The Costs of Avoiding Wealth Transfer Planning Michelle Connolly Vice-President, Wealth Planning, CI Investments Todd Prendergast Vice-President, Legal, Assante Wealth Management

Procrastinator Too generous Incomplete 73% Recognize anyone?

The winner… In 2010, no federal estate tax – savings of $500 million to $600 million

Most commonly seen problems regarding wealth transfer and estate planning

Five most common issues Capacity Power of attorney and wills Joint tenants (with right of survivorship) Beneficiary designations/communication Family dysfunction

Capacity Living longer: 2011 was crossover year More incapacity  Cannot understand relevant information or reasonably foreseeable consequences You must have a client More need for POA

Power of attorney documents What is it? Anything client can legally do, except testamentary dispositions Names one or more attorneys Jointly or individually Should name alternate attorneys Presently exercisable vs. conditional/“springing”

Power of attorney documents Two themes at the root of many disputes: General vs. continuing/enduring In addition to client, NOT at exclusion of client

Power of attorney documents 33% of Canadians have a POA for property 59% do not have one 8% do not know what one is

Wills 50% of Canadians have a will 50% of Canadians have not communicated to their families regarding intentions/provisions for Will Wealth creates complexity Do-it-yourself approach can be dangerous

Wills Maria, age 56, estranged from husband Children: daughter age 28, son age 26 Assets: $125K RRSP, husband beneficiary $300K house, her name only $18K TFSA, no beneficiary $52K open account, her name only

Wills

Joint tenants (with right of survivorship) JTWROS vs tenants in common Risks when using JTWROS to avoid probate  Pecore v. Pecore, 2007 SCC 17  Madsen Estate v. Saylor, 2007 SCC 18 Substance may trump form  Hansen Estate v. Hansen, 2012 OCA 112

KISS principle = Kiss goodbye minimizing potential financial costs, emotional angst and family breakdown/conflict

Beneficiary designations and communication Designations incomplete/contradictory Who/how designated? Tax consequences Communication with beneficiaries

Family dysfunction Conflict between named attorneys Who is your client? Conflict relating to multiple marriages/families Who is entitled? Elder abuse What is your role?

Questions and practice implementation strategies

Five practice management strategies 1.Confront and address FUDD 2.Complete documentation 3.Understand choices 4.Up-to-date copies on hand 5.Promote family discussion

19 Managing FUDD Fear Uncertainty Doubt Denial

20 Managing FUDD Draft 8-10 questions to discuss with clients in your next meeting. Send out beforehand, so client has had time to contemplate.

Name all the wealth transfer documents Canadians should consider

Name all the wealth transfer documents Accounts held jointly – JWROS/joint tenant Will(s) and verbal/written requests Power of attorney (s) Beneficiary designations Shareholder agreements List of assets and liabilities

Documents clear and complete Assets and liabilities listed accurately Beneficiaries are clearly identified Bequests are clearly laid out Document family members and any financial ties Map it out and compare to intentions  How assets are distributed  Best means to distribute given intentions

Joint name – tax and estate considerations What happens if John died? John and Mary Smith John and Mary Smith, JWROS John and John Jr. Smith (age 20), JWROS John and Mary Smith, Tenants in Common John and Mary Smith ITF Cathy Smith (age 16) John Smith ITF Cathy Smith (age 16) John Smith Smith Holdco (John has signing and effective authority) Don’t assume, discuss and document intentions

Appropriate choice – attorney and executor Suitable background and insight given assets Communication and organizational skills along with checks and balances Location and ability to travel Given powers to work with appropriate, knowledgeable professionals

Copies of power of attorney(s) and will(s) Know who is identified and why chosen Discuss at minimum every five years  Understand and still relevant  Changes in tax and estate laws Binder or listing of where all relevant documentation is for easy reference

Are new documents/designations required? Purchase of real estate for the first time Marital status change (beneficiary designations too) Nature or value of assets change Change of residence (province/country) Addition or loss of beneficiaries/attorney/ existing executor Change in health

How can we help protect the clients intentions against potential disputes or beneficiaries contesting?

Family discussion warranted Discuss and manage expectations now, as opposed to surprise Consider dependant’s relief legislation or concept of “forced heirship” impact What about the parents of a client in conjunction with clients’ planning? The Family Conference…

Take-aways… Canadians who have discussed their estate plans with families more likely to feel prepared than those that have not 40% of Canadians 65 yrs+ feel “very well prepared” 25% of Canadians 65 yrs+ concerned estates will pay too much tax, or heirs will disagree with their decisions or squander their inheritance TD Bank, 2014

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