Have You Had Enough?

When it comes to money, you know there are Haves and Have-nots. Here’s something that may surprise you: when it comes to estate planning, it does not matter how much stuff you have. I have learned you can fall into a different category.

When it comes to helping your loved ones, which category do you fall into?

Are you a ‘Have’?

Many people think, “I have no money or wealth to worry about. Estate planning is not for me.”

These ‘haves’ tell me they’ve had enough – enough information about their rights and obligations. They have an aversion to talking about death. They tell me, “It’s so negative and depressing, Ed. Let’s talk about something else”.

Well, I say, “Estate planning is what you do for the people you leave behind. You really do it for them. You want whatever you have to go to your loved ones. You don’t want it to be wasted on lawyers’ fees. Do you really want to pay more taxes than you need to?”

They respond like this:

  • I ‘have’ nothing to fight over when I go.
  • Who cares about all this when I am gone? The laws dealing with property, trusts, estates, wills, income taxes and family law will not ‘have’ anything to do with me.
  • My family is not dysfunctional. I ‘have’ no problems in my family. Everyone does what is expected of them.
  • Please prepare a simple will for me. ‘Have’ it ready for me to sign tomorrow. I’m leaving the country on holiday right after I sign it. Otherwise, I’ll find a sample will online. It’s all the same to me.
  • I ‘have’ to sign a will and powers of attorney right now, I cannot wait. I don’t understand why I cannot get what I want. What is the matter with lawyers, anyway? You want to know too much about me when I ‘have’ nothing.

Are you a ‘Have-not’?

Seems Have-nots always need more information. They have not made a decision about a guardian for their minor children. Sure, their children are not teenagers yet. They think they have plenty of time left.

The Have-nots see no reason to rush their decisions.  They are perfectionists. They wish to have all the information necessary (without going to law school). They do not trust anyone to make their financial decisions for them. They ‘have not’ developed any trusting relationship with a lawyer or financial advisor. They will go back to your website over and over again looking for more free information. They ‘have not’ yet finished researching. They keep skimming websites that may not be applicable or appropriate for them.

They search online for answers to questions like:

  • My son lives in Hong Kong. What are the income tax consequences under those laws if he inherits?
  • What if my son divorces his spouse in Hong Kong? Will she be entitled to a share of his inheritance?
  • Will my son have to pay income tax on executor’s fees in Canada and Hong Kong?

Have-nots can’t make a decision until all these questions are answered. The trouble is it is stopping them from protecting their loved ones from a disaster.

So, are you a Have or a Have-not?

You don’t want to become a desperate estate planner, either. I tell you all about those in the next post.

You may also enjoy reading Estate to the Heart: How to Plan Wills and Estates for Your Loved Ones. This book is only available via my website www.MrWills.com.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. © 2014

 

Do You Want These Estate Planning Benefits?

Estate planning may not save lives, but it provides important benefits.

Your estate plan makes a difference to the people you care about. You can also benefit your favourite charitable causes.

Today, I’ll cover the three key benefits of estate planning.

1. Estate plans provide protection

Your spouse and children will need you to protect them when you are gone.

Having a professionally prepared will provides a proper transition for your loved ones. You can make sure they remain in their home, fund their education or pay off a mortgage.

Do you believe you don’t have enough money to achieve such goals?

Think again.

Life insurance can create an instant estate to satisfy your wishes. Tax-free life insurance benefits play a key role in everyone’s estate plan.

You can also, inexpensively, create a trust in a professionally prepared will.  Setting up a trust is a complex tax and estate tool. It is not a project for a do-it-yourself will kit.

Trustees or executors named in your will can manage inheritances for:

  • minor children;
  • a second spouse in a blended family situation; and
  • a spendthrift beneficiary unable to handle money.

Are there charitable causes that depend on you? Your charitable donation can help a local shelter save animals. Cancer, heart and stroke research and foundations also rely on your donations.

2. Estate plans reduce expenses

On top of that, you can minimize some income taxes your family would otherwise have to pay. Using your RSP or RIF to donate, you can save taxes on your registered plans. You can also receive a tax credit.  You’ll need professional advice on the tax rules that apply to you personally.

A proper estate plan will transfer your money to loved ones at a low cost.  Your plan can reduce or eliminate probate costs, income tax and legal fees. This trio can otherwise devour a small estate.

Do some homework for your estate plan. You will need professional advice. Don’t rely on tips from a bank teller or your beer buddies.

You can find low-cost ways to transfer ownership of your assets. This can help avoid probate. You’ll leave more money for your loved ones. Probate of a simple estate can take 1-3 years. Imagine the substantial saving of time and expenses proper transfers can achieve.

3. Estate plans put the right person in charge

You choose who is in control of your estate. Do not assume your family will know what to do if you are suddenly out of the picture.

You must name an executor or estate trustee in your will.  This person will be in charge, so choose wisely. You can authorize someone to operate your business. You can spell out who sells it or continues to operate it.

What if you don’t have a great deal of money, property and assets? You can still benefit from having an estate plan.

Your plan should include, at least, a will and powers of attorney.

You name a person authorized to close your bank accounts, pay for your funeral and deal with your final tax bill.

Powers of Attorney for Property and Personal Care can protect you and your money while you are still alive.

Get these legal documents for your estate plan. You will have your own lifebuoy.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. Visit www.ExecutorSchool.com © 2013

You Need to Answer These Estate Planning Questions

Why do you invest your money? My guess is so you don’t have to stay up at night worrying about it. Money makes a difference in your life. You need it to protect yourself and your loved ones.

But who will protect your family and your money when you are gone?

Everyone can remember when an uncle or aunt died without a will.  You saw what happened to your relatives.  It was a costly learning experience that may still have painful memories.

Your money and your family may also be at risk. All it takes is a bad estate plan.

Sure, you may think a bad estate plan is better than no plan. A bad estate plan is good for the tax department and court lawyers. It is never good for your family. It is a bad investment that too many people make. Only your family really suffers and regrets your failure to make a proper estate plan.

You work hard for your money. So invest in professional estate advice to create a proper estate plan.  If you think you don’t need help, see if you can answer these 12 estate planning questions.

Estate Planning Quiz

Answer either Yes or No to each question. Count the “Yes” answers.

Are you sure you don’t need professional advice to get the right answers?

12 Estate Planning Questions You Need to Answer

  1. Do you know who should be the beneficiary of your RRSP, RRIF, annuities, life insurance policies, and tax-free savings accounts?
  2. Is putting assets into joint ownership with your relatives a good idea?
  3. Should you make bank accounts or your family home jointly-owned?
  4. Do you have a simple probate tax saving plan you can follow?
  5. Are you sure you have the best succession plan for your business?
  6. Is your will up to date with the right executors and backups?
  7. Have you set up a trust in your will for minor children?
  8. Did you set up a trust for beneficiaries with special needs?
  9. Have you provided for ex-spouses and your common law spouses?
  10. Is your cohabitation or prenuptial agreement still valid?
  11. Have you got the right kind of life insurance?
  12. Is your will up to date and can you find the original?

If this were a game, 7/10 correct answers may be a good score. In real life, however, one mistake can be a tragedy for your family.

It’s never too early to write your will. Get a professionally prepared will and help avoid real tragedies for your loved ones.

Keep Your Promises

Didn’t you promise this was the year you would get around to:

  • making a will;
  • getting powers of attorney; and
  • figuring out what happens to your business when you are gone?

Learn more about estate planning by reading my free ebook, Estate Planning: 7 Keys to Success. Visit www.EstateTherapy.com.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. Visit www.ExecutorSchool.com. © 2013

 

Stop these Top 10 Powers of Attorney Abuses

You must know the risks involved in signing powers of attorney. Here is a list of the top 10 abuses by people acting as attorneys. Still, the benefits of a power of attorney outweigh the risks of not having one. I’ll show you how to protect yourself from power of attorney abuse.

Here’s my top ten list of attorney abuses:

1. attorney misappropriating money
2. using the POA for identity theft
3. inappropriate taking of bank funds and investments
4. causing losses with improper financial decisions
5. making bad investments
6. selling or transferring real estate
7. changing beneficiaries or creating joint assets
8. neglecting the person who gave the power of attorney
9. breaching fiduciary duties as an attorney
10. being unable to explain where the money went

Provincial Laws Control Powers of Attorney

In Ontario, for example, it is the Substitute Decisions Act, 1992 that applies. This Ontario law states what a person, like Sheila, must know to make a POA. Sheila is presumed to have legal capacity to make a continuing power of attorney.

“Continuing” means her son, Kevin, can use her POA if Sheila later becomes incapable. Section 8 of the Ontario law governs here. Upon signing the POA, Sheila must appreciate that there is risk of:

1. Kevin not managing Sheila’s property prudently, causing its value to decline; and
2. Kevin misusing the authority given to him.

Sheila loves to golf during the winter. She wants to give Kevin her power of attorney for property decisions. She figures this is a good idea since she travels south before the snow falls.

Should You Include Conditions in Your POA?

Most people decide to make a POA that is effective immediately.

Sometimes clients want the POA to become operative only if they become incapable. There are problems with such “in the event of my lack of capacity” stipulations. These are referred to as springing POAs. This condition may be difficult to satisfy.

Picture Kevin telling Sheila’s bank that he wants to move money into her chequing account using Sheila’s POA. He needs to pay her mortgage and condo fees.

The bank’s legal department will look at how the condition is worded. The bank must be satisfied before Kevin can use the POA. In questions of incapacity in Ontario, only assessors can make assessments. This can take weeks when medical reports and capacity assessments are required. Is this really what Sheila wants? She can consider other options.

Consider These Options for Making Your Power of Attorney

  • Make a POA that is only effective while you are out of the country.
  • Give someone rights to manage property, but not sell it.
  • Specify that you can make multiple powers of attorney. Create one to pay your bills and one to handle digital passwords or assets. You can make another POA to allow someone else to make investment decisions.
  • Restricted powers may not be required on all attorneys. (Presumably you would only name attorneys you trust.)
  • Discuss options with your estate planning lawyer. You may have property or personal needs that require more supervision by an attorney.
  • If you place too many burdens on your attorneys, they may refuse the job.
  • Always name a back-up attorney in case one resigns.
  • Specify attorneys can share financial information with certain relatives only.
  • State in the POA your attorney can use your money to pay for professional advice – otherwise, your attorney may be afraid to hire a professional advisor.

Remember, attorneys are bound by the rules imposed on all fiduciaries. They must put your interests before their own.

Summary

1. Every family is different. How many of your family members should act as your attorney? Should they act jointly or individually? These are important decisions. Your lawyer can help you make them.

2. Powers of attorney are legal documents. They are subject to court review. POAs should be drafted by an experienced estate lawyer.

3. Financial institutions worry about power of attorney abuse. They will consider suspicious POAs not drafted by lawyers.

4. You need to meet with a lawyer to review your circumstances. In cases of blended families, having an independent review is crucial.

5. Deal with your own lawyer, not your proposed attorney’s.

6. You need to appreciate the risks of a POA, but you can take steps to stop possible abuse.

For related posts on powers of attorney, visit my law firm blog.

About Ed

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu: Master Any Estates in Three Easy Steps. © 2013

More Real Reasons Not to Do Any Estate Planning – Part 2

Think you have good reasons for not making an estate plan?

You may have reasons that raise legitimate questions. But sometimes a reason is an excuse to avoid making decisions.

Let me help you overcome your excuses. I’ll give you answers to help you protect your family and act.

Excuse 4: Making a will is scary… I’m afraid of making a mistake.

“Online will forms are confusing.”

“I want to use a will kit but I don’t know what kind of will I need.”

“I am afraid to spend money on hiring a lawyer. I want to save money.”

“I can wait until I really need a will.”

Answer: Why do you have a spare tire in your trunk? You really don’t need it until you have a flat tire. But every car has a spare tire for a reason; you need protection. You need it in case an accident happens. Invest in a lawyer-prepared will. The protection is pennies a day. I tell everyone that you can find a lawyer in every price range. Most do-it-yourself wills usually lead to complications never intended by will makers.

Excuse 5: I’m afraid to talk about money with my family.

“I’m afraid this kind of talk will only start an argument.”

Answer: You may be right. Money is a taboo subject in many families. This risk may be worse with a blended family. There, competition for attention and money can generate Oscar-worthy performances.

A lot of financial writers advocate open money discussion.

My answer to that advice is every family is different. I understand why some clients want to avoid the subject altogether. When someone in a family dies, the disruption changes lives. Families often need lawyers because they could never talk to one another.

Excuse 6: I don’t know what will happen to my business if I die.

“Who will run my business if I die?”

“Will my partners have the money to buy my share of the business?”

“Do I need a shareholders agreement with insurance to provide for my family?”

Answer: You need a contingency plan even if you don’t have a succession plan. You will want powers of attorney for property. You can designate someone to control the business bank account if you are a sole proprietor.

Are you running a small business by yourself? If you die without a will, your business account will be frozen. No one will have authority to even draw money out of the account.

You can set up a trust or a will to deal with your business. Give your trustees power to operate the business until it is sold.

Use an estate plan to reduce taxes from the sale of the business. That leaves more money for your loved ones.

Excuse 7: Everything in my life keeps changing.

“I can’t keep up with my children’s needs, money for school or their marriages.”

“I’m still paying for my divorce.”

“I don’t know if my new relationship will work out.”

Answer: Estate plans are not cut in stone for a reason. Things change. Every time your relationships, assets and beneficiaries change, you must update your plan. It may be a simple and inexpensive change. You may need to change the beneficiary of your life insurance, RSP or pension plan. You can do this without any expense.

Remember, estate planning is what you do for loved ones you leave behind.  Read the 7 Keys to Successful Estate Planning here.

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven estate books. © 2013

Suddenly you are an Executor!

After his sister’s death, Andrew suddenly realized he was the Executor of her Will. He figured she must have asked him about it at some time, but he’d forgotten about it. Now he had to find out what Executors are supposed to do. Their responsibilities and duties scared him at first, because he found he has to:

• Find his sister’s original Will and establish that it’s her “last Will and Testament”;
• Determine the provisions of her Will;
• Learn about his sister’s financial affairs;
• Locate all of her assets, both personal and business;
• Arrange for the continuation or sale of her business;
• Make sure that all assets are safe from loss or damage;
• Arrange to have the assets valued;
• Arrange for the sale of assets, if necessary;
• Pay all debts and claims;
• Make the most advantageous income tax elections to benefit the estate and its beneficiaries;
• File the necessary Income Tax and GST returns;
• Obtain clearances from the tax departments;
• Establish any trusts dictated by the will; and
• Distribute the remaining assets to the beneficiaries.

At first this looked overwhelming, and he thought of resigning. But he discovered he could hire professionals to assist him with the legal, tax and investment aspects of the estate to make sure that it is handled properly. After all, he may be held personally responsible for his actions if he makes a mistake.

So if a relative or friend asks you to be her or his Executor, take it seriously, and discuss with them beforehand the various things that should be done to make your job as easy as possible, such as:

• Having the Will professionally prepared. Do-it-yourself Wills have disclaimers stating that the publisher of the Will kit is not responsible for the validity of the Will you prepare from it. An improperly prepared Will can cause more grief, delays and expenses than not having a Will at all.
• Getting a copy of the Will, and knowing where to find the original. This lets you know its terms and conditions, and allows you to discuss any problem areas with the Testator (the person whose Will it is) while he or she is there to explain it. Advance knowledge minimizes surprises and costly delays.
• Getting a list of the details of the estate. Finding out about ALL its assets, and their locations; and all certificates, identification documents, bank accounts, safety deposit boxes, key locations, credit cards, loans, mortgages, leases; life, disability, group, property and casualty insurance; securities and investments; real estate holdings; business agreements; medical and professional advisors, etc.

As you discover the amount of work that you, as Executor, have to do you may want to suggest that the Testator name some additional Executors to spread the load and responsibilities.

You should review your Estate Plans before discussing it with your Executors!

Are You Sure You’ll Be Around in September?

Yesterday, Dolores, an elderly client, said, “I was getting nervous. I’ve been to 4 funerals in 4 months. I’ve met people at the funerals who told me they still have not made their will. That’s why I am here today to get my will updated.”

“You have probably been referring to fifty percent of the population. That’s the usual percentage of the population without a will,” I said.

“How is that possible, Ed? Why would people not want to make a will?”

My next answer was short, sweet and a bit sarcastic.

“Because they think they’ll be around forever.”

Dolores replied, “Well they can’t really believe that. Not when they’re going to as many funerals as I am.”

I tried to be more serious as she wanted an answer. She wanted to give her friends a reason to make their wills.

I said, “Perhaps your friends don’t know what happens to a loved one when someone dies without a will.”

Why You Need Estate Planning

I told Delores: “Estate planning is what you do for the people you care about. If you don’t have a will, you don’t know how much hardship and heartache you leave behind.”

“What does that mean,” she asked?

You don’t know how difficult it is to handle an estate if there is no will.

First, you have no one in charge. There is no one who can come forward to deal with legal matters. Who deals with the emergency services, police, hospital, coroner’s office or funeral directors?

Sure, if you have next of kin they might step forward to help. What if they are not nearby? They can try as best they can to manage without directions. But what if there is a disagreement among your relatives. What happens if there is no executor or estate trustee to make important decisions?

Who Decides These Estate Issues?

1. What happens to the house that you were living in that is now empty?

2. Who pays your ongoing expenses?

3. Who can arrange insurance to protect property from vandalism or fire?

4. Who takes care of your pets?

5. Who will pick up your children from day care?

6. Who is authorized to speak to your employer regarding your benefits?

7. Who gets access to your bank accounts to pay bills?

8. Who collects and secures your car and valuables?

9. Will your brother who you’ve not spoken to in 25 years inherit your life savings?

10. Who pays your income tax bill?

Remember, your power of attorney ceases to be valid upon your death.

Your last will only becomes effective upon your passing.

That’s when you’re estate trustee or executor becomes entitled to act as your legal representative.

It’s summer. You have longer days and more sunshine.

Before you start your summer vacation, review your will.

If you have not got around to making a will, download my free guide: Estate Planning: 7 Keys to Success. It will help you understand the simple steps to get started.

Have a happy and safe summer. Hope to see you in September.

Read my other posts on making a will here:

Making Your Will – The 12 Critical Steps

Wills: Should You Do It Yourself?

About Edward Olkovich

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu. Visit his website, mrwills.com for more free valuable information.

© Edward Olkovich 2013

One Day Makes All the Difference

So last week we made a commitment to make changes in our life to bring us to a happy conclusion with our financial goals. It is the small steps that are actually taken that get us through the journey.

This week we have a very simple step to take and that is choosing our annual Financial Day. It can be any day that is consistent that you will remember. Your wedding anniversary, Thanksgiving, Canada Day, Ground Hogs Day … Whatever works!

The next question is what do you do on your Financial Day? Well it is a day of review and update. So much stuff can happen in one year that affect us financially or otherwise and it is a good idea to stay current. A baby is built and born in less than a year and we all know how much of an impact that has on us. But how many of us haven’t reviewed anything in years if not decades?

Go through and do a household inventory, preferably on video. Open up your closets, cupboards, storage room and highlight any new and / or valuable items. Keep the video in a safety deposit box or fire proof lock box.

Pull out your home and auto insurance policies. Are you properly insured for the full replacement value of your stuff? Do you have groupings of belongings (example: sports equipment, books, computer stuff, tools, etc) that could be worth more than $1,500? How are they protected under your policies? Do you run a home based business or bring work home? Are you covered for that? Have your driving habits or commutes changed? Do you have coverage you don’t need or do you need to increase coverage? Have you gotten all available discounts?

Review your life, critical illness, disability, group insurance, travel insurance policies. What are you covered for and for how much? Is it adequate based on your financial situation? Have you had another child or have you had a child grow up? Are you covered for what you need and not what you don’t? Has your work coverage changed?

Review your Will, Enduring Power of Attorney, and personal directives (also known as Representative Agreements in some provinces). First off do you have these documents? Can you read them and understand what you signed? Is everything still relevant? Have any of your choices for Personal Representatives, Guardian, or Trustee changed? Have you added minor children, had children turn into adults, gotten married or divorced, moved, business changes, or any other significant life change?

Look over all of your investments: RRSPs, pensions, TFSAs, RESPs, Scholarship Trusts, Universal and Whole Life policies, stocks, bonds, exempt market securities, non-registered investments, and bank accounts. Where is everything? How is it doing? Do you want to be contributing more, differently, changing your investments?

Go over your credit cards, mortgages, loans, and lines of credit. Who all do you owe money to? Do you have open and available debt that you don’t need or use? Should you be looking for a better interest rate? Could you increase the payments on any of them to get out of debt faster? Also, make sure you get your current credit reports from both Equifax and TransUnion. See where you are and what you need to fix / update to protect yourself.

The first time you do your Financial Day it will take a few hours, but after that, as long as you keep it annual, it is a relatively fast and painless exercise. It helps you know where you are standing financially, helps you prepare to meet with your financial advisor to plan for the next step in your money life, and allows you to see your positive progress.

Go ahead, pick your day, and get ready to see your life move forward in the right direction.

“Eighty percent of success is showing up.”
Woody Allen