Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics
Published by the Private Client Team at KJ Harrison Investors
When it comes to wealth planning, it is often difficult to separate your personal circumstances and outlook from what’s going on in the world at large. That may be especially the case these days, with so much “bad news” clouding our vision into the future. Inflation is high. Interest rates have been rising sharply. Some banks in the U.S. and Europe are imploding. War in Europe, once unthinkable, is a reality. And the world is only beginning to recover from a global pandemic.
But let’s look on the brighter side. Europe – despite fears of spreading conflict between Russia and Ukraine and of an energy crisis – has survived. Yes, interest rates are higher than they were, but they are still low by historical standards, and for those living on investment income, as many retirees do, earning more interest is a welcome development. As for COVID, it is still a serious concern, but it no longer seems like a crisis. People are getting back to work, eating in restaurants, and spending family time with, well, their families.
So, despite all the dire predictions, we have made it through. Which makes this the perfect time, as the clouds of a difficult winter clear and we look toward the future, to talk about dying.
Granted, that’s not something most people want to even think about, but it is a vitally important consideration when trying to safeguard your family’s financial future.
No doubt, reluctance to contemplate a world without us in it is one reason only about half of Canadians have a will and even fewer have designated powers of attorney, according to the federal government’s 2019 Financial Capability Survey. But if nothing else, the events of the past few years should make us recognize the reality of risk – not just on the geopolitical or macroeconomic level, but also on the personal level. And there is inarguably no greater risk to the financial and emotional safety of our loved ones than death.
As strategic wealth advisors, we spend a lot of time working with high-net-worth individuals developing estate plans so they know they are taking solid steps towards protecting their families after they are gone. Circumstances and risks are always evolving, and planning is a process, not a finish line. The question of “What if?” can lead to some uncomfortable conversations, but everyone needs to have them.
So, as gloomy as it seems, it’s a smart idea to take a few minutes at least once a year and ask yourself: What would happen if I dropped dead (or was otherwise unable to look after my financial affairs) tomorrow? What kind of a mess would I be leaving for my loved ones to clean up? And what can I do now to make sure they don’t have to?
When planning for risk, people often focus exclusively on “big” things like portfolio management, business structure, retirement goals, and the like.
Those are all very important. But the “little” things are often the ones that make life the most financially and emotionally difficult for families in the wake of a death or disability. Addressing these issues can go a long way toward making those events less stressful and financially painful for your loved ones.
Here’s a quick checklist of things to consider:
- When did you last update your estate plan? Are the beneficiaries you designated still in the picture? Are they still the ones you want?
- Does your family know who helped you prepare your estate plan so that they know whom to consult if they have any questions or concerns?
- When you are gone or no longer able to make decisions, someone needs to be in charge. So, are your power-of-attorney designations, both for your finances and your health, up-to-date and appropriate?
- Are your insurance policies up-to-date? Do they meet the current and future needs of your family?
- Do you and your spouse have separate bank and investment accounts? If one of you passes, accessing the other person’s account can be a complicated and time-consuming affair, even if that partner has a will. (Wills in Canada generally must pass through the probate process, which can take six months or more.) Turning separate accounts into joint accounts can save time and avoid a lot of aggravation down the road.
- Have you properly named the beneficiaries for your RRSPs, TFSAs, LIFs, or other registered accounts?
- Do you know where all your online passcodes are? Does your family? Some sort of mechanism that allows your loved ones to access your codes and your financial information when you’re not there can save them weeks’ worth of headaches.
- Do you have a safety deposit box? Where do you keep the key? Does your family know where to find it? And do they know at which bank the box is?
Those are only a few of the seemingly small but very practical questions that follow from thinking about “What if?”
And you might have noticed something of a running theme in those questions: the importance of communication. To prepare and protect your family, it’s imperative to not only plan for their well-being, but also to communicate with them what you have planned. That knowledge will save them heartache, money and time when you are no longer there to look after them.