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Terms like wills, executors and powers of attorney usually only come up during a trying time in someone’s life. Not knowing how it all works can add to the stress and confusion.
This episode, we cover the basics of estate planning. Hopefully well in advance of when you’ll need it.
Sara Plant, the Vice President and Managing Director of Scotiatrust and MD Private Trust, is here to explain the importance of planning for the end, and how to go about it.
Key moments this episode:
1:20 - Quick definitions of common estate planning term
3:55 – Why do you need a will?
5:30 – Who should have a will?
6:09 – When should you get a will?
6:34 – How to choose an executor
7:58 – What exactly does an executor do?
9:12 – How to find an executor
9:48 – First steps if you don’t currently have a will
10:55 – The most difficult part of settling an estate: family dynamics
12:27 – Power of attorney 101
17:16 – What Sara finds rewarding about working in this field
Stephen Meurice: Estate planning. Wills. Executors. Power of attorney. These are terms that people often only learn about when they have to. And it usually comes as a crash course during an already stressful or scary time in your life. So, we’re dedicating this episode to learning the basics of estate planning. Hopefully well in advance of when you’ll actually need it. Our guest is Sara Plant, Vice President and Managing Director of Scotiatrust and MD Private Trust. She’ll answer the questions you might not even know you had about estate planning. I’m Stephen Meurice and this is Perspectives.
Sara, thanks so much for being on the show today.
Sara Plant: My pleasure. Thank you for having me.
SM: So, what’s the first thing people ask you about when they hear that you work in trusts, if you’re talking to somebody at a party. I’m sure you get lots of questions.
SP: Actually, what typically happens is they have an example they have in their head about something they’re struggling with, with some kind of an estate matter they’re dealing with, and so they jump right in and say what do I do about my aunt’s car? What do I do about my brother’s bank account? So, it often gets right into the specifics.
SM: And do you give them those answers right away? Or do you tell them to call the office make an appointment?
SP: [laughs] Depends on the question.
SM: [laughs] Okay. Alright. So maybe before we get into things we can start with some basic definitions, we’ll get into all these in more detail later. But maybe a lightning round of quick questions for you.
SM: What is a will?
SP: A will is the document that you put in place to make sure that your wishes are reflected for how you want your assets transferred and how you’d like your beneficiaries to receive those assets. The will is really the final document that reflects all those wishes.
SM: Okay, what is an executor?
SP: An executor. They are the individual or you can have more than one, who you appoint in your will to settle your estate. And it’s referred to as a liquidator in the province of Quebec.
SM: Okay. And finally, what is power of attorney?
SP: Okay. So, powers of attorney — there are two types in most provinces. There’s a document called a power of attorney that deals with finances and a power of attorney that deals with your healthcare. And they’re two separate documents. And those are the documents that are used when somebody is still alive but has become incapable of handling their affairs. Either their financial affairs of their healthcare affairs.
SM: Okay. We’ll and we’ll come back to that as well. So, the final sort of definition I guess maybe I could ask you is what is a estate planning? Does that basically mean having a will?
SP: Pretty close. So, estate planning is the process that you go through in order to arrive at a will and arrive at a power of attorney. So, it’s the discussion that you have and the questions that you ask yourself and the decisions you make that put you in a position to be able to create a will and a power of attorney to make sure your assets transfer as efficiently, as smoothly and according to your wishes as possible.
SM: Okay. I think for a lot of people — myself included, they hear wills and estates and kind of think, oh boy, that sounds like all the fun of filing my taxes and having to think about my own death. Do you find that most people do this type of planning just when they’re forced to or something bad happens and then they start thinking about it?
SP: Yeah, it’s so true. Often there’s something that happens in somebody’s life that says, oh, I need to put a will together. Or I need a power of attorney right now. And so, there’s usually something that prompts them to do it. Because you’re right, a lot of people don’t like the thought of putting their final wishes down. But I always like to say you go through the exercise once. The first one’s always the hardest. You have to answer some questions you haven’t before. But then really, most people don’t change their wills until maybe another seven or 10 years have passed. So, it’s not something you’re doing all the time. It’s something you put into place. It’s done. You put it away and then you can move on with your life and you revisit it again, you know, in a few years to make sure it’s still relevant.
SM: So why do you need a will? A lot of people might think well, it’s not my problem. Once I’m dead, that somebody else can sort it out. Why do you need one?
SP: Well, a will allows you to control how you’re going to transfer your assets and protect the people that you care about. If you don’t have a will, the way your assets are transferred and the way they’re handled and who they go to and how much is governed by legislation. And it’s a legislated formula that the family is stuck with. So, if you want any element of control over that whole process, you want to will in place rather than relying on what the legislation in any given province says. You could find assets going to people and your money going to people you’d never intended to. Or leaving out people that you wanted to because the government formula is set. And that’s that.
SM: Right. Have you seen those sorts of scenarios play out?
SP: Absolutely. And nowadays people’s lives are really complicated. Their lives are more global. So, they have family members living outside the country. Their assets aren’t as straightforward as they used to be. It used to be that somebody had maybe a house and a bank account, but now there’s so many different types of accounts you can have. You can have RRIFs, you can have life insurance, you can have different types of real estate that you own. And you can also find yourself being married more than once and having children from other marriages. All that makes it more complicated now. And to rely on that legislative formula, odds are it’s not going to meet what you wanted and you want a will to be able to make sure all those pieces are put together properly and transfer the way you want them to.
SM: Right. And who should have one? Should everybody have a will or are wills really just for people who have a lot of money who have an estate, so to speak.
SP: My children asked me that question recently, and my answer is when you have assets. When you have, say an investment account, a portfolio or a house, when you have assets, that’s when you want to make sure that you have a will. Because at that point you want to make sure they’re transferred properly and that the most tax efficient base is possible. And also, you want a will, if you have people in your life you want to protect. So, if you have a partner or you have some family members or a cause that you want to make sure that you protect, you’ll want to will to speak for you.
SM: And when should you get one?
SP: So, my opinion, I think most people should be starting to think about it when they’re about 30. And I say that because it’s about 30 there’s a chance you’re going to have real estate, you may be married at that point, you may have children at that point and you’ve got some people who are depending on you. And you need to look after them and the estate planning process and will make sure that happens. If something happens to you when you weren’t expecting it.
SM: And I guess in the course of making a will, there are other people who have to be involved? I guess there’s an executor, maybe you can explain how you choose one. It just sounds like another big deal. Suddenly you’re an HR manager as well as someone making a will and you’re trying to appoint the right people.
SP: Ah, so true. And it’s a really good question. I actually think it’s one of the most important questions to ask yourself when you are setting up a will. Who is going to be doing all this for you? You want to make sure that you’re choosing somebody who will be there for you. So, if you’re quite old, you don’t necessarily want somebody who’s the same age as you because they may not be there when the time comes. So, you want to choose the right age. You want to make sure somebody is available. They’re in the country or the province where you live. You want to make sure that they are comfortable with financial matters. Obviously, it needs to be somebody you trust. Really, you’re asking them to wrap up your life and move it forward. And keep in mind, you don’t necessarily have to just choose one. You can choose two. You can have two people working together. Some people say, oh, ‘I’d like to include all my children as my executor.’ And that’s where I say, be careful because the more executors you have, the more complicated it is to actually do the work that’s involved to settle an estate. If it gets too complicated, then trying to arrive at decisions amongst yourselves can be really challenging. So, choose your executor carefully.
SM: And how tough of a job is that? Like would I want to be an executor?
SP: It can be very complicated. It depends on the life that needs to be wrapped up. And nowadays dealing with financial institutions and the courts in order to first of all get that document from the court to allow you to settle the estate. As well as deal with the financial institutions to transfer the assets the way you need to, it can be very time consuming. What I’ve personally found and seen others, is that it takes many more hours than you expect. And the word I give to that is because of administrivia. Meaning it isn’t just looking at a list and saying, I have to go and file the tax returns. That means you have to make sure you have all the slips, you’ve talked to all the right people, you’ve talked to the accountant. You physically probably jumped in your car to go to different buildings and meet with people, tried to find them on the telephone, trying to find live people on the telephone. And it all takes this extra time around the one task. And it can take up to a year and a half to settle in an estate. And I’ve heard that your average estate can take up to 600 hours to settle.
SM: Wow. What if someone either doesn’t want to place that burden on someone close to them or maybe it doesn’t have someone that they would want to put in that position? What are the alternatives?
SP: Yeah, there certainly are options. So, some people hire a lawyer to settle their estate and to act as their executor. Others can touch base with their financial institutions. Every bank in Canada has a trust company. And for example, Scotiatrust and MD Private Trust are the ones that are owned by Scotiabank. And trust companies offer the service for certain circumstances to help people out to settle their estates.
SM: If someone is listening to this and they don’t have a will, what’s the first thing they should do?
SP: So, I encourage people to use a lawyer to have the will drafted. There are systems online and tools you can use to create your own. Personally, I’m not a fan of those. I think it’s very important to have a professional put the will together. And I say that because so often the fights that you hear about from families around how the will read. Was due to some kind of ambiguity or confusion in the will for how it was written. And you reduce that risk if you have it done professionally. So, I’m a big fan of having the wills done professionally. The second piece is I would encourage you to speak with an estate planner, a professional who can sit and speak with you and discuss with you about how you might like that will to read. And the benefit of working with an estate planner is they know the questions to ask and they’re probably questions you wouldn’t even realize need to be asked to think through some of the issues that you’re facing and creating the will.
SM: Right. You mentioned some of the fights that can sometimes arise within families as they go through this process. Do you find yourself playing referee? Like, does that end up being part of the job that you do is being the ref between people who are battling through these things?
SP: Yes. And actually, that’s another point for who you’re choosing for your executor. That individual, who is your executor is going to need to deal with the family dynamics. And sometimes that is the most challenging part of settling an estate. When one parent passes away and then a second parent passes away. The family dynamics really shift and a lot of old grudges can come to the surface. People get very sentimental and can fight over items that may not necessarily have any financial value but have tremendous personal value. I have a recollection of spending hours one time dealing with the negotiation around how a vase would be handled by one person or another. Another one unfortunately was what was going to actually be written on their grave marker. That went into litigation. It can be very sentimental and you can’t prevent it. But again, having a will, having it done professionally and thinking through the questions can help reduce that risk of some of the family tension that happens.
SM: So, the first step unfortunately is to call a lawyer.
SP: Well, I wouldn’t actually say it’s unfortunate because I happen to be a lawyer.
SP: But aside from that, lawyers are a critical part of the process because they can make sure you not only have your will, but you also have your powers of attorney in place at the same time.
SM: Which is a perfect segue into powers of attorney. One of the first questions people might have is that person a lawyer? It’s got attorney right there in the name, does that person have to be a lawyer?
SP: That’s a great question. So, the term, power of attorney is the name of the document itself. And again, there are some variations across the country because each province has a different way of referring to these documents. Generally, it’s called a power of attorney. And the word attorney actually doesn’t mean lawyer in our sense. In the U.S., they use the word attorney to refer to a lawyer. So, I think sometimes that’s where the confusion comes in. Power of attorney is the document that puts somebody in your shoes to act on your behalf, either for financial matters or healthcare matters while you’re still alive. And those documents stop being effective when you pass away because the will takes over. So that’s what they mean by power of attorney. It’s not necessarily a lawyer at all. Your first stop would be to look at your family members and decide if there’s a family member that’s most appropriate because they’re closest to you and are part of your life.
SM: So that would be a very important decision who you would name for that. Because at a certain point, this person could be making all the significant decisions for you, whether they’re financial or medical.
SP: That’s right. And you don’t necessarily have to choose the same people for both documents. You could have somebody that you know, you trust them to handle your finances and you feel that somebody else is more appropriate for your personal care issues, your healthcare issues. So, you can have different people appointed. You just want to make sure they get along because the healthcare individual that you’re asking to look after you, will be making decisions and the person acting under your document for your finances will be paying for it. So, you want to make sure that they get along.
SM: Right. And what happens if you don’t have somebody doing that for you? Who would make medical say decisions or financial decisions on your behalf if you have not created a power of attorney?
SP: So, for healthcare, it does vary across the provinces, and it also varies according to what the issue is. Some hospitals rely on their own policies for who they go to. If there is nobody stepping up to say, I have a power of attorney to deal with this individual’s healthcare matters. Some of them look to next of kin, otherwise they can look to their own policies for who they can rely on.
SM: Would most people appoint their spouse as… I don’t know if I’m using the right terminology here. Do you appoint someone as a power of attorney? You said the power of attorney is actually the document. It’s not the person, right?
SP: Yeah. The common expression is, so and so is my attorney for property or for personal care.
SM: Generally, a spouse if there is a spouse on the scene?
SP: Yes, absolutely. Yes. Because typically assets are owned jointly between spouses, and they live in the same house and they’re the closest to that individual. It gets more complicated when you then need to go to the next generation or if you don’t have children to rely on who you can go to from there. So that can be complicated.
SM: Does that also tend to be something that people would only start thinking about once they’re 50 or 60? And is that the wrong approach? Is that something you should be thinking about earlier in life?
SP: Well, I would like to think that when you get your first will, you get your first powers of attorney at the same time. Not everybody does that. As you get older, odds are your health will change and you may need to rely on that document. The fact of the matter is that our population is aging, and they are living longer and longer. So, the fastest growing demographic are the centurions, that’s the age group over 100. So, there are people living longer and longer, but not necessarily under conditions that are ideal because the mind and the body isn’t designed to live a really long time. So, people live through a bit of a gray space where they come to a point where they’re still mentally capable, but they really are struggling with their finances or struggling to make decisions about how they need to work with their doctors and what kind of care they need. And it’s that gray area where people need those powers of attorney ready should they reach a point where they become incapable. Because the longer people are living, and nowadays more and more people are living longer, the odds are you’re going to need that document.
SM: Right. And the need could arise gradually over time or something could happen suddenly where a person very quickly is not able to make those decisions and need someone else to do it.
SP: Yes. An illness, someone could have a stroke. Other times you can find particularly elderly individuals that are just growing older and in the later stages, some individuals just get really tired, and they just need somebody else to take over because they just don’t have the energy to do it. They’re still mentally capable, but they need their financial hand held a little bit. Or somebody working with them with their doctor to make sure that somebody’s advocating for them and speaking for them.
SM: I mean, that’s a positive thing. We’ve been talking about, you know, death and challenging situations at end of life and all that. But there must be something positive and uplifting around the work that you do? You must have had experiences where you’ve really been able to help people prepare for those challenging days ahead.
SP: Oh, it is a very gratifying career to be working in the trust and estates area. You make such a difference for individuals and give them peace of mind that somebody is looking out for them and settling some really challenging issues. This individual always stays in my head. I was a lawyer in private practice before I joined the trust industry and I worked with an individual who didn’t have any family members and was very concerned about her well-being going forward until she passed away. And I was able to work with her for a considerable amount of time to get her affairs organized. And she had quite an estate that she wanted to give to benefit sick children. And so, we put a plan in place and she did end up needing the power of attorney. And we looked after her during that time period. And then she did pass away and we were able to give a really wonderful gift to a hospital that dealt with sick children. And it was very gratifying to know that we had given her that peace of mind. And she was very appreciative.
SM: That’s a lovely story to end on. Sara, thank you so much for coming today. We really appreciate you taking the time. It’s an important subject that I think people don’t talk enough about.
SP: Well, you’re welcome. And it’s been my pleasure.
SM: I’ve been speaking with Sara Plant, Vice President and Managing Director of Scotiatrust and MD Private Trust.