In our first installment in this mini-series, we looked at why developing an estate plan is a critical aspect of financial planning that shouldn’t be delayed. But that’s only the start of the discussion, particularly for professionals, business owners and high net-worth families, whose wealth and strategic tax planning needs are often far more complex.
A well-designed estate plan should:
- Take the extent of your life insurance coverage into account and determine whether that coverage is adequate to provide financial security for your beneficiaries
- Include a review of beneficiary designations on insurance policies and registered accounts
- Involve a complete inventory of all assets in your estate and how they can best be structured for transfer upon death
- Include substantive discussions around tax planning to minimize income and probate tax liabilities, often using tools such as trusts
Many high net-worth individuals also choose to incorporate a philanthropic strategy into their estate plans to give back to their communities—which can also help minimize tax liabilities. Advanced funeral arrangement planning is another aspect of estate planning that can help reduce the stress on grieving family members and ensure that your send-off goes according to your wishes.
The family side of estate planning
While part of achieving financial wellness is simply being prepared with an estate plan, one overlooked aspect is the process of setting a family-centric vision for what you want your plan to achieve.
If your estate holdings are substantial, consider the impact that wealth could have on your children. From the family cottage to stock portfolios and family heirlooms, it doesn’t take much to ignite a full-scale family conflict over an inheritance. The breakdown of a family unit after their death is many parents’ worst nightmare. The legacy of wealth and happiness that you intend to leave to the next generation could be compromised in less time than it took to develop your estate plan if heirs clash over money or other assets.
In other words, estate plans need to be detailed and explicit when it comes time to managing inter-family dynamics.
Three family-centric estate planning considerations
- Distribution matters: If you have significant wealth, decide whether you want your beneficiaries to receive large sums of money all at once or in intervals over the course of their adult life. If you have young children or other financial dependents, such as a disabled loved one, it’s important to ensure that caregivers have ample funds to pay for your dependents’ lifestyle needs and that those funds are properly managed to ensure growth over time
- Be diligent: Updating an estate plan is just as important as drafting one in the first place. The Financial Consumer Agency of Canada study found that 95 per cent of Canadians aged 65 and older have wills, but 53 per cent haven’t updated them in the past five years. That kind of oversight could leave your beneficiaries exposed to unexpected legal issues or even tax liabilities—risks that can be easily avoided
- Consider transparency: To avoid inter-family tension, consider explaining your estate plans to your heirs during your living years. That openness can help minimize the likelihood of a post-mortem family battle, while making sure that no parties are surprised by the contents of your will. Using a platform such as ReadyWhen—a cloud-based repository of estate and personal information such as life plans, photos, passwords and other important information—can help with the process
Remember that financial wellness is anchored by preparation, and it’s never too early (or late) to tackle one of life’s most important financial planning exercises. Also, estate planning isn’t just about organizing your financial affairs. It’s also about building a meaningful legacy during your living years.
In an upcoming blog, we look at some of the overlooked aspects of estate planning and why it takes a team of experienced advisors to help you navigate the process.
The Bridgewell Team
For more information on Bridgewell’s estate planning advisory services, contact us today.
