Help your client prepare to write a will

When a wealthy client left one adult child out of the will, the child had no idea why. The child took it as “a big blow,” recalls Wilkie Kam, vice-president and senior investment advisor at BMO Nesbitt Burns in Vancouver. Because the client had arranged their affairs with another firm, Kam had no knowledge of the will—and even if he had, he told the child, he’d be bound by privacy.

The adult child was a lawyer and understood Kam’s position. Still, Kam would normally explore a client’s wishes with them, as well as potential consequences of a will, “though I cannot tell them what to do,” he says. He also notes the importance of consolidating one’s affairs. “It’s better to manage from the big picture.”

Often, clients haven’t focused on any picture, let alone the big one.

Almost half of respondents to a 2016 BMO survey said they hadn’t made a will (48%). For those aged 35 to 54, that figure jumps to 55%.

Even accumulating a large estate or having unique family circumstances is no guarantee a client will have a will. Queen of Soul Aretha Franklin died in August without a will, despite having an estate worth an estimated US$80 million and an adult child with special needs.

Dying without a will has consequences. Loss of control to the courts and extra legal fees and taxes are a given. Further, it can be stressful if there are delays in asset distribution or if guardians appointed for minor children aren’t whom the client would have wanted. An estate without a will is also vulnerable to being contested.

Ariel-Charles Guigui, vice-president and will and estate consultant at RBC Wealth Management in Toronto, sums up the wills problem: a testator who fails to plan properly adds to a grieving family’s burden.

Still, no one wants to think about their mortality. Wills require significant forethought, so clients could easily be overwhelmed or unwilling to find the time. While lawyers provide intake forms for clients to fill out and answer their technical questions, clients often need help considering their intentions, says Kam.

Clients typically aren’t prepared when they meet lawyers to discuss wills, says Suzana Popovic-Montag, managing partner at Hull & Hull LLP in Toronto. Conversations with advisors in advance would be ideal preparation for more productive meetings—and would potentially save clients money, she says.

Depending on the complexity, wills can cost a few hundred dollars to a few thousand, she says. “No matter how much you pay, it’s a lot cheaper than any kind of litigation.”

Focus on discovery

Kam suggests advisors “focus on the preparation process” of will writing, or discovery, so clients can examine their intentions.

Clients might have more questions than answers if they haven’t considered writing a will before, such as what their options are, what an executor does and what happens if they cut someone out. What’s important is advisors “plant the seed” to get clients thinking, says Popovic-Montag. Ideally, the advisor-client meeting—which comes before advisors refer clients to lawyers to answer legal questions—stimulates further family conversations as clients explore what their final wishes are, she says.

Beyond personal wishes, exploring family dynamics is important, says Guigui, because estate planning has more to do with harmony than money.

He describes a business owner who told each of his sons privately that they would be company president after his death. When he passed, the sons predictably fought. Honest family discussions would have minimized resentment, Guigui says.

He adds that family discussion often leads to surprises; for example, a parent might discover that a child long thought to assume the family business doesn’t want the position.

Surprises are a good reason advisors shouldn’t accept the standard, and inadequate, client response when they bring up wills: “My kids (or spouse) will know what to do.” Kam says advisors can steer around that response by presenting various potential outcomes that clients haven’t thought of—and might not like. In the above example, the father might have benefited from an advisor painting a picture of a fractured sibling relationship.

Presenting options and outcomes promotes discussion and helps advisors get to know clients better, says Kevan Herod, financial advisor with Manulife Securities Incorporated in Peterborough, Ont. And advisors shouldn’t impose their own ideas on clients. For example, instead of defaulting to distributing assets evenly among beneficiaries, clients might want to give children different amounts if they’ve offered more financial support to some children over others. Helping clients reflect on their true desires may also reveal a wish to leave charitable bequests, he says.

Kam asks clients what and who are important to them—even getting them to envision their assets and loved ones from the afterlife as if sitting from heaven. The strategy gives them perspective and helps clients with cultural backgrounds where death isn’t discussed, he says.

Another discussion tip: with couples, directly ask each spouse what they want—perhaps in separate meetings, if required. “Don’t let one dominate,” says Herod.

The wills discussion will likely lead to further planning. Herod tells clients they have three options for asset distribution: those close to them, charity or CRA. No one picks CRA, he says.

Kam adds that clients tend to care about their tax bills, which could mean planning such as setting up a trust or gifting assets prior to death.

Sweat the details

After the initial discussion, it’s time to get detail-oriented. Appointing executors tops the list. “People don’t realize how important that appointment is,” Popovic-Montag says. “That’s the individual entrusted with doing what you want, pursuant to the terms of your will.”

Life and business experience, knowledge and dependability are required for the position, which won’t be an easy one if the will is contested, she says. Will discussions should extend to executors.

“Tell people you’re appointing them executor of the estate, where they’re going to find the will, what you want to be done with your ashes […] or your funeral arrangements,” says Popovic-Montag. Even when the will includes details such as funeral arrangements, discussion with the executor helps ensure they comply with client wishes. She adds that items like digital assets might require separate executors.

Guigui says clients should ask a potential executor if they’re up for the job, since no one can be forced to accept the position. In case executors predecease clients, clients should name alternatives. This is especially important when executors are older, which is the case with Kam’s clients who tend to appoint older professional mentors, such as bosses. Contingent beneficiaries should also be named, in case children predecease parents, for example.

Clients should plan for as many contingencies as possible. “You want to try and consider all the eventualities,” says Popovic-Montag. “That’s where people get tripped up.” For example, a beneficiary might leave the country or additional grandchildren might be born.

Checklists, which her firm distributes to clients in advance, help with considerations, she says. Herod asks clients to fill in his firm’s will kit, with clients typically filling in about half on their own and half with him.

Sentimental items are often overlooked. Popovic-Montag says she’s witnessed countless fights over personal effects because clients haven’t considered who in the family might be attached to particular items.

To that point, Guigui recalls a son who wanted the tack holder from his mother’s kitchen corkboard. He encourages clients to ask children what they want and prepare a list. If children claim they don’t want anything, parents should still designate personal effects to prevent fights later, he says.

Clients should also consider when and how assets should be distributed—for example, in instalments, says Guigui.

Again highlighting the importance of discussion, Popovic-Montag suggests clients explain their will decisions to beneficiaries, which prevents surprises. In the BMO survey, only 30% of respondents said their parents had shared their estate distribution plans or will details and executor selections.

Advisor to lawyer

When providing the lawyer with an inventory of assets and liabilities, along with a rate of asset consumption, Herod projects cash flow to age 100. “We talk about what will change over time and how they’re going to spend,” he says, as a way to project assets left to be distributed.

Clients typically have financial plans, so figures for the lawyer are readily available, says Kam. He’s never been required to attend a client-lawyer meeting, but would if warranted. For example, if the client wants part of the estate to provide a scholarship, he would be responsible for portfolio construction, including the provision of annual cash flow.

Herod prepares notes about the client’s desires and gets client permission to pass them on to the lawyer. Whether he sits in on a lawyer-client meeting depends on the estate’s complexity, he says.

Popovic-Montag says the intake process can be collaborative, with advisors attending the first, exploratory client-lawyer meeting if the client wishes, though often a phone call with the advisor suffices. Referring to lawyers consulting with advisors, she says, “We certainly want to make sure we’re being accurate. Having the second check [from the advisor] is important.”

She also says professionals are becoming more collaborative, understanding that clients require full estate plans, often from a global perspective.

Wills should be reviewed when clients’ circumstances change, such as upon marriage, divorce, a birth, children reaching age of majority, or a change in assets, tax laws or debt structure. Updates will likely cost more where there’s a major tax overhaul or other legislative changes, or significant distribution plan changes, says Popovic-Montag. Clients’ desires often change as they age, says Herod. He updates wills every three years as part of his planning process.

Complexity in circumstance and perspective

While the wills process should be thorough for all clients, wealthier clients usually have more complicated assets to distribute, requiring special financial or tax considerations, says Wilkie Kam, vice-president and senior investment advisor at BMO Nesbitt Burns in Vancouver.

An example is a client who wills a property to children, as well as additional funds for upkeep and a cushion should one child wish to buy out the other. The situation requires advisors to consider property price increases versus portfolio returns, as well as capital gains upon the potential sale.

Suzana Popovic-Montag, managing partner at Hull & Hull in Toronto, says a team of experts is often required for high-net-worth clients. “As the value of the estate increases, so does, typically, the complexity and potential mistakes,” she says.

More affluent clients might need reassurance that they and their families will be adequately provided for before they consider giving to charity and pursuing philanthropy, says Kevan Herod, financial advisor with Manulife Securities Incorporated, in Peterborough, Ont. If the advisor can demonstrate the client’s on track, they can have the bigger discussion about estate planning, he says.

Will and estate planning considerations clients might overlook

• provision for minor or disabled children who can’t receive insurance proceeds
• support obligations for former spouses or other family (review court orders and separation agreements; financial help may include providing housing)
• creditor claims or loans to family and friends
• provision for funeral expenses and taxes
• wishes for organ donation, burial or cremation, and remains disposal
• special bequests (e.g., to charity or to someone unknown to family members)
• beneficiaries of life insurance, pension plans, registered accounts and TFSAs (when beneficiaries are named, these can bypass the estate and avoid probate)
• arrangements for private business shares
• planning for foreign assets (a will in the jurisdiction in question could be required to deal with property, and there could be estate tax in that jurisdiction)
• cryptocurrencies and digital assets (e.g., continuation of social media accounts, transfer of points programs)
• genetic material such as frozen embryos (which may impact who is considered a child for will planning)
• estate administration costs (2% to 6% of estate value)

Source: Manulife and RBC documents

Trusts for pets? Only in Quebec

Pet lovers might want to plan for a pet’s care in a will, but that won’t include setting up a trust. Doing so for the benefit of an animal isn’t recognized in most of Canada since animals are treated as property. (In Quebec, legislation treats animals as sentient beings, so trusts are possible.) Will language would likely reflect a guardianship-type arrangement, with any purpose trust created for the animal’s care having the guardian as beneficiary, says a Manulife will-planning document.