Estate Planning Is More Than A Will

Estate planning begins today and should address a period from now to about a year after the second death of a couple. It is far more than a will.

There was a valuable piece in the Globe and Mail recently. A simple guide to estate planning. You should read it. It will give you an insight into some of the matters that can concern you.

The estate distribution question

You have worked hard and grown your wealth so retirement is comfortable and fulfilling. Your estate will be composed of assets you use like your house and cottage. Assets you own for income like a retirement plan, assets that are residual from your business and likely some other investments.

Looking at the final distribution is important, but not the place to start.  If you do, many mistakes will be baked by then.

Estate planning should look at three dimensions

Distribution is important but it is the final step of a longer journey. The article above has valid points and you should read it. Distribution is one of the three key ideas.

The more general estate plan address two other factors.

  1. What you will lose in your estate and during the time from now to the end of life, and
  2. What you will spend to live the way you want from now to the end of life.

Everything you have now and will acquire in future will end up in one of the three categories.

  1. Leave it to others.
  2. Spend it to live as we wish
  3. Lose it.

You cannot leave what you spend and you cannot spend or leave what you lose.

I think we can agree that “Lose it” is seldom the first pick.

Losses to avoid

The biggest and a relatively easy one to minimize is taxation. Be sure you have enough cash to spend each year in retirement, but be sure to notice that having cash and having income are not necessarily tightly connected. You can only spend cash, you cannot spend income.

Think stewardship.

If you have 250,000 in guaranteed investments at the bank and a child has a $250,000 mortgage with the same bank, you are playing a four-person game where three of participants get money and the child furnishes all the money to pay.

You lend the money to the bank at 3% of which the government takes 1.5% as tax.  The bank lends the money to your child at 4% and keeps 1% for themselves. At the end of the year, child pays 4% for you to get 1.5%.  Lend the money to the child at 0%, take first mortgage security in case anything  goes bad and have them make the same payment each month as they paid the bank.

  1. The value to you is $15,780 per year, cash in hand versus $3,750 in the old way.
  2. The value to your child, mortgage paid off in 16 years instead of 25. Saves $140,000.
  3. Bank and government get nothing
  4. Your child was going to inherit the money anyway.

Inter-generational estate planning is very powerful.

Efficient estate liquidity.

Harvey MacKay’s Lesson 62 says:

If you can solve a problem by writing a check, you don’t have a problem, you have an expense.

There is no such thing as an estate tax problem. Taxes due are a fact. Organize for the irreducible minimum  and then provide a way for the executors to make a deposit to clear the check. Life insurance is by far the cheapest method.

Not everything in an estate can be measured with money

Understand what a fungible asset is:

“Able to replace or be replaced by another identical item”

Anyone could do a good estate plan if all the assets were fungible. One bank account of $50,000 is worth the same as $50,000 in cash or a bond or an account at a different bank. Avoid treating all assets as if they are fungible. The problem comes with assets that are not fungible.


Personal affects. Jewelry art, antiques, the piano, the coin collection and so on. Some will have more value to one heir than they will have to another. Find the right heir.

Personal property are a special kind of heirloom.  Usually valuable and hard to treat everyone the same way..

The cottage, the ski-chalet, the family home, can, and will be, a problem. Resolve it while you are able. Involve the children.


The fifth generation family farm or the business with the family name on the sign and the labels, for example. There is a right owner or possibly owners.  Work out succession as soon as possible. Be sure all the heirs know and understand.

Sometimes equalization of shares is a concern.  Try to observe and point out that some assets are not worth what they could sell for. A multi-million dollar farm cannot pay for itself out of earnings. Understand the difference between value in use and value in operation.

Some things are hard to transfer

Understand how digital rights work. Who owns your iTunes music collection or your email name.

Time shares can be a burden, especially if they are away from your normal place of domicile.

Set up the mechanism

  1. Choose executors carefully
  2. You might usefully have more than one will.
  3. You will need powers of attorney
  4. Keep your will up to date. Your will eventually will become your “last will” Be sure it stays valid.

It is not uncommon for an estate to shrink 40% or more. Most of the time it is because distribution was considered in isolation, or more likely because there was no will at all.

Don’t be silly about it. You worked a lifetime to get what you have. Don’t give up half of it for want of a little time and fees to a professional who knows how to do it.

You don’t get good at things you only do once.

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.  866-285-7772

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