Articles & Cases

Globe & Mail Article on estate planning "Taking guesswork out of who gets what" quotes Mark Blumberg

October 31, 2006

Taking guesswork out of who gets what: Parents who don't take the time to make a clear plan for their estate may leave trouble for their children

by EVA SALINAS

From Monday's Globe and Mail October 30, 2006

Everything appeared to be going to plan for Ole Nielsen. But when his wife, Linda, was diagnosed with cancer three years ago and he had to leave his successful business, PFG Glass Industries, in the hands of his two sons, he realized something had been missing.

"It opened my eyes," Mr. Nielsen said, referring to the financial security plan he forgot to make while his business boomed over the years. "You're not immortal any more. You're in your 60s and things could happen."

Until then, he hadn't given much thought to his will, first made when his children were in their teens.

Since then, a lot has changed -- his business has outgrown its 800-square-foot office in Burnaby, B.C., and today it claims to be the largest glass distributor in western Canada, managed from inside a 90,000 sq.-ft. warehouse in Langley, B.C.

"Ten years ago, when you are not a grandparent yet and illness hasn't occurred, I don't think you think about it," said the 61-year-old grandfather of five. When he retires, some time in the next couple of years, he hopes the legacy he intends to leave will be in place. He includes his sons, Steve, 35, and Ryan, 33, in discussions about it.

For some parents, planning that legacy can be a challenge especially when including the adult children in the process.

Mr. Nielsen said he is lucky to already have his sons on board in the business.

Financial advisers recommend that you should review your will every five years.

And when significant changes occur -- a second marriage, retirement, or arrival of grandchildren, for example -- your will should be changed accordingly, keeping in mind the many ways to disburse your estate.

Starting that process with open communication is crucial, especially when there is a family business involved, said Gary Coskey, an executive professor at the Alberta Business Family Institute, with the University of Alberta.

Though some parents like to keep their finances private, Mr. Coskey recommends trying to include adult children in the estate planning stage, to avoid potential feuds down the road. "Sitting down and going through the will with the whole family -- that's really important," he said.

"I've seen many situations where there are a lot of problems when mom and dad die . . . If you don't have the communication, it's going to end up in court."

Edmonton estate lawyer Phil Renaud said three documents are essential to the process: your will, an enduring power of attorney, and a living will, sometimes called a personal directive, which provides health-care instructions should you become unable to give them.

Even adult children may need explanations about these documents, Mr. Renaud said. "Let [your children] read your will so they can understand what you're trying to accomplish. Let them know who you've picked as an executor and why."

Sentimental items, such as a painting or piece of jewellery, can cause major disagreements among your heirs, Mr. Renaud added. He suggested using a dispute mechanism in the will, such as a lottery draw, that can disburse any in-demand items. Consult an adviser, he warned, especially in British Columbia where the Wills Variation Act allows for an adult child to contest a will if he or she doesn't agree with the distribution of assets. Nova Scotia has a similar provision.

Setting up a trust in your will is also a good idea for many people, said Mr. Coskey. A trust can provide a grandchild with income for post-secondary education, and be transferred to the parents afterward. A spousal trust can benefit the surviving spouse until his or her death, when assets in the trust might then go to a child.

Many couples opt for a "mirror will," in which spouses first assign everything to each other, with specific assets then distributed in the same way. But a second marriage and other children complicate such a plan, Mr. Coskey warned.

No single scheme will work for all families, said Mark Blumberg, a partner of Blumberg Segal LLP in Toronto. "Estate planning is like clothing -- if the jeans are a couple of sizes too small, it hurts. There's no one size fits all."

Special consideration should be made for a business, a cottage or a disabled child, Mr. Blumberg said, noting that some of children may not want the responsibility.

If your children are well looked after, or financially established themselves, consider making a bequest to charity, Mr. Blumberg said. "If your children are okay, it's a very good idea . . . It's like an extra child in the family," he added. "In many cases the children are very proud and the recognition goes to them."

Mr. Blumberg noted that more significant charitable gifts have been made since the federal government recently eliminated capital gains tax on donations of stocks to charities. A charity can set up a brokerage account to which the stocks can be transferred. Most charities will sell the stocks as soon as they are transferred, Mr. Blumberg said, and issue a tax receipt for the estate.

Often, couples adopt joint bank accounts or joint tenancy on their property to avoid high fees for probate (the provincial tax levied against the total value of the estate to cover the legal costs of distributing that estate). Ontario and British Columbia have the highest probate rates, at 1.5 and 1.4 per cent of the value of the estate, respectively, but some provinces have a maximum amount.

By putting a bank account in both spouses' names, there is no need for probate. Without careful planning, however, such a move might give your spouse full access to your assets, and perhaps undermine the rest of your will, Mr. Blumberg cautioned.

"In the end, it's your will," he emphasized. "You can decide what is in your will."

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