Top five estate planning mistakes
By AdvocateDaily.com Staff
With almost a decade of experience behind him, Toronto litigator Matthew Urback has seen it all when it comes to estate plans.
1. Not having one
“It’s kind of self-evident, but by far and away the worst thing you can do is not to have an estate plan or a will,” Urback says. “Essentially what you are doing is abandoning your right to decide what happens to your property after you die, and putting it into the hands of others.”
Although Ontario’s Succession Law Reform Act (SLRA) determines the distribution of an estate when a person dies without a will, Urback points out that its strict rules take no account of the individual’s unique situation or desires.
2. Choosing the wrong estate trustee
Administering a will is not for the faint of heart, according to Urback, who explains that the job of trustee is harder than it sounds.
While most people pick a close family member by default, he suggests testators put a bit more thought into the choice.
“People close to you might not have the financial savviness needed for the task,” Urback says. “There are pros and cons to picking a trusted person who you have a close relationship with, as opposed to a professional trust company.”
Either way, he says selecting an alternate is good practice.
“It’s helpful to have a backup option in case your first choice can’t or won’t act,” Urback says.
In addition, he says testators who pick multiple trustees could be setting themselves up for trouble.
“You need to account for disputes between the trustees, and an odd number is better so that they can break deadlocks,” Urback says.
3. Never updating
“People like to do a will, and then put it in the drawer and forget about it,” says Urback.
But establishing an estate plan is rarely a one-time event, he warns. And while wills gather dust, lives are being lived, and circumstances are changing.
“What may have been appropriate at one point in time may not work at a later date,” he says. “Things can change in all kinds of ways, and your will should be updated to reflect those changes.”
“It’s almost always worth seeking professional advice instead of using will kits or attempting to do tax planning on your own,” says Urback, noting that many laypeople fall afoul of technicalities hidden in the law.
For example, he says many people are tempted to avoid probate fees by adding the intended beneficiary of property to title. While the transfer of the house will bypass the estate via right of survivorship, there may be a considerable capital gains tax liability, Urback says.
“Every act has a fallout, and it’s important to understand those before making any decisions,” he says.
5. Ignoring human nature
Whenever a story about an ugly estate fight engulfing the friends and family of a prominent person makes the news, Urback says most people have an understandable reaction to it.
“The thought is that this could never happen to my family and me,” he says. “People don’t like to consider that their loved ones will argue and fight, but the sad thing is that nobody is above it. There’s often no rhyme or reason to the types of people it happens to.”
Urback says testators who wish to minimize the chances of a spat over their estate should communicate openly with intended beneficiaries.
“If you’re treating your children unequally in the will, you might want to explain why, either in the will or in person, even if it means some uncomfortable conversations,” he says.