Many of us think of a will as a one-and-done thing, but it’s really not. In our latest episode of Conversations on Wealth, Sarah Widmeyer, SVP and Head of Wealth Strategies chats about will planning with Sean Hsu, Vice President, Tax.
Sean advises that we should be reviewing our wills regularly (at least every 3-5 years) as part of managing our financial health, and addresses these questions:
– What life transitions might trigger the need to look at our will again?
– What should we be looking at when we review our will?
– What should we know when it comes to legislation changes around succession and tax laws?
Sarah Widmeyer 0:16
Welcome to Conversations on Wealth, a podcast dedicated to helping Canadians navigate the complexities of wealth with a multi-dimensional approach to planning and wealth management. I’m Sarah Widmeyer, SVP and Head of Wealth Strategies at Richardson Wealth. And today, we’re talking about a topic many of us avoid. And that’s what will happen to our assets after we’re gone. When we talk about estate planning, we often focus on the backbone of an estate plan–your will. But recent studies show that less than half of Canadians even have one. If you do have a will, when’s the last time you updated it? Many of us look at a will as a one and done document. But it really is a living, breathing document that can and should change as you go through your life. Updating your will is something we keep meaning to do. But then life happens, and we just don’t get around to it–let’s face it, it’s something we probably don’t want to do. But it’s because life happens, and we should review our will regularly. My guest today is going to talk about how often you should revisit your will, and what significant life events and other circumstances may trigger changes to your estate plan. Joining me today is my colleague, Sean Hsu. He is Vice President, Tax and Estate Planning here at Richardson Wealth, and a returning guest to our podcast. Welcome, Sean.
Sean Hsu 1:52
Thank you for having me, Sarah.
Sarah Widmeyer 1:54
It’s my pleasure. So, creating a will is not easy. Most people don’t even want to think about their mortality. And even after we’ve managed to do that, and we’ve sat down and actually drafted it, the thinking might well be "Well, that’s done and dusted, now I don’t have to think about that, again." Talk to us Sean, about why this really is not the case.
Sean Hsu 2:20
Yeah, so the statistic you mentioned earlier, about half of Canadians don’t have wills, so that means at least the other half do have wills, which is a… good thing.
Sarah Widmeyer 2:29
Glass half full,
Sean Hsu 2:31
Yeah…!
Sarah Widmeyer 2:31
or glass half empty (laughs).
Sean Hsu 2:31
Exactly. So of that 50% that do have wills, I saw a research study that was done last year that suggested that 37% of Canadians feel like they have wills that are up to date. So the remaining 13% have wills, but they’re not up to date. And the funny thing is that the results are similar to uh, to the results from five years ago. And
Sarah Widmeyer 2:33
So… (laughs)
Sean Hsu 2:55
over the past five years
Sarah Widmeyer 2:56
So no, nobody did anything.
Sean Hsu 2:58
Yeah, yeah!
Sarah Widmeyer 3:00
(Laughs)
Sean Hsu 2:33
So the past five years, we’ve had a global pandemic, which you would have thought would have spurred more Canadians into reviewing their wills and making changes.
Sarah Widmeyer 2:33
Yeah…
Sean Hsu 3:00
But clearly the statistics show otherwise. So back to the question, updating your will is so important because a will captures life circumstances at a point in time. But as you mentioned, life changes. There are many factors and events that occur throughout your life, that can impact the distribution of your assets that you have outlined in your will. As well, your visions and your mentality on wealth transfer can change over time. How you think wealth should be transferred now may be different than what it was 10 years ago. And so when we think about wealth management, we want to think about risks to wealth. And one risk to wealth is not having an up to date estate plan, because that can lead to unintended distributions on favourable tax consequences, inefficiencies, delays, and, and worst of all, damaged family relationships.
Sarah Widmeyer 4:05
Yeah. So I’m glad you, you talked about that at the end. So throwing a bit of a curveball at you because we’re talking about today, when you should review your will again, assuming that you’ve got one, so that 50%. But taking a beat for a moment, and thinking about the people who are listening, that don’t have a will… maybe let’s just talk about that one more time, because yeah, we don’t want to do it. Like we don’t.
Sean Hsu 4:31
Yeah.
Sarah Widmeyer 4:31
We don’t want to go to the dentist. We don’t want to like. We just don’t.
Sean Hsu 4:35
Yeah.
Sarah Widmeyer 4:36
But we really should because if we don’t what happens, Sean?
Sean Hsu 4:41
Yeah, if we if we don’t even have a will and we pass away our assets are… the distribution of assets are not within our control.
Sarah Widmeyer 4:49
Somebody. So in other words, my language… someone else decides who gets what.
Sean Hsu 4:54
Yeah, the provincial laws decide how your assets are distributed.
Sarah Widmeyer 4:58
Okay, so it’s even worse. It’s the government that decides who gets (what, that’s) worse.
Sean Hsu 5:01
Yeah.
Sarah Widmeyer 5:02
Okay.
Sean Hsu 5:02
So a will gives you control over how you want assets to be distributed. So from my perspective, it provides peace of mind knowing that your affairs are in order, your wishes on how you want your assets to be distributed, or documented, and will be followed by having a will. And so it’s important at the same time to update that will to reflect changes in life circumstances.
Sarah Widmeyer 5:28
Yeah
Sean Hsu 5:28
and financial circumstances.
Sarah Widmeyer 5:30
Yeah. Like I said, I, I think it’s important… We have to review them. We’re going to talk about that, I promise in a second. But just let that sink in. If you don’t have a will, someone else decides who gets what, someone else who, who you don’t know. In fact, it’s the government decides who gets the piano, who gets the diamond ring, who gets the car, who gets like, that should be enough, I hope for those 50 percenters that are listening that don’t have a will…
Sean Hsu 6:02
Yeah
Sarah Widmeyer 6:03
…to, to make an appointment and get something done.
Sean Hsu 6:06
And like you sa–kind of made the analogy of not wanting to go to the dentist or you know, not wanting to do health checkups, even though you should. So to me, health is also financial. So financial health in-includes having an up to date estate plan, so just like you should get regular health checkups, you should also regularly check on your finances.
Sarah Widmeyer 6:28
Yeah.
Sean Hsu 6:28
And part of that is having an up to date estate plan
Sarah Widmeyer 6:31
Right. So getting back to the topic that I lured you in this morning to talk about, is again, back to this. Okay, so the other 50% went and got the will done, they’re thinking, okay, that’s done, checkmark off the list, it’s one and done. But we should be as you’ve been saying, reviewing our wills regularly as part of managing our overall financial health. Common advice is to review your will every three to five years. But are there other life transitions that might trigger the need to look at the will again, even off cycle?
Sean Hsu 7:07
Yeah, I think the common recommendation of every three to five years is because usually there’s enough life changes that have occurred within that time period to–to warrant reviewing your will. And oftentimes wills are drafted in a way that permits some degree of flexibility so that if there are slight changes that occur, those are accounted for, and you don’t need to necessarily go back and, and do a complete rewrite. But like you mentioned, there are, ugh, certain triggers or circumstances that should compel you to do a revisit earlier. One is, is major life changes that involve you or your family members, or the people that you’ve named in your will. So a common example is if you get married or enter into a common law relationship, so it’s…
Sarah Widmeyer 7:56
Or di–or divorce,
Sean Hsu 7:57
or divorced, yeah or you separate.
Sarah Widmeyer 7:59
Yeah.
Sean Hsu 7:59
So for example, in the case of marriage, depending on what province you live in, those laws in that province may say, when you become married, that revokes your prior will.
Sarah Widmeyer 8:10
and revoke means
Sean Hsu 8:12
means your will that you have in place is, is, is no longer effective
Sarah Widmeyer 8:15
Right.
Sean Hsu 8:15
It’s no longer valid
Sarah Widmeyer 8:16
Right.
Sean Hsu 8:17
So once you become married, if you don’t update, and review your will and know that it needs to be updated, we fall into the situation that we talked about earlier, where it’s as if you died without a will.
Sarah Widmeyer 8:28
Right.
Sean Hsu 8:28
Uh, so now the–your new spouse and the people that you originally intended on benefiting that you may still want to benefit, you no longer have control over because you forgot to update your will, and you live in a province where marriage revokes a will. So it’s important to review your will and not when that life event occurs. Same with common law relationships. So in some provinces, common law relationships are not acknowledged at all. So a common law partner may not have any rights to the estate
Sarah Widmeyer 8:59
Wow.
Sean Hsu 8:59
if you don’t update your will to include them. And that’s different from, from spouses, uh ma–legally married spouses.
Sarah Widmeyer 9:06
Yeah.
Sean Hsu 9:07
And so it’s important to review your will when you enter into a common law relationship if you want that individual to, to be able to benefit and be taken care of when you pass away.
Sarah Widmeyer 9:17
Right.
Sean Hsu 9:18
Death, of course, is a major life event as well, that should prompt you to think about updating your will if your spouse or common law partner passes away. Something that I’m thinking about recently is um, I’m thinking about getting a pet. And so when it comes time to update my will and I get a pet then I should be thinking about how if I get a pet, how do I want my pet to be taken care of
Sarah Widmeyer 9:43
Yeah.
Sean Hsu 9:43
if something happens to me?
Sarah Widmeyer 9:44
Yeah.
Sean Hsu 9:44
Is there a specific individual that I want to become the guardian of my pet? Should I give them a fund? So…
Sarah Widmeyer 9:51
So responsible.
Sean Hsu 9:52
(Laughs)
Sarah Widmeyer 9:53
I’m so happy to hear that.
Sean Hsu 9:55
Yeah, well, the risk is–
Sarah Widmeyer 9:56
They’re babies!
Sean Hsu 9:56
Yeah, if you, if you have, if you get a fur baby and you don’t account for them in your will, then they could end up in the wrong hands with the wrong person,
Sarah Widmeyer 10:04
Yeah.
Sean Hsu 10:04
Or even abandoned.
Sarah Widmeyer 10:05
Yeah. Yeah. Yeah.
Sean Hsu 10:05
So, uh, that’s a life event that could prompt a need to review your will as well.
Sarah Widmeyer 10:11
Yeah.
Sean Hsu 10:11
And also thinking about other people, like your executor or your beneficiaries, what life changes have occurred in their circumstances. So have they moved away? Have they become ill? Are they too old? Have you fallen out of favour with them? All those changes to other individuals should also spur you to think about reviewing your will.
Sarah Widmeyer 10:33
Yeah. So you’re kind of touching on the next question that I would have for you, which is, could you talk to us about considerations or things you should be thinking about when you consider beneficiary designations or guardians or executor appointments? Or for sure, in addition to financial or tax planning issues?
Sean Hsu 10:54
Yeah. So when it comes time to reviewing your will, there’s, there’s so many things that you could update. And so I think as a start, it’s helpful to understand your position, right now what assets liabilities you have, what you own, what the values of those assets and liabilities are, and then understanding as well what your current will and estate plan says, with respect to how those assets would be distributed. And from there, you can start to identify gaps or changes that you want to make. So a–one item you mentioned is uh, executor appointments.
Sarah Widmeyer 11:33
Mmhmm
Sean Hsu 11:34
So executor appointments are often one of the most important decisions you have to make when you’re creating a will or updating it because that individual or (those) individuals are responsible for administering your estate.
Sarah Widmeyer 11:48
So you must pick an executor?
Sean Hsu 11:50
Yeah. So, so when you decide on who should be executor, there’s lots of factors you can, you should think about… their age, their skillset, right, estates are getting more and more complex. So they need to have the skill set to be able to manage that complexity, their availability, people have lives of their own, families of their own, are they available to take on this task, where they live, their ability to relate with the beneficiaries? So all these factors should be considered, and if you feel like the executor that you’ve named right now is not appropriate, given those various factors, then it’s worth thinking about choosing somebody else.
Sarah Widmeyer 12:32
Right.
Sean Hsu 12:33
So we often see circumstances where you know, you name your parents as executors, but if everyone lives a long, healthy life, when the time comes, your parent is probably not available, or unable to–
Sarah Widmeyer 12:47
Yeah.
Sean Hsu 12:47
take on this task.
Sarah Widmeyer 12:48
Yeah.
Sean Hsu 12:49
So…
Sarah Widmeyer 12:50
We should do a conversation, not today, but we should do another conversation about executorship.
Sean Hsu 12:55
Yeah.
Sarah Widmeyer 12:55
Because it, it’s, you know, it’s something that I’m personally living through right now. My mom passed a year ago now that ended in November of ’22. And my brother and I are executors on the estate and we’re still working our way through it.
Sean Hsu 13:11
Yeah.
Sarah Widmeyer 13:11
And it was a very, very simple estate. And so we–we you know, when you talk about the skill level, and the complexities of settling an estate, and the time that it takes, it’s a big thing you’re actually asking somebody to do. And so picking an executor wisely, and actually, the executor going in with eyes wide open in terms of what they’re taking on…
Sean Hsu 13:35
Yeah,
Sarah Widmeyer 13:35
…I think is worth a whole nother podcast. So we’re gonna bring you back for that one Sean.
Sean Hsu 13:39
Yeah, it’s a very thankless job. And I find clients more and more thinking about appointing third parties to be
Sarah Widmeyer 13:48
Yeah.
Sean Hsu 13:48
executors rather than family members
Sarah Widmeyer 13:50
Yeah
Sean Hsu 13:50
or relatives.
Sarah Widmeyer 13:51
Yeah.
Sean Hsu 13:51
Because things are getting more complex. People’s lives are busy.
Sarah Widmeyer 13:54
Yeah.
Sean Hsu 13:54
Push it on to a third party
Sarah Widmeyer 13:56
Yeah
Sean Hsu 13:56
who do this day in and day out.
Sarah Widmeyer 13:58
Right. And get it settled more quickly.
Sean Hsu 13:59
Yeah.
Sarah Widmeyer 14:00
So moving on that I want to ask you about things outside our control, like legislation around succession and tax laws. You know, one thing you can count on for sure is that the rules are changing. They change all the time.
Sean Hsu 14:14
Yeah.
Sarah Widmeyer 14:14
What do we need to know? What do we need to consider?
Sean Hsu 14:16
Yeah, so succession laws that apply to you can change, and so it’s important to review our will in those circumstances to make sure we comply with any relevant laws. And so that reduces the risk of conflict or what we want to avoid with estate planning is litigation. And so making sure we’re complying with the laws is important to reduce that risk. So a circumstance where we would need to review our wills if we move to a different province, so succession laws vary from province to province. So certain planning strategies that work in one province don’t work or aren’t valid in another province. So whenever you move to a new province, it’s important to review your will and make appropriate changes to account for the new province’s legislation.
Sarah Widmeyer 15:06
Yeah, so it’s not where the will was drafted, it’s where you reside. Where you–
Sean Hsu 15:10
Where you–yeah.
Sarah Widmeyer 15:10
Yeah.
Sean Hsu 15:11
And same with tax laws. So tax laws, of course, are constantly changing. And so planning strategies that you have–may have incorporated in your current estate plan may no longer work. Now, in light of new tax changes, or there may be new strategies that may become available, that aren’t accounted for in your current will, so one example of this is back in 2016, the government introduced what are called qualified disability trusts.
Sarah Widmeyer 15:40
Mmhmm.
Sean Hsu 15:40
So these are trusts that you can set up in your will, for the benefit of a beneficiary that qualifies for the disability tax credit. And so the tax benefit of having a disability–a qualified disability trust, is that any income earned in this trust for this disabled beneficiary that’s not paid out to them can benefit from graduated tax rates. And so if you are in a situation where you have a beneficiary that’s disabled, reviewing your will is a good opportunity to determine whether or not establishing a qualified disability trust is appropriate from a tax planning perspective.
Sarah Widmeyer 16:21
Yeah. And so just thinking about our listeners for a sec, so when you say graduated tax rate, what you mean, is that those people that that have a qualified disability trust may in fact, pay less tax
Sean Hsu 16:36
Yes.
Sarah Widmeyer 16:36
than an able bodied person
Sean Hsu 16:38
Right.
Sarah Widmeyer 16:39
Yeah.
Sean Hsu 16:39
Right.
Sarah Widmeyer 16:40
So this is the, the key planning consideration.
Sean Hsu 16:43
Yeah. And it requires updates to your wills, if uh, your will did not account for that planning already.
Sarah Widmeyer 16:48
Right. So let’s talk about then, financial planning. So having a financial plan is important for so many reasons. And, you know, we just surfaced one of them. How can having one and working with your advisor help provide clarity on important issues to consider when reviewing our will.
Sean Hsu 17:07
So, going through a financial plan is a great exercise because it forces you basically to organize and collect and understand what you have in place right now. So it provides a comprehensive overview of your assets, liabilities, their values, and so you can tie that in with your current estate plan and your will, and you can understand how your assets would be distributed, if something were to happen to you under the current plan. And that then leads to the ability to identify gaps or things that may have made sense back then, but now no longer makes sense given your changing financial position and, and your attitudes and, and your intentions. A financial plan can also provide you with insight on how your wealth can evolve over time. And that may lead you to start thinking more about your other legacy goals and, and preferences. So that could be maybe incorporating more charitable giving…
Sarah Widmeyer 18:09
Mmmhmm.
Sean Hsu 18:09
now that you’re in a more–in a better financial position than you were before.
Sarah Widmeyer 18:13
Mmmhmm.
Sean Hsu 18:14
A financial plan, as we talked about earlier can also help you with assessing what tax liability we–your estate could be subject to
Sarah Widmeyer 18:22
Mmmhmm.
Sean Hsu 18:23
And so we want to of course minimize tax liabilities and enhance what’s available for the beneficiaries. So going through a financial planning exercise can identify that liability and, and find ways to maybe plan around or minimize that tax liability. And going back to what you mentioned at the beginning, a financial plan just like a will is a living document it’s not one and done so as your financial circumstances as your goals and objectives evolve, so can your financial plan and that can also tie in with your will and you can work together to–as you update your financial plan look at what gaps there are in your estate plan in your will and make changes to constantly ensure that your objectives and your wishes continue to align.
Sarah Widmeyer 19:12
Right
Bottom line me summing, my language, uh not your highly educated, knowledgeable–language, to the 50 percenters that don’t have a will please go get a will. You don’t want the government deciding who gets what.
Sean Hsu 19:40
Yeah.
Sarah Widmeyer 19:41
It’s certainly not something I would want. To the 50% that do have a will, things change. Perspectives change. People’s lives change including executors lives’
Sean Hsu 19:51
Yeah
Sarah Widmeyer 19:51
change. Pick wisely, review that will, and so now I’m starting to eat into your last thoughts, but those are kind of what I heard and I thought it you know from um, a less educated person on this topic, it would be good for me to express that in my language, but any other thoughts that you would add?
Sean Hsu 20:08
No, I think you summed it up very well, for our listeners, it’s going again, back to that analogy of health, and–
Sarah Widmeyer 20:17
Health. Yeah.
Sean Hsu 20:18
Yeah. So health is not just physical and, and mental health and you know, getting regular checkups from that perspective, but it’s also your financial health. And so financial planning, creating a will, updating your will, that’s all important to ensure that you are financially healthy, and that your wishes are fulfilled.
Sarah Widmeyer 20:39
Right. Well done. So, Sean, I’d like to thank you so much for joining us today. This is a topic that’s so important, so fundamental to Canadians. And I’m, I’m thrilled that you were able to come and join us today to share your expertise around will planning and other factors that might necessitate us looking at our, our estate plan on a regular basis. It’s hard to think about mortality, but having a will in place and updating it regularly is the only way that we can ensure our wishes are carried out and our legacy continues the way we want it to and our loved ones are protected. And of course, you’re not alone. We’re here to help you navigate the nuances of estate planning, and walk you through the process from start to finish. Conversations on Wealth is available wherever you get your podcasts. Remember to follow us on LinkedIn or Facebook for the latest on Wealth Strategies. Thank you all for listening today. And join me again next time.
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