As you might remember from my post last June, the sending of this newsletter marks the one year anniversary of my mother’s passing after a prolonged journey with breast cancer. A few months after her death, I wrote on the many little things we learned as a family during that time in regards to the ’day to day‘ aspects of estate planning. It remains the most popular, and commented-upon, article I have ever written. (You can find a link to it here.)

At the one year mark, and in honor of Valentine’s Day, I wanted to share with you a few other items, some small, some large from our experience.

1)  Your tax situation can be worse as a single rather than a couple

As my dad is discovering, from a tax perspective, a couple is often treated more favourably than a single in many ways. RRIF/RRSP rollovers to spouse mean that in the year following, you can end up with GIS or OAS claw backs, as you no longer have income splitting opportunities, and your minimum RRIF withdrawal is now based on the combined assets of you and your spouse’s accounts.

Needless to say, January 2017 brought a big surprise in how much he has to pull from his RRIF, and the impact it will have on his taxes.

2) Give yourself time before making big decisions

I think it’s safe to say that my dad, my sister, and I have been learning that, while one adjusts, the grieving process can take far longer to work through than you might anticipate. Certainly, you find it impairs your judgment at unexpected times. Generally, it’s not wise to make big financial decisions for a year or so.

3) Time to go see the lawyer about wills

Your lawyer generally should have written your will in such a way as to anticipate one spouse predeceasing the other. That said, my entire family now finds ourselves in a situation where we should all be revising our wills and Powers of Attorney (POA). Some of the reasons are practical (Mom was named as one of my backup POAs), but others are more subtle.

Having witnessed the last three years of Mom’s decline, it’s fair to say that we have all formed new opinions on what we would or wouldn’t want if we find ourselves in a similar situation to mom in the future. The directions I would give in my POA today are really different from those from a few years ago.

On a more practical front, my  father’s will  & POAs and my own reference my mother in a number of spots that are no longer relevant. It’s probably best to remove those references to prevent any unanticipated lack of clarity going forward.

4) Charitable giving changes with the death of a loved one

I think it’s fair to say that some folks in my family who traditionally haven’t donated to charity a lot in their lifetime have begun to donate significant amounts for the first time. (A fact of which I am immensely proud, given my profession and specialty in charitable planning!)

Even though Bridget, my wife, and myself have been quite charitable over the years, we’ve now included St. Joseph’s Hospice in our giving. Mom spent her last two months at Hospice, and there is no way for my family to repay the immense debt we owe the wonderful folks who work there.

5) Segregated Funds and insurance transfers can make some things much easier – but care and consideration is needed

For non-registered money, segregated funds and life insurance provided for quick and easy transfer of assets, outside the will – sometimes in a matter of days. This can be important both for transfers to family, and increasingly, for charitable gifts at death, thanks to recent CRA rule changes. Settling an estate with other non-registered investments can take significantly longer due to probate and other aspects settling of the estate. It is important however to ensure that you coordinate your will and your beneficiaries on these products to ensure everything gets to where you want it to go.

In Mom’s case, everything went smoothly, but recently we worked with a new client and discovered that their lawyer and their stockbroker had not given coordinated instructions in the will and beneficiary designation of the segregated fund, and it would have lead to a major problem in disbursing the estate. Fortunately, when they transferred the assets to us we were able to correct this for them long before it became a problem.

6) Gifts of set amounts to beneficiaries can be eroded by inflation fairly quickly

One of the things that was super important to Mom was travel – so much so, she actually had a clause in her will that left money to my sister and me expressly for that purpose. When she last did her will, about eight years ago, she set aside a small amount that seemed reasonable. In that time period, however, both my sister and I had children, and the cost of travel increased substantially.

My mother was very concerned in her last days that the amount she stated would not be enough, and fixated on this and made Dad promise her daily that he would gift some extra funds to us to ensure we could take the whole family on a trip. While neither my sister, nor myself were too concerned, it truly became a major concern to mom, as she saw this as a legacy for her kids and grandkids, and related to one of her true passions in life.

I often suggest to clients that you talk to your lawyer about percentages and shares in your will rather than fixed amounts. As a financial planner, my concern is that you may not have enough funds in your estate at the end to meet set dollar figures, and that can impact cash flow for your survivors. In this case though, it turns out that the set amount was eroded by inflation, and the estate had more than enough to cover the true cost.

By the time mom wanted to make changes, however, her mental capacity was in serious question and she was not able to revise her will legally. Dad had no issues honouring her wish using his own funds to make up the difference, but it is easy to see where under different circumstances, a similar issue could end up with a will being contested by a beneficiary.

This is a tricky legal area – there are significant legal ramifications to naming flat-amount gifts versus a share or residual interest, and you should always have this conversation with your estate lawyer. A good estate lawyer can draft your will to address your concerns and ensure your wishes are followed in most circumstances.

One year later

I think it’s fair to say that we are moving on as a family, but the best analogy I can give is that we feel like a person who has lost a limb – we adapt, but we certainly aren’t all that we used to be without mom’s presence. Like all life events, what we have learned has enriched our lives tremendously, and what we have lost we will continue to miss forever.

I’m happy also to report that my Dad’s health has improved tremendously – as some of you know, it’s been a long hard road for him both as mom’s caregiver, as well as dealing with his own health issues.  As I write this, he’s about to board a plane to Cuba, to spend time in a place that was special to both him and mom, filled with many dear friends. It seems a fitting way for him to draw this long year to a close.

All the best,