Every estate is seen in three different ways. You can develop a better plan if you look from all three viewing points.
This is the most expansive view. You see the value of each of the pieces and you see how you came to have them. A fine home, a cottage on good lake, stocks, bonds and other investments, a pension, and attractive, functional assets you use. You understand how you would like all of it to belong to your heirs. The problem is you don’t see tax liabilities, estate resolution costs, and how the others will see what you have left.
While you see assets, the executor will see liabilities. Where does the money come from to pay the costs that arise because of your death. Taxes and costs can easily exceed 25% of the total. Where exactly does the cash come from? If you did not provide for the cash they must borrow or sell something. If borrow it ties up the estate for a long time, if sell there will be costs to do so, often including significant discounts from your value.
They see whatever is left over. That may not be pleasing. The first issue is that of monuments and heirlooms. Who got the family business,and who got the cottage, and who got the piano, or the jewelry, or the antiques? Is the distribution equitable if not equal? Is it much less than they expected. If internal family disputes are the result, you didn’t do it right.
The easiest way to get your attention is to do a pro-forma probate. It is a bit of a nuisance and will involve some professional fees, but you might find $6 million dollar estate you think you have will distribute differently than the $4 million dollar estate you really have. You will find liquidity problems and you will find forced distributions that are not equitable. Maybe Johnny can’t have the business, nor Mary the cottage and the RRSP.
Planning is about attaching meaning to what you find. Then discovering ways to get more of what you want.
A problem observed is a problem nearly solved. You can take action now to resolve some of them. Maybe all of them.
Communication is important. Be sure to manage the heirs expectations.
Pick your executors wisely and be sure they have enough cash to address the liabilities you don’t think about.
If the resulting estate is too small to distribute equitably, or if the estate is too illiquid for easy resolution, look up life insurance. Life insurance is not a cost. The cost is the problems in your estate. Life insurance is an answer.
Most estate problems reduce or go away with some planning. At least get to the I can see what the executor will see stage. especially pay attention to how long it will take to complete the estate distribution. Two years is not uncommon. Much longer sometimes. How will everyone see that?
I help people have more income and larger, more liquid estates.
Call or email firstname.lastname@example.org in Canada 705-927-4770