Practice Management

The NEW Estate Planning: Turning Client Values into YOUR Value

When a client’s loved one passes away, it can be challenging to triangulate all the relevant changes in family and tax law, probate law, and Powers of Attorney – especially after the fact. To prevent leakages in your book that come from being underprepared, Lesley Cameron, BMO’s National Director of Estate Planning, provides tips, best practices and checklists for making estate planning a differentiator in your practice.
July 2019

Lesley Cameron

Vice President, National Director of Estate Planning at BMO Wealth Planning

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When a client’s loved one passes away, it can be challenging to triangulate all the relevant changes in family and tax law, probate law, and Powers of Attorney – especially after the fact. To prevent leakages in your book that come from being underprepared, Lesley Cameron, BMO’s National Director of Estate Planning, provides tips, best practices and checklists for making estate planning a differentiator in your practice.

 

Early is Right On-Time

In my specialized role, I come across all types of estate planning scenarios – ones where the Advisors plan ahead to account for death or incapacity, and others where a crisis propels a team into action. While there can be reasonable differences of style, it’s clear that waiting for an emergency could leave yourself vulnerable to significant risks that may have clients questioning your value add.

For example, one Advisor recently told me about an aging client that had invested heavily in complex real estate holdings. When the client died, the properties passed to various business partners by virtue of how the assets had been registered, rather than to the next of kin through her estate. Because the client had not taken the time to review the ownership and create foundational documents – e.g. wills, insurance policies, shareholders’ agreements – to deal with how these specific assets would be dealt with, surviving family members were not left with adequate means, and had to resort to litigation to recompense their losses.

The fact is effective estate planning cannot be achieved via a piecemeal approach. Similar to the growing acknowledgement of what holistic wealth planning can do for clients, there is a recognition that Advisors can’t simply assign beneficiaries in an ad-hoc manner – one to this holding, another to that – but must pull together all threads of a client’s estate, in order to ensure a smooth and predictable transition.

Two-thirds of children switch Advisors after receiving an inheritance.

The Great Wealth Transfer

Demographic change is another force that’s transforming estate planning from “staid and old” to “bold and dynamic.”

As the Baby Boomer generation passes on a historic amount of wealth (approx. CA$750 billion) to their children, Advisors are under pressure to keep those assets locked within their book. This is especially true – and challenging – given the reality that 66% of children fire their parents’ Advisors after receiving their inheritance.

A proactive approach can help mitigate the risks of asset leak, by putting you in conversations with the WHOLE family. With the permission of your client, you can get to know the executor and the beneficiaries on a personal level through individual meetings, and hear their questions, concerns, hopes, dreams, and financial needs. You can help to anticipate potential disputes, share relevant facts and figures where appropriate, and propose solutions that balance everyone’s needs. You can forge a sincere relationship with the next generation – so that when the time comes for them to inherit, you’re more likely to retain their business.

Non-monetary items are more likely to hold up the process than cash or other financial assets.

The First Step

How can you prepare for the upcoming Boomer-to-Millennial wealth transfer? The first step occurs in the financial planning phase, when you are having an earnest discussion about the client’s circumstances. At this point, it’s important to keep an open ear for special conditions that warrant closer estate planning consideration – e.g., scenarios involving blended families, loved ones with special needs, or assets spread across multiple jurisdictions. Factors that an Advisor might not beware of – unless they take a deeper dive – may surface when retirement planning, and change the complexion of the conversation to take on more urgency.

Next, consider the emotional significance of who gets what. Clients typically have an underpinning logic to how money is divided, yet there can be disharmony when one inheritance is larger than another – not necessarily because of the financial impact, but because it can be interpreted as favouritism. Having worked with families for decades, I can tell you that even when children reach their 40s, 50s or 60s, they still tell siblings, “I knew Dad loved you best.” It can be helpful to have your lead client explain the proposed division beforehand, to minimize any potential surprises or misperceptions that may emerge in the reading of the will.

Items with emotional significance can also be problematic. The consensus opinion of estate lawyers I deal with is that non-monetary items are more likely to hold up the process than cash or other financial assets, owing to the difficulty of evaluating sentimental value and negotiating its ownership. The earlier these considerations are taken into account, the better.

Client Conversations That Add Value

Here’s a fresh take for some: Anyone who’s over the age of majority and has assets in their own name – either jointly or as individuals – should consider estate planning. While the need can sound very far down the road, especially for young professionals, some components are best initiated at an early age. For example, some clients are surprised to learn that opening a joint account may create an inherent right of survivorship – meaning the entire account will go to the other account holders (except in Quebec). But is that what they truly want? Simply getting them to think about the consequences of smaller decisions can lead to a more comprehensive plan, and by extension, one that better serves their long-term financial needs.

One example that comes to mind is a married couple in Atlantic Canada. They had no children, and so while contemplating what to do with their wealth, the Advisor had the foresight to bring in experts to discuss estate planning, tax strategies and charitable giving. Normally, the couple would have delayed the creation of a will and wealth transfer plan for their later years, but the complexity of their holdings warranted immediate action. Unfortunately, within months the husband was diagnosed with a terminal illness. Although he passed quickly, his spouse called to thank the Advisor for having put the plan in place – particularly for bringing such important issues to their attention and guiding them through the process. When the difficult moment arrived, she had peace of mind about her financial future while coping with grief and personal loss.

CLIENT CONVERSATION CHECKLIST

Family Dynamics

  • Extended/blended families
  • Beneficiaries with special needs
  • Caring for parent or sibling
  • Pets

Practical Matters

  • Choice of executor
  • Tax strategies

Personal Wishes

  • Digital assets/online legacies
  • Non-financial legacies and philanthropy

For a deeper dive on estate planning, see our online support materials, including: tools & resources, podcasts, tips on how to navigate complex family dynamics, blueprints for setting up trusts and working with an executor, information on probate fees and taxes, and more.

To schedule an in-branch presentation on estate planning, life transitions or working with female clients, contact your BMO Global Asset Management Regional Sales Representative.

For further reading, see our past Insights articles:

BMO Global Asset Management Disclosures:

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO’s specialized investment management firms.

®/™ Registered trade-marks/trade-mark of Bank of Montreal, used under licence.

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