Will Planning With Foresight

The structure of your will provides insight into how you could organize your affairs in anticipation of settling your estate.

Part 1 – Identification.  In the beginning, your name, occupation, place of residence and such, identify you as the maker.  The end will have your signature in front of witnesses.  The courts will want to know that the intentions expressed are yours and that you had capacity to make a will.

Part 2 – Intent.  You establish here that it is your intent to deal with things you own at the time of your passing.  It will further revoke other wills made earlier so that your most recent intentions will be implemented.  If you are creating multiple wills, be sure they reference each other and that one does not cancel others.

Part 3 – Appoint Trustees. (Sometimes called executors)  These are the people who will have an obligation to deal with your collected assets in the way you specify.  If you are less than clear, their jobs may be difficult and will likely devolve into court ordered solutions that may have little to do with what you would have preferred.  Choice of trustees is a consideration that few spend enough time on.  Be sure to supply them with enough liquidity and review your philosophy with them while you can. 

Part 4 – Instructions.  There are usually many instructions.

  1. Call in, sell or convert such assets as are necessary to carry out the payments
  2. Pay liabilities, the costs of the funeral and estate administration,
  3. Make specific bequests of cash.  Usually to charities, but sometimes people.
  4. Make specific bequests of other assets.  Could be a business or real estate or heirlooms.
  5. Whatever is left is the residual estate and it is usually allocated by fractional shares.

Think it through as if you had to carry it out to the end.  Start with what you want your will to mean.  See the specific disbursements.   Especially taxes.  At a minimum, you should be able to tell that the allocation that comes out in step 4 and 5 will be as you wish.

Sometimes wills are worded so that the specific bequest of a business is to one child but the relating taxes end up paid by the estate and thus reduce the residue.

Sometimes there is not enough cash to do what the executor must do.  Did you leave instructions about what should be sold and in what order?  Should the heirs be consulted?  Should the trustees pay attention to the heirs?

What should happen if a specific bequest of an asset must fail because at the time of your death, you no longer own it?

If you have multiple wills, which of them is ultimately responsible to raise cash and is the residual heir effect considered?

Most people spend a lifetime accumulating their wealth and end up losing 30% or more on their death.  Estate distribution planning is multi-fold.  It considers the value received by each heir, the nature of the asset received  (real estate versus cash for example), the appropriateness of the amount and the timing of receipt.  For a potential spendthrift or for someone with financial problems, a trust may be the method of choice.

Other options for distribution exist,  but must be implemented while living.  Trusts being the most common.

Talk to an advisor that can show you your options.  At the same time ask about problems that can arise.  Estate disputes are among the more emotionally destructive.  Once you know what you need, your decisions will tend to be both effective and efficient.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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