Putting off estate issues is dangerous, experts warn
By: Amy Crofts
| Posted: Saturday, May 03, 2014 06:00 am
Planning ahead can be one of the greatest gifts you can give your surviving loved ones, said presenters at the Connelly-McKinley Funeral Homes estate planning seminar on Thursday night.
For some families there is a conflict brewing quietly amongst them and it brews year after year after year, explained Kevin Holte, a funeral planner from Mission B.C.
Sometimes these families encounter the death of the member who is keeping the family together. Then everything falls apart.
“Death is the trigger,” Holte said. “It’s as if there is a lid on the conflict and death is the great remover.”
Death is emotional, stressful and relationships sour.
“It’s very difficult when you’re so emotionally charged – in my lifetime I’ve seen chairs fly across the room and people walk out,” noted Marq Jeffrey, family consultant at Connelly-McKinley.
“When it comes to the end of our lives, we leave it for somebody else.”
A grieving family does not need to be left to figure out cremation or burial plans or finding your will in a coffee can under your bed, said Holte.
Having no will or named executor is a recipe for disaster.
“It could end with fights over Royal Doulton figurines. Who would have thought everyone would love that figurine that much?” he said, jokingly.
“But it happens all the time.”
Handwritten and holograph (handwritten and signed by a testator) wills are legal in Alberta. Ideally, your will should be in a safety deposit box, safe, or with your lawyer, said Holte.
The will should be reviewed when big changes in finances or family occur – birth, death, marriage, separation or divorce – or when there are substantial changes in your assets, liabilities or tax laws.
A clearly marked copy of your will may also be given to your executor. If you want to change your executor, the will should also be reviewed.
Picking an executor is not a decision that should be made lightly, noted Holte.
“If your estate is complex, carefully consider your choice of executor,” he said.
A complex estate might mean extensive property or investment portfolio, or a son/daughter with “large holes in their pockets.”
Even though it costs more for the bank or your lawyer to be your executor, in certain cases you may not want a son, daughter, niece or nephew to be your executor.
“The savings in ulcers and headaches could be worth it in spades,” Holte said.
Another option is to name a living relative as a co-executor and the bank or your lawyer as a co-executor. In such a case, it’s important to put in the will whose view trumps whose when there is a disagreement.
Holte also noted it is important to give permission (written or spoken) to your executor to pay for professional help in settling the estate if needed.
“A lot of people don’t do that. It’s a very wise thing to do,” said Holte. “The executor feels the pressure – both internally and externally from beneficiaries – to save as much as possible. It can be very stressful.”
If you are an executor and don’t want to be, say so now, no matter how uncomfortable it is, added Holte.
In certain situations a financial institution holding an asset of your estate may choose not to release it to your executor – they may be protecting themselves from a future lawsuit if the will was illegitimate and they released the asset to the wrong person.
In that circumstance the will must be probated and go before the courts to prove its legitimacy. The maximum fee for probate in Alberta is $400.
Probate fees can be avoided with joint bank accounts, joint ownership on investments and property, explained Holte, but you also have to look at the bigger picture.
“If probate was a dog it would be a little chihuahua. It bites the ankle, a little drop of blood comes out – it’s not a pleasant experience.”
“But be careful about rearranging everything to avoid a little chihuahua bite. There’s another dog you need to really pay attention to and it’s a pit bull – it’s income tax and capital gains.”
Capital gains taxes are usually levied on non-registered mutual funds, stocks, bonds, shares in metals or worth of a business. They are not levied on GICs, RRIFs and RRSPs.
Joint ownership of property does not eliminate capital gains taxes.
Holte advises consulting with a financial planner and lawyer to simplify your estate. Otherwise your money could end up with the other 1.4 million unclaimed balances with the Bank of Canada, worth more than half a billion dollars.
“Use the experts,” he said. “Four hundred dollars spent now can save your estate $4,000 or $40,000.”