Many of your clients have spent years building their wealth, but without a proper estate plan, all that hard work could be distributed in ways they never intended. The truth is that most people put off estate planning because it feels overwhelming or uncomfortable.
You can help your clients understand that estate planning is not about preparing for death. It’s about taking control of their financial future while they’re still alive and able to make sound and thoughtful decisions. In this article, Wealth Professional Canada will explore all that you need to know about estate planning.
Estate planning is the process of creating a detailed set of instructions that explain how your clients’ assets will be used and distributed when they die or become unable to manage their finances. A complete estate plan includes various legal documents and financial tools that work together to accomplish two main goals:
The beauty of estate planning is that it doesn’t only benefit your clients after they’re gone. Estate planning can also help your clients manage and structure their financial affairs while they’re alive.
Without a proper estate plan, your clients’ assets could end up in the hands of a court-appointed administrator who might not share their values or understand their wishes. The administrator might sell cherished family items or distribute assets in ways your clients would never have chosen.
The court process can also be slow, expensive, and stressful for your clients’ loved ones. Watch this video to learn more about estate planning:
One study found that less than 50 percent of adult Canadians have general knowledge about estate planning. As a financial advisor, you must help your clients realize how important this process is.
You can also check out our Glossary page for more wealth and investment concepts.
Estate planning doesn’t have to be complicated if you break it down into manageable steps. Here’s how your clients can move through the process:
Before your clients can create an estate plan, they need to know what they have. This means gathering information about all their assets and belongings. Your clients should collect details on:
They should also create an inventory of items that hold sentimental value, like family heirlooms or keepsakes. This documentation becomes the foundation for everything that follows.
When your clients have this information organized, it becomes much easier to decide how to distribute their assets and plan for taxes.
Now that your clients know what they have, they need to think about where it should go. This step requires imagination and honesty.
Your clients should consider what they want to happen to their wealth when they pass away. They’ll need to think about how they’d like to transfer their assets, considering factors like minor children or charities they want to support.
This is also a good time for your clients to think about the people who will handle their affairs when they’re not able to. These personal representatives might include an executor, a trustee, or a guardian for their children.
Estate planning involves working with several professionals who bring different areas of expertise to the table. Aside from engaging your services as a financial advisor or financial planner, your clients will need to work with tax specialists, lawyers, and notaries too.
This is where the estate plan comes together. At a minimum, your clients should have:
For your clients’ will to be legally valid in Canada, there are three requirements:
This is true in most provinces, although Quebec has different conditions.
Once the documents are created and finalized, your clients need to store them somewhere safe. Options include a safety deposit box at a bank, a lawyer’s or notary’s office, or even at home in a secure location.
The important thing is that your clients tell their loved ones where these documents are kept. If something happens to them, their family members need to know where to find this information so they can begin settling the estate.
Estate planning is not a one-time event. Your clients’ lives change, and their estate plans should change too. Major life events like marriage, divorce, or the birth of a child should prompt a review of the plan. Family conflicts can get in the way, so regular updates to the plan are crucial.
Life circumstances change, and it’s vital to make sure that the people your clients have chosen to handle their affairs are still willing and able to do so. As such, they should review who they’ve named as executor every few years. Someone who was the right choice two years ago might not be the best option now.
Check out this video for more valuable insights:
Read this article to find out six estate planning mistakes that clients should avoid.
It depends. While Canada does not have an estate tax, your clients will need to pay for the services of an estate lawyer. For instance, in British Columbia, a simple will is going to cost about $800. In Ontario, the average fee is around $500.
Lawyer fees for estate planning usually fall into two categories: hourly rates or flat fees. Hourly rates work well if your clients' estate is simple. Flat rates work well for complex work because lawyers will provide the cost upfront.
Estates that are more complicated obviously tend to be more expensive.
One of the most important reasons to have an estate plan is to reduce the tax burden on your clients’ estate. While Canada doesn’t have an official estate tax like the United States does, there are taxes on certain types of accounts and assets that are usually transferred in an estate.
Retirement savings accounts and certain kinds of real estate can be subject to taxes when they’re transferred. Without a proper estate plan, your clients could end up paying more taxes than they’re legally required to pay. There are also various fees involved in settling an estate, including:
With a solid estate plan, your clients can appoint an executor who will work to minimize these fees and maximize what’s left for their heirs.
Without a will, your clients’ assets will be distributed according to provincial intestacy laws. This might not reflect their wishes. For example, a court-appointed administrator might sell family heirlooms or miss tax-saving opportunities. They can even transfer assets in ways your clients would never have chosen.
When your clients have a will and other estate planning documents, they maintain control over where their assets go. They can specify which beneficiary receives which assets and set conditions on inheritances. They can make sure that treasured items go to people who will value them.
To learn more, check out these five tips to achieve the best estate planning.
If your clients have minor children, estate planning is not optional. They need to give clear instructions about what should happen to their children if both parents die before the children reach adulthood. Without these instructions, the courts will determine who raises the children and how any money left to them is managed.
Choosing a guardian for minor children is a difficult decision that your clients will make. They should evaluate potential guardians carefully, considering their values, their location, and their financial situation. Your clients want to be confident that whoever they choose will raise their children as they would want.
Estate planning also provides your clients the opportunity to leave instructions for their pets. They can include how they want their pets to be looked after if they ever pass away or become incapacitated.
The most important thing to remember is that estate planning is a process. Life changes, laws change, and your clients’ wishes might change too. As you help your clients review and update their estate plan regularly, you’re making sure that their plan continues to reflect their current situation and values.
When your clients have a well-executed estate plan in place, they have a guarantee that their hard-earned wealth will be distributed the way they intended. They're assured that their loved ones won’t have to guess about their final wishes. That’s the power of proper estate planning.
COO explains that it’s not market volatility or the rise of robo-advice that threatens the industry
Canada Life SVP unpacks misconceptions around this category, explains how new retirement realities and the great wealth transfer are driving their new relevance
Trump accounts bring US$1,000 federal seeds and a US$6.25 billion pledge
Financial planning professor shares what educators are doing and what dealers need to do
The confidence gap quietly costs cautious Canadians thousands in retirement wealth
Survey identifies dissatisfaction with tech, client acquisition, and succession planning
Emotional counselling meets administrative support for executors and family members after losing a loved one
Advisors can help their clients give back and make a difference, while making progress towards their own financial goals
Chief Commercial Officer explains why and how advisors might want to consider turning a policy into cash
Edward Jones Canada moves to boost estate and trust services for clients amid looming wealth transfer
