Estate planning isn’t just for couples and individuals with children. It can be an important process for people without children as well. Mindi Banach, Tax and Estate Planner, TD Wealth, joins Kim Parlee to talk about how child-free people can plan for the future of their estate.
* Let's start with-- and I guess when people think about they don't have children, perhaps, maybe it's a bit more carefree. They don't have to worry so much. But maybe there's more worries, because there's not any obvious people to be taking care of things afterwards.
* So. I think in some circumstances, it may add more complexity. In other circumstances, it may not. I think what really adds to complexity is the individual client's unique facts and circumstances.
* Now when we're on this topic, I do want to mention that a big misconception that I tend to find and that I tend to see is that a lot of clients assume that the only people who need to be considering estate planning are people who are married or people who have children. And that's just not true.
* I do tend to find that the reason why people start thinking about estate planning is usually when they first get married or they start having children. But I do think that people who don't have children need to be a little bit more proactive in thinking about their own estate plan because estate planning is not only about considering who you're going to be distributing your money to. It's also determining who you want to appoint to make your financial decisions, to make your medical-care decisions, if you are unable to. And again, that's not a determination about whether you have children or not. It's a determination of who you're appointing.
* Yeah. It's a great point. It's like, who's going to take care of you in your final years when you need to be taken care of? So often, I know when I've spoken to folks like yourself, they think about children to be the caretaker, the power of attorney or executor, or all those types of things. So what do you need to think about if you don't have those choices?
* So I think the factors to consider are actually the same, in that you really need to find somebody who's, number one, trustworthy and number two, capable. So even if you have children, you still need to take into consideration those factors. Are they trustworthy? Are they capable?
* And so if you don't have a child or anyone that in your family who's trustworthy and capable, who then should you be considering? So when it comes time to determining who to appoint for financial decisions, you can appoint a professional. So it could be your accountant. It could be your lawyer. Or it could be a private trust company, so appointing a corporate executor or a corporate attorney.
* I do want to let you know, when it comes time to making medical-care decisions, unfortunately, you cannot appoint a private trust company. Again, you do need to look to family and friends.
* Yeah. And that's something you want to be thinking about not when you need it tomorrow. You want to be thinking about that when you need a little further advance.
* What about-- I think about the aunts and uncles, great relationships with nephews and nieces, friends. And let's say they do want to pass things on. Are there different considerations, different complications?
* So I don't want to say that the factors are going to be exactly the same as a parent distributing assets to children. But I will tell you, a lot of the factors are very similar. So for example, regardless of who your beneficiary is, whether that is a child, niece, nephew, or friend, you may want to consider adding in some trust planning within your estate plan.
* So for example, if that beneficiary is a minor, if that beneficiary is disabled, or if that beneficiary is an immature, financially immature beneficiary, you want to determine, at what stages do you want to be distributing money to that beneficiary?
* Oftentimes, we see a lot of clients putting in place a staggered distribution. So maybe you're telling your executor to have a trust in place where you're only distributing, perhaps, a third of the assets at age 25, a third of the assets at age 30, remaining at age 35. This approach takes into effect the notion that people may become more financially responsible as they mature and get older. And again, nothing to do with whether you have children or not and everything to do with the specific beneficiary that you're choosing.
* Yeah. I know maturity is a big one, and it's the reason why lots of issues happen. We'll leave it at that.
* What about for people who are thinking about more charitable giving and those types of things? It's important to incorporate that in early, and the specific instructions around that as well.
* Yes, absolutely. So the first thing you want to determine-- there's a number of steps, and the first thing you want to think about is, which charities do you want to support? And which charities are you passionate about?
Next, you want to determine the amount. Is it going to be a specific dollar value? Is it going to be a percentage of your estate? After you determine the amount, you want to determine the method. Are you going to be distributing it in one lump sum, or are you going to be distributing it over a specific amount of time?
* Next, you want to look into making certain that your documents are in order, your will, your trust documents. You want to be communicating your wishes and outlining them, not only in written form but also communicating your wishes with, ultimately, the people who are going to be administering your wishes. So talk to your executor. Talk to the charities. Again, you want to follow through with your wishes.
* And then keep consistently reviewing your plan and updating it whenever there's any changes that you have to your plan.
* And that's a big one. Make sure, because if you get remarried, divorced, all that good stuff, then you have to make sure that your will reflects your current wishes, right?
* What about-- and this is the big-- this is the same for everybody. It's like, don't die without a will, whether you have kids or don't-- kids or not. But is it different if you don't have children and if you die without a will?
* So when you die without a will, you die what's called dying intestate. And the provincial intestacy laws are going to govern who the beneficiary is going to be for your estate. So for example, in Ontario, if you die without a will and you do not have any children, the first person that benefits from your estate is a legal married spouse, if you have one. Here in Ontario, unfortunately, common-law partners are not eligible to inherit under intestacy laws.
* If you do not have a legal spouse to inherit from you, next in line are your parents, or your parent. After your parents, we look at siblings. And if one of your siblings have passed away, then we look at their children. After siblings, we look at nieces and nephews. If you don't have nieces and nephews, then we go to next of kin.
* If you don't have next of kin, the last person, or entity, I should say, that becomes the beneficiary of your estate is the government. The government will be more than happy to become a beneficiary of your estate. So if you don't want that to happen and you want to incorporate other individuals or charities within your estate plan that are not within the provincial intestacy framework, you do want to be drafting a will.