’Tis always the season (for estate planning)

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This article was published 16/12/2022 (738 days ago), so information in it may no longer be current.

Sorry to kill the buzz from the eggnog with a somber discussion about death and money.

Yet it’s always the season for a little talk — and a lot more thought — about estate planning.

No one likes talking about the inevitable end. Being the giving season, though, why not give a little thought to a topic we give short shrift — the D word.

Indeed, a recent survey by RBC on estate planning provides some chilling food for thought while feasting and imbibing good spirits.

It found 52 per cent of those surveyed do not have a will.

“That’s a pretty big chunk of people,” says Leanne Kaufman, president and CEO of RBC Royal Trust, which provides services like administering estates for individuals.

While alarming, even more so is the fact 66 per cent of individuals 35 to 55 years old had no will versus the somewhat unsurprising number of 70 per cent of 18- to 34-year-olds.

“Even those who have a will, it’s really important to revisit it and make sure it’s still reflective of current circumstances,” says Kaufman.

Just consider some potentially overlooked corners of your affairs as the world has changed dramatically in the last few years, like the fact most of your assets — photos, investments, music and money (normal and crypto) — are online and password-protected.

Perhaps not shockingly, younger folks are more woke to this with the survey finding 48 per cent of respondents between 18 and 34 — who have a will — have instructed their executor how to handle their digital assets.

That’s compared with 40 per cent for those from 35 to 54, and about 33 per cent for folks over 55.

“Every time you need a password to do something, that is a digital footprint,” Kaufman says.

She points to one example of how things can go awry. In the United Kingdom, a young father passed away in 2015, and the spouse had to take Apple to court to release his photos and videos so their young daughter would have access to them to get to know who her father was.

Chartered professional accountant Cynthia Kett, a Toronto-based tax and estate practitioner, says most estate plans now include instructions to provide executors “access to digital accounts and authorization to handle, distribute and dispose of digital assets.”

Of course, the challenge, given about half of Canadian adults may not even have a will, is getting them to draw one up.

Kett agrees with the survey that millennials are particularly vulnerable.

“They are in the asset- and family-building stages of their lives,” says Kett, also a certified financial planner with Stewart and Kett Financial Advisors.

It’s not just about making sure assets go to the right people, or ensuring life insurance is there to replace lost income. A will also makes certain — should both parents die — children end up being taken care of by the right members of the family.

Death isn’t the only disruptor, she adds.

Disability and illness can derail plans just as dramatically.

In turn, those without long-term disability and critical illness insurance through their employer should consider buying coverage.

“Arguably, it’s more important than life insurance,” Kett adds. Even individuals with work coverage should think about additional private coverage in case they find themselves as ‘consultants’ without benefits. The reason being is premiums do not get less costly with age.

Insurance and a will, however, are two considerations among many.

Other key pieces of estate planning include appointing a power of attorney to take care of your financial affairs if you can no longer do so on your own. There’s also the health-care directive, sometimes called a living will. Again, you’re appointing someone trusted to make medical decisions if you cannot make those on your own.

These are must-do basics of estate planning that help loved ones avoid a potential mess of paperwork and having to engage more than necessary with Kafkaesque bureaucracy and an overloaded court system.

That said, even with a will, administering an estate is challenging. Just ask anyone who has been an executor.

They can spend many hours administering an estate, which can be made even more time-consuming if the deceased failed to create, for example, a list of digital assets, along with usernames and passwords.

“Being an executor can be a very painful process,” Davide Pisanu, CEO and co-founder of ClearEstate.

It’s so burdensome, startup company ClearEstate was able to gain funding from large Canadian institutional investors who wholeheartedly agree with his statement.

Although it’s a one-stop-shop for executors, ClearEstate’s customers are actually individuals planning their estate.

ClearEstate will house all relevant estate information in one secure, cloud-based vault for ease of use for executors. Important data include not just the will but also copies of documents like deeds to a home or property, marriage certificates and a list of financial, digital and other important assets with instructions on how to access them.

“I’m sure you think you’re organized, but imagine you pass away tomorrow,” Pisanu says. “Does anybody in the world know everything that you have and where you’ve put it?”

He notes his father has all the aforementioned information in a cardboard box in the basement.

“What I tell him is in the 21rst century that information in a digital account is a lot more secure,” he says.

“A house can burn down, but Amazon’s servers are not going to burn down.”

Whether you house your important data in a digital vault or in a box, the big picture here is to put some thought and effort into planning for the end, Pisanu says.

“People don’t like to think about it, but it’s really a financial literacy issue.”