Checking out

So 2023 is croaking. You will too some day. It’s inevitable. It’s usually messy. And the best possible thing you can do is get ready.

And so today we talk lightly on the delicate issue of (as the funeral parlour dudes call it) final planning.

Of course, you need a will. Not the drugstore or online kind. A real will drawn up by a lawyer experienced in same. In fact, if you have various kinds of assets (investments real estate, a business, corporations as well as personal property and financial securities, for example), you may need primary and secondary wills, so some things are not included in probate.

Remember that only certain people (like spouses and dependent kids) can be the non-taxed beneficiary of an RRSP. And ensure your squeeze is the ‘successor holder’ (not the beneficiary) of your TFSA. Non-registered accounts should be joint with your spouse so when you skate off all of the holdings become their property. No delay. No probate. As for other benes, you have a myriad of choices, from splitting it between kids to sticking wealth in a trust or donating to a charitable outfit or the Hell’s Angels. As it turns out, this is the easy part.

Bill helps explain why:

Could you provide some insight into what one should look for in choosing a professional executor. It seems such a daunting task involving an extraordinary level of trust. I’m sure many find this an issue that prevents their having a proper will ( as I do). It seems to me a more difficult decision that the actual disposition of assets. Thanks again for all you do.

He’s right. Most people blunder when choosing an executor. They go with family. Big mistake. In reality, your kid or sister or uncle probably have never done this before, have no special legal or financial training, are completely unaware of tax and legal obligations and don’t know that for years to come they’ll be personally responsible to the CRA and the government for any issues, challenges or payments. Besides, the job sucks. It takes months to complete, can be very complex and can put the executor into the crosshairs of family disputes.

Pensions have to terminated, or sometimes repaid. There’s a terminal tax return to file within a specified period of time. Investment accounts to close or transfer. Probate, death certificate, valuing and distributing assets plus completing administrative documents and more to manage. All this is apart from the immediate stuff – funeral, burial, memorial or scattering assets from that railing hanging over Niagara Falls.

Of course, remember the POAs, too. You need a power of attorney (and alternate) for property, as well as for personal care. People usually take a while to fade, and during that process most need help. Choose wisely – and understand that it’s a mistake to give POA or executor status to more than one person. If they don’t agree, you or your wishes suffer. Just because you have three children does not mean they should all be executors. In fact, it might be a good idea to have none of them involved.

Why?

Because odds are your family members know diddly about this. Your death might come at an inconvenient time in their lives – work, careers, kids. They might have moved to another province, bringing a whole new set of administrative issues (and costs). They could predecease you. Or be indisposed. Or not inclined. Or merely incompetent.

There are lots of reasons to give this job to an entity, not a person. That way there’s professional management, attention to all details, consistency, timelessness, impartiality and a greater assurance your wishes will be carried out, devoid of a big burden on your family who (you hope) have been paralyzed with grief at your passing.

This entity could be a law firm. More completely, it will be a trust company or the trust division of a bank. All the big guys offer this service, as well as other financial players (including my corporate partner, Raymond James). They can be named as executor, or work to provide support services to someone you name to that role. They can also act as POA for personal property, paying bills, taxes or managing portfolios if you are unable or uninterested in doing so yourself.

An institutional executor will probably handle complex situations better than your BIL, such as blended families, privately-held businesses, dual citizenship filing requirements or out-of-province assets, like that cabin in Fernie. They will apply for probate, value assets, inform beneficiaries, pay taxes, manage financial assets, secure or sell properties, look after creditors, deal with pension plans (like CPP), keep records, set up and run trusts and dole out assets according to the provisions of the will.

You gain confidence all this stuff will be done because it’s a legal obligation on the part of the trust company or division. And for that, of course, you pay. Fees could amount to about 4% on the first million of estate assets, scaling down to 1% or so above five million. There’s typically an initial estate fee (maybe twenty grand) when the work commences. The good news is, you’re dead, so it’s easier to ignore the cost.

It might also be the best money you can spend, sparing your family grief and turmoil. That way they can get on with immortalizing you. All good.

About the picture: “Just wanted to say love the blog. Look forward to it daily,” writes Theunis. “Also ignore all the negativity, the silent majority of us love it but don’t bother with the comments. It really does help many people. I’m a renter and the last few years your blog helped keep me sane. My friends all shamed me for missing the investment of a lifetime, and being “priced out forever”. Felt like insanity but everyone constantly told me otherwise. Came way too close to buying but your blog was a voice of reason that reassured me I wasn’t losing my mind. Anyway, I’m still a (very) happy renter with a full TFSA and RRSP, and my friends have been awfully quiet about their real estate investments recently.  Here is a picture of my friend Mike’s Chihuahua named Chula. I figured it was a good representation of the last few years in real estate here in Canada. Thanks again for all your do!”