Don’t let myths about estate planning prevent you from creating your own plan.
A couple of recent surveys delivered good news and bad news for those of us who work in the world of estate planning.
Encouragingly, people seem to be getting the message about the value of a comprehensive estate plan, but on the downside, not enough people are acting on that knowledge. Psychologists have a term for this kind of discrepancy: a value-action gap.
For example, a U.S. study revealed 90 per cent of respondents believed in the importance of having a will. More than half of them even had direct or indirect experience of family conflict that had arisen as a result of the absence of a proper estate plan. Still, only a little more than 40 per cent had actually had a will prepared for themselves.
Things are not much better in Canada, judging by an RBC survey that made strikingly similar findings. According to this report, 91 per cent saw wills as an important part of an estate plan, while 86 per cent felt the same way about a power of attorney (POA). Compare that to the proportion who actually had one in place: around 48 per cent for wills and 35 per cent for POAs.
Both studies also looked at some of the reasons why respondents have yet to create their estate plans, and their answers reveal some common misconceptions about the process. So, to help bridge the value-action gap that has developed in the area, here are four of the biggest myths about estate planning.
MYTH 1: I’m too young for an estate plan
The only people who can be sure they’re too young for an estate plan are those who can accurately predict the future, and I haven’t met too many of those.
However, I can be confident that your family and friends will thank you for having a will in place should the worst come to pass. Dealing with an intestacy is not only an unwanted hassle for beneficiaries; it also defeats the very purpose of estate planning. In Ontario, the strict rules set out by the Succession Law Reform Act determine how assets are distributed on an intestacy, rather than the wishes of the deceased.
A POA is another estate planning document whose value people only tend to appreciate once it’s too late. Most are only designed to take effect once the grantor becomes incapable of handling their own affairs, which means that you must have one in place ahead of time. After you’ve reached the point of incapability, you can no longer sign a valid POA, which could leave you and your loved ones in a very difficult position.
The younger you start, the simpler it will be to establish the basics of your estate plan. It will also give you the perfect template to work from as you cycle through the milestone moments of life that inevitably require an update: landmark events such as your first house, marriage and the birth of a child are a great time to revisit your original choices and check that the people you named beneficiaries and executor still make sense.
MYTH 2: My assets aren’t valuable or complex enough for an estate plan
You don’t need to be wealthy to make an estate plan worthwhile. In fact, the more straightforward your assets, the less work and money it will take to get an estate plan in place.
I’ve already talked about the dangers of an intestacy, and for those whose possessions hold more sentimental than monetary value, it can still be a great comfort to know that you are the one deciding where they go after you’re gone.
In addition, a comprehensive estate plan deals with much more than your personal belongings. Those with minor children can use their wills to appoint a preferred guardian. A judge will ultimately have the final say on the issue, but they typically need a good reason to depart from the deceased’s wishes.
Testators whose dependants live with disabilities will also want to consider the need for various types of testamentary trusts to make sure that their offspring are properly taken care of.
MYTH 3: My loved ones get along, so I don’t need an estate plan
The death of a loved one can do strange things to people, and I have lost count of the number of families I have seen descend into wasteful, expensive litigation over apparently minor disagreements regarding the deceased’s assets or perceived sleights from fellow beneficiaries.
In some cases, you can see an estate dispute coming from miles away, but it’s not always possible to tell how people will react. In my experience, it’s not unusual for sibling rivalries or other familial tension to simmer below the surface for years, only to surface after a close relation’s passing. You can relieve some of the tension in advance by letting your beneficiaries know exactly what they can expect from your estate.
Those who have gone to the trouble of making an estate plan can run into a different kind of trouble when they blindly appoint their children as co-executors, assuming they will be able to handle working together.
It may seem like a good way to share the load, but this can cause more problems than it solves if the personalities involved are prone to clash and there is no mechanism for breaking an impasse during the administration of the estate.
MYTH 4: It’s too complicated to put together an estate plan
This myth comes closest to the truth. One of the most common reasons people give for their estate plan inaction is not knowing where to start, and I understand how difficult it can be to approach such a perceived apparently overwhelming task — especially one that that forces us to confront the uncomfortable reality of our mortality.
The good news is that you don’t have to do it alone. An experienced estate planning lawyer can help you figure out exactly what you need to ensure that your assets are distributed according to your wishes in the most tax-efficient manner possible, based on a rigorous assessment of your individual circumstances.
The more complex your estate planning needs, the more crucial it is to obtain professional advice. Ensure your estate is in good hands by developing a comprehensive estate plan that honours your wishes. Reach out today to schedule a consultation and take the first step towards safeguarding your loved ones’ future. Let’s collaborate to create a secure and effective plan for your peace of mind.