By Michael Woods, CFP, CIM
Our snowbirding friends Walter and Winnie Bago understand that spending significant time on the road does add some risk to their lives. With their frequent travels, they are wondering what should be done to ensure their affairs run smoothly should anything happen and they want to have their estate transfer as efficiently as possible to their heirs. While there are many advanced strategies that can be considered when it comes to estate and life planning, we will focus on some basics here.
At a bare minimum, Walter and Winnie should ensure that they have a power of attorney and a will. Also, they should check that their registered accounts have the appropriate beneficiaries designated. These are simple tasks to complete and can ensure that financial and other affairs run smoothly if Walter and Winnie’s lives take an unexpected turn.
A Power of Attorney and an Enduring Power of Attorney are legal documents that appoint one or more individuals to be your “attorney,” giving them the power to handle your financial and legal affairs if you are unable to do so. A power of attorney can be very specific or general, depending on your objectives. While straightforward documents for any notary or lawyer to prepare, they provide you with options such as ensuring your bills are paid or investments are taken care of by someone you trust. If you are a frequent snowbirder, providing a responsible family member with a power of attorney could give you some flexibility. For instance, in the event of a pipe bursting in your home, your attorney could access your bank account to pay for any remedial work while you continue to relax in the warmth of Arizona. On the other hand, an enduring power of attorney allows your attorney to make financial and legal decisions on your behalf if you become mentally incapable due to age, accident or illness.
While many individuals already have a will, it is important to ensure it is up-to-date. A will dictates how you would like your assets distributed and to whom. It can provide direction for the care of dependent children and ensure that they do not receive a large inheritance all at once, or until they reach a certain age. A will can be a flexible document, but only offers value if it is updated and reviewed to ensure it meets your current wishes.
As many Canadians have investments in registered accounts, it is often a good idea to have one or more named beneficiaries for these assets directly on the account, as opposed to designating your Estate as the beneficiary. By having a named beneficiary, registered assets may bypass the estate and avoid probate. If your spouse is your named beneficiary, perhaps consider naming a contingent beneficiary; a contingent beneficiary can be useful if both you and your spouse pass in quick succession. Non-registered assets can be held in joint accounts and are often set up this way for spouses to allow the surviving spouse uninterrupted access and avoid probate. In some circumstances, a parent may joint an account with an adult child, but not without tax and legal consequences that must first be considered.
Trusts and life insurance strategies are also tools to consider for individuals with larger estates consisting of significant investment portfolios, vacation property and/or large foreign holdings. More advanced planning strategies such as these can provide sources of cash flow to fund capital gains taxes and/or probate fees and help families keep their treasures for generations to come! Walter and Winnie would do well to consult their financial and tax professionals before taking to the road once again.
Michael Woods, CFP, CIM is a Portfolio Manager with Odlum Brown Limited
The information contained herein is for general information purposes only and is not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. Many factors unknown to Odlum Brown Limited may affect the applicability of any matter discussed herein to your particular circumstances. Odlum Brown Financial Services Limited is a wholly owned subsidiary of Odlum Brown Limited, offering life insurance products, retirement, estate and financial planning exclusively to Odlum Brown clients. You should consult directly with your financial advisor before acting on any matter discussed herein. Individual situations may vary. Member-Canadian Investor Protection Fund.