When is having a financial advisor important for estate planning?

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    As an online will creation platform, you might think that Willful doesn’t have a lot of interaction with their customers. In fact, many customers reach out before, during, and after creating their wills to ask questions about the estate planning process. Willful’s site has a convenient ‘book a meeting’ feature to enable 20-minute discussions with estate planning experts, and they also provide live chat and email support.

    For most situations, Willful has the basic legal information required to enable Canadians to create their wills quickly and affordably. But there are situations when, after speaking with a client, their questions are best suited to a financial advisor. Let’s take a look at those more complex situations and when you may want to seek ‘offline’ advice. And further, let’s look at how to find a reputable financial advisor via a tool like AdvisorSavvy who is suited to your estate planning needs. 

    Situations where financial advisors are an asset

    Succession planning for your business

    Businesses whose owner passes with no succession plan in place are often left floundering, especially if it’s a family-owned business. Lack of direction can lead to family squabbles and damage business performance. 

    For straightforward business ownership treated as any other asset within a will, Willful’s online wills include a carry on business clause that allows your executor to act on your behalf to wind down, continue, or otherwise deal with your business interests. If you have more complex wishes that you want recorded in your will, you would need to visit a lawyer.

    However, succession planning isn’t just about accounting for your assets in your will. It’s also about how you structure your corporations and who has access to key information. To discuss those aspects of succession planning, or to learn about strategies like a dual will that help to minimize taxes, you may want to consult a financial advisor. They can develop a workable business succession plan and provide entrepreneurs with peace of mind. 

    Strategies for reducing estate taxes

    Unfortunately, taxation doesn’t end when a person passes away – after all, death and taxes are the only two sure things in life. Part of estate settlement is accounting for and paying any taxes due. That includes your final income tax return, and probate fees if applicable. 

    For large estates or ones that involve ownership of multiple homes, including residences outside of Canada, taxation issues can certainly be complex. You may also have out of province or out of country executors or beneficiaries, which come with additional tax considerations. Not to mention that there are tax minimization strategies available. Those include will alternatives, multiple or dual wills, leaving charitable bequests, and other solutions that can help reduce your estate’s tax burden. And that ensures more money ends up in the hands of your beneficiaries. A financial or tax advisor can help you map out the optimum strategy for you. 

    Naming beneficiaries for assets outside your will  

    There are advantages to leaving some of your assets outside your will to reduce probate fees and simplify payouts to beneficiaries. These are typically called will alternatives. For example, life insurance policies often include a named beneficiary vs. paying out the policy to the estate. This ensures the policy is payable to the beneficiary directly immediately after your passing and the payout is not subject to probate administration fees. Registered retirement funds such as RRSPs and LIFs can also have a designated beneficiary or beneficiaries and remain separate from your will.

    While this sounds straightforward, consulting a financial advisor can be beneficial in situations of multiple marriages or other complex family circumstances. Are you separated but not divorced? You may need to take steps to ensure that your estate is passed on according to your wishes, rather than being directed to your spouse. A financial advisor can look at various scenarios based on your life situation and wishes prior to adding named beneficiaries on policies or investments, and they can help to ensure you keep those beneficiary appointments up to date if you go through life events like a divorce.

    Living trusts and jointly owned assets

    If you have a beneficiary living with a disability you may want to consider creating a Henson Trust. Unlike a living trust, this is a type of trust whereby the beneficiary is considered not to have any legal claim to the property held in trust. That way the property is not considered an asset of the beneficiary when determining eligibility for disability benefits. 

    There are multiple types of trusts available in Canada and a financial advisor can assess your situation and recommend the best choice. 

    Another way to ensure an asset passes outside your will is joint ownership of assets. Real estate can be structured in two different ways. Joint with rights of survivorship passes the property to the other owner automatically when one owner passes away. Joint with tenancy in common allows you to gift your portion of a property in a will. 

    If you pass away and gift someone a property, it’s subject to capital gains taxes, so discussing joint ownership options may help to avoid that tax burden. The same is true of bank accounts or investments whereby any jointly-held investments automatically transfer to a spouse. 

    This can also be a strategy for passing assets to adult children, but there are nuances around this that a financial advisor can advise on.

    Setting up charitable legacies

    Those who don’t have beneficiaries in mind or for whom their philanthropic values are very important often leave assets to charity. Charitable giving can have its own complexities when ensuring that funds are allocated and managed according to your wishes. A financial advisor can help you explore the options and in deciding how your charitable legacy will be handled.  

    Naming a Power of Attorney 

    If you don’t have a family member or other resource to act as your Power of Attorney to manage your finances and medical care should you become incapacitated, you can appoint a lawyer to fulfill that role. It’s important to have a Power of Attorney – also known as a Living Will – to protect your assets while you are still alive.  

    Getting financial advisor support when you need it

    What motivates people to find a financial advisor?

    According to an Angus Reid poll conducted in 2019, the top life event that motivates Canadians to seek professional advice is death and inheritance. That is followed by other major events such as buying a home, getting a new job, loss of employment, having children, and getting married or divorced

    What to look for in a financial advisor?

    If you don’t already have a financial advisor who knows your goals and aspirations, getting started on finding the right resource can be daunting. 

    The Angus Reid survey was conducted in conjunction with the launch of Advisorsavvy, a Canadian online advisor rating and directory website. The survey found that only one in 10 Canadians have no fears at all when choosing a financial advisor. For the rest of us, selfishness on the part of advisors tops the list of fears, followed by potential for fraud and consideration of fees you’ll be charged for advisory services.

    To mitigate those fears and help with your selection, Advisorsavvy has prepared a checklist of questions that you can ask a financial advisor before making your decision. You can access the checklist here.

    How to find a financial advisor?

    Word of mouth referrals is often the go-to way of finding a professional resource, but your needs may be different from those of your family or friends. 

    For unbiased references, Advisorsavvy can help you source the right advisor for you, serving as a ‘matchmaker’ between your requirements and potential resources. The company was founded as a free service to help consumers find, compare, and rate local investment, financial, and insurance professionals. Advisorsavvy visitors can be more confident about selecting their advisor based on unbiased information shared on the Advisorsavvy website.  

    Preparing for the unexpected

    Working with a financial advisor to ensure best plans are in place for you and your family now and for the future can be a smart move. To avoid pitfalls and reduce stress for your beneficiaries, estate planning should be a priority for all. 

    The financial information in this article is meant for information purposes only, and does not constitute financial or tax advice. To find a financial advisor who might be a fit for you, visit Advisorsavvy.com, an unbiased directory of financial planners across Canada.

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