The Importance of Estate Planning - Easing confusion for families following the death of a loved one. May 25, 2023

Although death is a reality for everybody, many families coming to a funeral home have little knowledge regarding estate planning. As experts in the field of death care, funeral directors need to know all the answers to their many questions or at least be able to point them in the right direction.

Surprisingly, it is still common for a loved one to pass away without a will. Even when families have written wills, they are often not structured in a way to avoid confusion and tax implications. Although this can lead to many complications and delays, estate specialists at banks, trust companies and investment firms can help decrease the burden as well as reduce the amount of money leaving the estate for tax purposes.

Even if families have never before consulted with an investment specialist, it is not too late to make an appointment. Shafik Hirani, managing director of Investors Group, says he meets on average with four to six families per month inquiring specifically for assistance with estate matters. Investors Group currently manages approximately $80 billion for about two million clients across Canada. They specialize in retirement, estate and tax planning.

“It is very confusing when there is a death in the family,” says Hirani, who joined Investors Group in 1995. “When someone passes away, depending on the size of the estate, 80 to 90 per cent of the time the wills aren’t structured properly and people don’t know where to go for help.”

Hirani says there are a number of common questions that arise as well as challenges that families need to work through. These usually include:

  • How do I get the estate through probate?
  • What goes through probate and what does not go through probate?
  • How do I get a notarized copy of the death certificate?
  • How do I get the will notarized?
  • Where do I find an estate planning lawyer?
  • What happens if the executor declines to be the executor?
  • What happens if there is no executor?

“The majority of people who call for estate planning are not clients,” says Hirani. “Somebody has passed away and they need direction on what to do. We can help them with some of the issues and will refer them to a lawyer for legal issues.”

Hirani explains that Investors Group can assist families with the investment side of the estate including the distribution of benefits and the transfer of funds. As the majority of this responsibility falls on the executor of the will, Hirani says they work closely with the executor and provide a checklist of responsibilities that need to be undertaken on behalf of the deceased. This checklist is quite in depth – three pages – and includes such things as planning the funeral, arranging living expenses for the widow or dependent family members and contacting employers, Veterans Affairs and pension plan administrators.

Pamela Hauck, financial consultant with Scotia Private Client Group, says pre-planning helps alleviate stress but unfortunately many families do not meet with estate planners until following the death of a loved one.

“Part of our planning is centred around will and estate planning and having the generation of families together and looking at their wishes or goals for the family. This could be establishing a memorandum outlining specific items to be passed on, setting up a trust for minor children or disabled beneficiaries, charity giving or other tax planning issues and even thoughts about funeral arrangements. In essence doing a valid and current will, personal directive and power of attorney,” says Hauck. “So we encourage all of our clients to plan ahead of time. But a lot of the time what we are seeing is that there are a lot of elderly individuals that are passing on that haven’t gone through that exercise so then it’s a matter of helping their family.”

If the deceased person has a will, Hauck says the next step is to assist with administering the will as per their wishes and transferring their wealth. She says it is important to do this in a tax efficient manner but that is hard to do after a death if the will has not been set up properly in the first place.

Both Hirani and Hauck explain that settling an estate is time consuming and families that try to do it themselves can run into a number of stumbling blocks. In addition to attending to personal matters, Hirani says an executor has to locate all bank accounts. A new bank account will likely have to be opened in the estate’s name to pay the debts of the estate and all other accounts closed. An inventory of all debts and assets will also have to be taken and such things as jewelry, stock certificates and other valuables stored securely. If there are bonds, stocks or business assets, all the components will have to be dealt with appropriately.

“Many people don’t understand that they can get into trouble and can overpay the amount of taxes by not distributing the assets in the most efficient tax manner,” explains Hirani.

But what if an executor is unable or unwilling to serve in this manner? Hauck says the best choice for the family then is to acquire the assistance of a professional to help elevate the burden from the executor and the family.

“At the time of their passing what we like to encourage is for the family members to consider having a corporate executor, like a trust company, or someone that’s a professional, to help administer the estate because they’re grieving and they’re having to deal with the funeral and the whole family dynamics,” says Hauck. “In our view it doesn’t matter if it’s a very complex estate with assets outside the country or private companies, we just feel that it helps the harmony of the family to have a professional do it and also expedites the whole procedure.”

With professional assistance it takes approximately 18 months to settle an estate. However, for family members taking on the task themselves, this time period can easily be stretched to over two years.

“There’s also permanency with a trust company,” says Hauck. “Sometimes when you appoint a family member or even an adviser such as a lawyer, there’s always the issue that they may pass on before you or that they may have other burdens in their life that it becomes hard or challenging for them to put the time and energy into it.… And if the executor doesn’t know where to start or they just don’t want the burden, they can appoint a trust company as agent. The executor still has the final decision on everything that’s done but the trust company does the legwork.”

If an executor declines to fulfil their duties and there is no alternate appointed in the will, Hauck says provincial law would determine who would complete the administration of the estate. Sometimes the person with the right to apply under those circumstances would not have been someone the family or deceased would have otherwise chosen. This would also be the case if there is no will at the time of death.

Hauck also adds that a trust company can also assist with the area of probate which varies between the provinces. For example, in Alberta, the probate fee is only $400 regardless of the size of the estate. However, in other provinces such as British Columbia and Ontario, probate is based on a percentage of the estate and can become quite costly.

“That is when planning really become a larger part prior to death,” says Hauck. “Looking at moving the assets into trust, doing joint ownership, assigning beneficiaries to life insurance policies and RRSPs, and that sort of thing.”

Although pre-planning is not possible for many families arriving at the funeral home following the death of a loved one, funeral directors can still point them in the right direction. And through the process, the remaining generations might realize the importance of pre-planning and therefore reduce the stress on family members left behind.