November 26th, 2020

How Financial Advice Eases Family Conflict and Estate Planning

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Written by Selva Hafeez

               There can be many unexpected complications when it comes to estate planning. There are many small details that can change the financial situation in regards to estate planning. This is why it is important that you have a financial advisor help you with your estate planning.

Advisor's roles help lessen family conflict

Families are finding that having a financial advisor aid in lessening family conflicts when it comes to estate planning. Organizing the beneficiaries can become messy if family details are left out and later realized. In more recent years, advisors look beyond solely managing investments, they also manage estate planning and wealth transfer. 

“A TD Wealth survey found that family conflict is the leading threat to estate planning” due to: 

  • beneficiary designations (30%)
  • absence of communication (25%)
  • dynamics of blended families (21%)

Beneficiary Designations

Within Canada (except Quebec), the annuitants and policy holders are able to assign beneficiaries on insurance policies (life insurance, etc.), segregated funds, pensions plans, TFSA/RRSP/RRIFs, which all allow them to bypass probate taxes.

This also means that the transition of the plan proceeds to their estate beneficiary. There are cases within Alberta and Ontario where beneficiary designations were the leading cause of family conflict.

Absence of Communication

Communications is a vital part of an effective wealth transfer and estate planning. When meeting with a family, an advisor should encourage their clients to discuss:

  • last will and beneficiaries
  • enduring power of attorney
  • personal/ health care directive, representation agreements
  • bequest
  • charitable giving
  • candidates for executorship or alternate executorship
  • disability planning
  • business succession planning
  • trust planning
  • investments

The list of discussion topics goes on. Advisors are now well aware of their importance of their role within their clients’ lives. A good advisor will always encourage communication between family members to ease the tension and lessen the outcome of a family conflict when it comes to wealth transfer and estate planning. 

Blended Families

According to a 2016 census, 9.7% of children under the age of 14 (567,270 total) live in a blended family situation. The census includes families with half and/or step siblings.

A good advisor knows to pay attentions to the possible situations that may arise when dealing with estate planning within blended families. Majority of the cases, each spouse will bring their own, independent generated wealth into their relationship, but they also create wealth within their new family. Complications come when it comes to the death of a parent and how will the estate be dealt with. There are a couple options available, it all depends of the family’s situation and composition.

Mutual Trust

This is where assets are placed in the trust of the surviving spouse, and the children from the previous relationship are the contingent beneficiaries. This would help the remaining spouse financially support the family while also protecting the inheritance for the deceased’s children. This usually does not include the children of the living partner. 

Insurance

Insurance is another way one can provide inheritance for their children from a previous relationship.

Citation

T. Brisibe, “Family conflict, estate planning and the value of advice,” Advisor’s Edge, 30-Jul-2019. [Online]. Available: https://www.advisor.ca/tax/estate-planning/family-conflict-estate-planning-and-the-value-of-advice/. [Accessed: 26-Nov-2020].

 

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