Talking to your parents about their estate
all know that we will die someday, but that doesn't always make writing a will
high on our to-do lists. Nor does it make talking to our parents about their estate
plans any easier. But what's worse -- having a difficult conversation now or dealing
with resentment, regret and even litigation because of a parent's poorly executed
According to a recent Investors
Group poll, only 27 percent of Canadians under age 45 have talked with their
aging parents about their estate plans. Almost half (43 percent) haven't discussed
funeral plans either.
This reticence is hardly surprising.
"Canadians are somewhat reluctant to talk with their parents about finances,"
says Duane Snow, an estate planning consultant with Assante Estate & Insurance
Services. "Most people would say, 'I'm going to get something from my parents
and for me to say, if you structure your estate this way, I'll get $400,000 more,
it looks like I'm being greedy.'"
Fear of seeming greedy isn't the
only inhibition. "Sometimes adult children are hesitant to
bring up the topic because they aren't sure if it will upset the
parent," says Debbie Ammeter, vice-president of advanced financial
planning at Investors Group in Winnipeg. "But discussing these
issues can give your parents some peace of mind when they realize
there are ways to set-out instructions and take care of things in
Consequences of keeping
There's more at stake than preserving family harmony. Sixty percent
of Canadians believe they will inherit some money from their parents, and 41 percent
believe it will form some part of their retirement savings. But sadly, too many
families are hit with unpleasant surprises because a parent died without a comprehensive
Here are just four examples of what can happen:
- After the death of a parent, you discover
he died intestate (without a will) or, equally damaging, with
an outdated will. If your parent dies without a will, the estate
gets divvied up according to provincial succession legislation,
with no regard for the family's wishes or any tax-deferral strategies.
Dying with an outdated will has its own share of problems. Perhaps
the deceased referenced specific gifts, personal property or real
estate that no longer exists. Or maybe she provided for beneficiaries
that died while omitting ones that had been born. "In all
likelihood, the distribution of the parent's estate is not going
to reflect their intentions," says Melanie Yach, an estate
lawyer at Blake, Cassels & Graydon, in Toronto.
- Your parent's
estate is hit with a big tax bill because of missed tax planning or deferral opportunities.
Efficient tax plans can be complicated, but without such simple provisions as
up-to-date beneficiaries on assets such as RRSPs or joint ownership designations
on non-registered investment accounts, the taxman will pocket large portions of
"It's very disappointing when you're doing the [final]
tax return and you see that some steps could have been taken to improve the tax
situation," says Ammeter.
- A substantial asset,
such as a cottage, is willed to two surviving children who have conflicting opinions
of what to do with it. Estate planning becomes particularly tricky with assets
that can't be physically divided among beneficiaries. "Many clients I meet
struggle with equality," says Snow. "Equality to them sometimes means
sameness. It's not about that -- it's about being fair."
A parent who was recently hospitalized with a serious illness has no valid Power
of Attorney (POA) in place. Without a valid POA, family members won't be able
to manage the finances or make health care decisions for a parent who is mentally
or physically incapacitated. Instead, they will have to defer to a publicly appointed
guardian until they successfully petition the court to assume the role.
Canadians live longer, the chance of them becoming incapable before their death
is greater," says Yach. "It's critically important that the POA be up
to date so that someone is able to manage your property and/or make personal care
decisions for you if you become incapacitated."
These situations can easily be avoided by talking openly with
your parents before disaster strikes. "It's better to have the conversation
now rather than later," says Yach. She suggests three ways to broach the
1. With respect
have to respect the fact that your parents are capable adults and that decisions
about how their estate is to be distributed are theirs to make," she says.
"You can't purport to make decisions for them. All you can do is alert them
to the risks of not doing it." If you don't treat your parents with the respect
they deserve, they can misconstrue your intentions.
It's important to ensure your parents speak to the right professional,
be it a lawyer, accountant or financial planner. Going to the local office supply
store and buying a do-it-yourself kit might put a will in place, but badly worded
intentions or missing provisions can result in heated family feuds and complicated
legal battles over who gets the family silver or what to do with the family business.
you're a financial planner, resist the urge to counsel your parents on their affairs.
"You've got to have some kind of a skill set," says Snow. "Most
people are going to approach their parents and say what? Do they really understand
the probate process? What the executor does? The tax consequences of the parents'
historical investment strategies? It's like me advising my neighbour on his plumbing."
Yach advises her clients and friends to help put their
parents in touch with the appropriate professionals and then stay out of the process.
Don't give instructions to the lawyer, don't accompany your parents to meetings
and don't attend the execution of the will. "Respect your parents' privacy
and maintain a measure of distance," she says.
always a risk of litigation when surviving siblings or beneficiaries don't feel
they are being treated equally or fairly. "You don't want there to be any
suggestion after your parents' death that you somehow influenced them unduly into
is a freelance writer in Georgetown, Ontario.