clients along a bit as the natural tendency is often procrastination.
By asking new clients to fill out the professional checklist and asking existing clients to update or provide this information, it encourages people to dedicate time to compile this useful information that they could then provide to their Executor. The most basic of questions we ask is whether our clients have a Will. We believe it is important to know when it was last updated, where the original(s) are kept, and who the Executor and alternate Executors are. We also advise clients that we do not prepare Wills and don’t require copies of our clients’ Wills unless they have questions and concerns. When we have estate planning meetings, we always want to know how our clients ultimately want their estate distributed. If the Will does not reflect their most current wishes, then I will work with their lawyer to ensure it is updated.
We also obtain details regarding Power of Attorney, including legal, banking, and financial information. Unlike Wills, there is no registry for Powers of Attorney. We ensure that we document the details that our clients provide, and request that they confirm no changes at every meeting. In cases where clients are aging, we will encourage them to bring their trusted representatives in to meet with us prior to a situation where the client’s capacity can be questioned.
Often the legal section of our checklist is returned without the requested information, or with incomplete information. In some cases, it may be because the client didn’t understand the question, or that it is not applicable to them. Many people want to know about the different types of Power of Attorney and health care directives (i.e. representation agreement) available, but have never really talked to anyone about it. This provides an opportunity for us to discuss the various documents, and ensure they are all in order and current for their Executor, Power of Attorney, and representatives.
Perhaps the most important part of this exercise is that it enables our clients to be open about personal situations that have been bothering them. After working with clients for a couple of decades, there are very few problems that we have not found solutions for if the client was willing to discuss them.
Banking information
When clients first open up their investment accounts, they must provide a copy of a void cheque to ensure we have the correct details. In some cases, we have clients who have multiple bank accounts at different institutions. Many couples have joint accounts. Some clients choose to have individual accounts. Our elderly clients have, at times, had questions about setting children up as Power of Attorney on bank accounts and investment accounts or setting them up as joint owners. We try to simplify our client’s banking needs while at the same time ensuring they understand the pros and cons of each decision that they make.
Every investment account is linked to a bank account. It is possible to have different bank accounts linked to different investment accounts, which can get a bit confusing, especially as our clients age.
We generally encourage closing unnecessary accounts and consolidating them into one Canadian chequing account. In this one account our clients can have all your deposits transferred in including CPP, OAS, RPP pensions, and withdrawals from their financial institution.
Establishing a good relationship with one banking institution, and having one point of contact there, makes sense. It also makes cash flow planning and taxation administration easier, and from an estate administration standpoint it also helps to simplify things for the Executor.
Instead of having to deal with multiple financial institutions, having one set of bank accounts and one set of investment accounts can certainly make their lives easier. Within the important information document, our clients leave for their Executor, we strongly recommend listing all financial accounts (including account number, institution, name and contact details). It is quite common for an Executor to receive a statement in the mail months after they thought all accounts were captured.
It is also important that whenever our clients change their banking information, they let us know so we can update the applicable link to their investment account(s). They should also remember to update their important information document so their Executor will know where their bank accounts are held.
Insurance information
When clients come to the insurance section of the checklist, they often don’t have a clear understanding of their insurance coverage. Some may have insurance they purchased many years ago but have forgotten the details. Sometimes clients bring in policies that have lapsed, have been replaced, or converted. In other cases, they are fully in-force.
For existing in-force policies, we document all details, including why the insurance was initially put in place. We also obtain details regarding the cost of the insurance and any periodic cash flow needs to fund it. In some cases, the insurance is fully paid-up.
In other situations, premiums are set to be paid monthly or annually. When we see monthly premium payments, we usually talk to the client about converting to annual payments as the cost of insurance is typically lower. With annual payments we are also able to coordinate payments from a non-registered account on our client’s behalf. We ensure that cash flow is available to fund the payments and we can make them directly for our clients, similar to us making instalment payments to CRA.
In some cases, our clients have no insurance and they do not need insurance. In other cases, our clients have young families, or have significant debt loads, partnership agreements, compliance with separation agreement clauses, etc. When there is an obvious insurance need, we will outline how risks can be managed in the scope of an overall Total Wealth Plan.
Asking questions about insurance and obtaining details of all in-force policies enables us to understand the full picture. One of the side benefits of gathering all insurance details is that it is required information to complete a comprehensive Total Wealth Plan. Within a Total Wealth Plan, a section covers insurance. Insurance can often help provide solutions to concerns, protection, taxation benefits, and estate maximization and ensuring that asset transfers after taxes have been paid.
Background information
For every client, we request that they provide us with some background on their family dynamic, usually starting with a verbal discussion. These types of discussions really set the framework on how the estate planning process can get structured. Starting with the details of how they grew up and how they created their wealth.
We wrote another article, “Why do we ask for a family tree?” that outlines in greater detail the reasons we ask for a family tree. If this information is not obvious to your Executor, we would encourage providing them a copy of a family tee with all applicable contact information.
Children and grandchildren
Information on children and grandchildren is also important to know and discuss. We will often discuss with our client’s what type of assistance, if any, they want to provide to any minor and adult children during their lifetime.
In some cases, we have clients that feel they have no obligation to assist their children after they leave home. Some say they feel an obligation to fund education costs only. Others want to extend the assistance to helping their children purchase their first home.
Every client is different, and we try to get an initial understanding of where they fit within this wide spectrum. The conversation also flows to how our clients would like to deal with children and grand children for estate planning.
Non-family members
We also want to obtain details of non-family members that are involved as part of our clients current estate plan. They could be key people they plan to rely on or beneficiaries who are listed on life insurance policies and registered accounts. A
t times, we have had beneficiaries that live overseas and have been challenging to reach. Making sure our clients have up-to-date addresses and phone numbers of key individuals is a crucial part of your estate plan and is important information to provide to us, as well as your Executor.
Charitable giving
We will specifically ask if our clients have a charity, or charities, that they would like to support. We encourage clients to make a specific list of those charities that they would like to support, either during their lifetime or as part of the estate. Getting the specific details, including the charitable number, and full name ensures no confusion on the charity you would like to support. Often there are benefits for making charitable donations during our clients’ lifetime as opposed to having this dealt with through an estate. Planning and organizing the right way to support charities can often result in greater tax savings.
Pets
Many of our clients have pets that are an integral part of their family and have concerns about what will happen to them as part of their estate. We can provide solutions that give pet owners options and peace of mind, which we discuss in one of our past articles, “Who cares for your pet after you pass?”
Other information
With extended families and complicated family situations, we ask our clients to provide marriage contracts, prenuptial agreements, or any information that gives us a complete understanding. We also ask clients to provide any additional details that they feel we should know. We want them to communicate to us any concerns that they may have. The more information that we have the better able we are to assist in mapping out the necessary estate planning steps.
When clients have estate planning questions, we encourage setting up a dedicated meeting specifically to discuss estate planning. Reviewing your current documents and having an open conversation with what your estate planning goals are is an important first step in the estate planning process. After a review of the existing documents, and estate planning meeting(s), we can map out an action plan. We involve the professionals our clients work with to ensure the steps are completed. We assist our clients in creating a system of organizing their documents together that ultimately translates to them having peace of mind.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email [email protected], or visit greenardgroup.com.
