Are your clients managing the finances of others?

One in ten Canadians are looking after the finances of a family member or close friend, finds a CIBC poll. But 31% of those doing so have no formal or legal agreement.

“[It’s] important a formal estate plan, including a power of attorney, be created before anyone takes on [this] responsibility,” says Jamie Golombek, managing director of tax and estate planning at CIBC.

Read: How estates get ruined

He cites an example of an elderly client who asked her eldest son be added as a joint account holder. However, without any formal documentation, her son could potentially withdraw funds for his own personal use. Further, upon death all the funds in the account would belong solely to him because she lives in a province where joint with right of survivorship applies.

Mom should’ve formally outlined her son could only use the funds for her expenses, says Golombek. This way, upon death the remaining account balance would be passed to the estate beneficiaries of mom’s choosing, which might include all her children.

Read: Get clients to make estate decisions

Also, clients asking others to manage their finances should ensure they choose the right person for the role—they may have to pay bills, manage budgets, select investments, sell property, and file tax returns.

“Consider who is best equipped to carry out your wishes and specifically define the scope of responsibility and how funds are to be used,” he says. “This will reduce uncertainty and conflicts later.”

Read: An estate planning checklist

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.