Rights & Money

Now’s the Time to Review Your Estate

Congratulations if you’ve been wise enough to create a will, but you need to check it now and then to ensure that it still makes sense

By Olev Edur

With tax-filing season at hand and your financial statements laid out before you, there’s no better time to take a look at your will and your estate plan to see if any updates to details such as account balances or the locations of assets and interested parties are in order. After all, if the provisions of your will are out of date and the worst should happen, the result could be substantial delays and added costs in the settlement of your estate.

“When you’re listing assets in your will, it’s very important that they still exist and that the amounts are correct,” says Nicco Bautista, director of estate planning at BMO Private Wealth in Vancouver. “If your will specifically mentions an asset by address in the case of real estate or by account number for securities and you no longer own that asset at the time of death, then that inheritance disappears. Similarly, if the value has changed, then the amount of the inheritance changes.”

That may sound obvious, but the point is that if you’re trying to balance bequests to family members and others such as friends or charities, then any changes in asset values, and especially the disappearance of certain assets, can play havoc with those balancing intentions. In a worst-case scenario, it could even result in legal action if family members who are adversely affected feel they must forcefully reassert their rights.

“Every province has slightly different rules regarding estate dispositions, but there’s a general expectation in British Columbia and Ontario, for example, that all children be treated equally,” Bautista says. In other words, those aggrieved claimants would have the law on their side.

If, for example, one child was supposed to inherit the cottage but you sold it last year and forgot to update your will, that child may have little alternative but to press his or her case in the courts. And, needless to say, a court proceeding would involve very hefty legal costs against the estate, not to mention the settlement that would likely follow.

While that would be the most extreme consequence of forgetfulness, even matters as seemingly minor as getting an address or account number wrong can lead to delays. The time and energy your executor might have to spend simply trying to find someone who has moved or securities that have been transferred to a different account would be frustrating for not only him or her but also your loved ones.

Keep It Simple

According to Leanne Kaufman, president and CEO of RBC Royal Trust in Toronto, the best long-term solution to these types of information-driven problems is to keep the will itself as simple as possible and record the details such as asset values and locations separately.

“If you put all those specifics into the will, it can end up creating confusion,” Kaufman says. “You should keep the will generic and put all the specifics—networth statements and other financial information, a list of key contacts, and so on—in a side document.”

While making changes to your will is a formal legal process, changing these accompanying documents is not: you can alter them as circumstances evolve. “It’s much easier to make changes to a separate side document than it is to change your will,” Kaufman says.

“My wife and I review our investment balances and other financial information monthly,” Bautista says. Keep these documents handy and use them as a reference when you’re reviewing your will.


Consider the Overall Plan

There are other reasons for reviewing your will. “You need to make sure the provisions still reflect your intentions, particularly with respect to gifts to those outside your immediate family,” Kaufman says. “Charities, for example, or family or friends—are they still in your life?”

Bautista agrees that charity always merits scrutiny in a review: “If you have charitable-giving intentions, make sure that the choices, as well as the amounts, still make sense.”

Factors such as account balance changes and the sale of some assets, as well as the impact of taxation, can affect the relative amounts given to those you love. “You need to keep in mind that an estate plan review is about more than just the will,” Kaufman says. “For example, designating a beneficiary for your RRSPs or RRIFs can have downstream effects stemming from taxation.” Many families have discovered too late that while designating a beneficiary can enable an RRSP or RRIF to bypass the estate and revert directly to that beneficiary in its entirety, it’s the estate that must pay the resulting tax bill. As a result, the estate’s other beneficiaries end up seeing a reduced inheritance.

“In addition, you have to ensure that you won’t outlive the terms of your will,” Kaufman says. “Are the people named in the will, such as the executor, still around? We had one recent case in which the client outlived everyone and the will was useless.”


Review Your Executor

The executor is the key to enacting your posthumous wishes, so make sure the person (or persons) you appoint is willing and able. “You need to make sure that he or she is still capable of acting,” Bautista says. Without an executor, the estate is required to go through a more complicated probate process, resulting in delays and added costs.

“Review who the executor is and what your instructions are,” Kaufman advises. Is the person you appoint financially literate enough to manage your assets competently and deal with issues such as taxation? Does the person understand your family dynamic? If there are trusts involved in the case of young children, does the trustee understand children and their needs? These are the types of questions you should ask when considering whether your appointee is appropriate.

“It should be someone local—not necessarily in the same city but not a non-resident,” Bautista says. “It could be a family friend or even a family member, but you should consult the person before naming him or her. If you have no choice, you might want to choose a trust company.”

And you should consider a backup executor—people’s circumstances can change unexpectedly. Bautista suggests reviewing your will every two years or whenever there’s a significant family event such as a death, divorce, or birth but points out that there’s no guarantee your appointee will always be available on your timetable.

“Powers of attorney are important, too,” Kaufman says. “These are critical documents that govern the management of your finances and your health care when you are alive but unable to manage your own affairs.”


Don’t Forget About Digital Assets

“One thing that’s almost never considered is digital assets—the accounts you have online,” Kaufman says. “This includes anything for which you have a username and password and could also include online banking as well as social media such as Facebook—there may be a number of things that are accessible online only and your executor needs to know about them. Unless he or she has access and knows where to go, they cannot be closed out.

“You may want to keep this information in a separate document or as part of your statement of assets and liabilities,” Kaufman continues. “Just don’t write the passwords down where others can access them. At the very least, alert the executor that you have these online assets and connections.”

When it comes to assessing your overall estate plan, both Bautista and Kaufman say that some professional input can be invaluable. “Most financial institutions offer financial planning as part of their services, and you should take advantage of those services,” Bautista says.

Finally, for those who may think that creating a will in the first place is a lot of unnecessary bother, Bautista suggests otherwise. “If you don’t own any real estate and your only assets are RRSPs or TFSAs with designated beneficiaries, then here in British Columbia, you may be able to get by without a will. But if you have more assets, it can be very problematic for the executor and costly for the estate to access those accounts or documents without a will. The general advice is, make a will.”


Photo by Gabrielle Henderson on Unsplash