Tuesday, June 10, 2014

New report highlights potential pitfalls couples face when transferring assets to the next generation

RBC Wealth Management offers tips to make estate planning process a smooth one
TORONTO, Ontario June 10, 2014 /Canada NewsWire/ - An estimated $1 trillion, or more, is positioned to change hands in Canada over the coming years as baby boomers age and assets begin to transfer to younger generations. The country's high-net-worth population alone held close to $900 billion in investable assets in 2013, according to RBC Wealth Management, and with improving economic conditions that figure is likely to grow. This impending transfer of wealth is putting the onus on baby boomers to ensure that their estate plans are crystal clear about how a lifetime of hard-earned assets are to be managed upon their passing.
"No one likes to think about death, let alone build an actual plan around that fateful day," says Tony Maiorino, vice-president and head, RBC Wealth Management Services at RBC Wealth Management. "But one of the most important financial decisions you can make during your lifetime is to take the time to develop a well-thought-out estate plan to ensure assets are seamlessly transferred according to your wishes."
A new report by RBC Wealth Management - Until Death Do Us Part … Then Everything Can Change - explores a key aspect of estate planning for married couples, in particular, and that's the critical role a surviving spouse plays in managing and maintaining family wealth for future generations.
"We find that when we talk to couples about estate planning, most of them naturally focus on their kids," Maiorino says. "Children are an important part of the decision-making process, no doubt, but a comprehensive estate plan needs to consider an important step before the kids, and that's the surviving spouse."
Until Death Do Us Part … Then Everything Can Change provides a comprehensive, plain-language look at estate planning essentials for married couples in Canada, including the various ways to leave assets to a spouse, while allowing the estate to seamlessly flow through to the next generation.
The report also offers practical tips for estate planning first-timers, including:
Take a Family Inventory - A good first step in developing an estate plan. Compile a list of information pertaining to your family's banking and investment accounts, advisors, assets, pension information and insurance policies. Don't forget about your digital legacy - e-mail accounts and passwords, social media profiles, domain names, etc. Share and discuss this information with your spouse.
Introduce Your Spouse to Your Advisors - If your wealth, legal, tax and other advisors only have a relationship with you, consider an informal meet-and-greet with your spouse, and possibly other family members. This will allow your surviving spouse and other family members to continue working with advisors who know your history.
Create/Update Your Financial Plan - A current financial plan is critical and helps ensure that life goals will be met. Involving the family in the financial planning process can mean that they are more likely to understand each other's needs, goals and concerns. A financial plan is not a one-time exercise, however - as circumstances change, it is important to review and adjust your financial plan as necessary.
Choose the Right Executor - An executor is the individual or institution appointed to administer the estate. A common practice is for each spouse to consider the other as their respective executor. Alternatives include family members, including children, professionals such as a family lawyer, or a trust company.
Build a Business Succession Plan - Business owners have additional planning requirements and should consider having a succession plan in place that addresses the needs of the business and the surviving spouse if they are involved in the business.
Communicate, Communicate, Communicate - If your spouse will be the first heir of your estate, and potentially your executor, it is important that you have open and regular discussions about your intentions, goals and plans.
"It's important that your spouse is familiar and comfortable with the tasks they will face," Maiorino says. "And, just as important, ensure you communicate your plans to your children."
Maiorino adds that many couples also revert to the common estate planning approach of simply leaving everything to the surviving spouse, without taking other family members into consideration, which isn't always the best course of action either.
"The suggestion isn't that the surviving spouse won't do their best in honouring your legacy," Maiorino explains. "Rather, the surviving spouse may simply not be experienced enough in managing finances, they may become ill, they may develop solvency or creditor issues, or they may re-marry, while other family members might contest the estate in court believing they were entitled to certain assets."
Maiorino says clients today are looking for an increased level of support around how to achieve their life goals, including how and where they will retire, how will they manage their business, how they can ensure their children are taken care of, having the right amount of insurance, and how they can contribute to philanthropic causes.
"Having these discussions during your lifetime may help alleviate any misunderstanding and problems that arise in settling your estate," says Maiorino, whose team of more than 200 RBC Wealth Management Services specialists has conducted close to 8,000 wealth planning discussions with clients of RBC Wealth Management Canada's investment professionals over the past year. "Most importantly, it will provide peace of mind that your goals and objectives will be met."
To read Until Death Do Us Part … Then Everything Can Change, click here.
As always, you should obtain professional advice from a lawyer or accountant, as applicable, to ensure your own circumstances have been properly considered.

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