The financial industry often uses jargon that is clear to people who work in the industry, but not necessarily easy to understand for outsiders. The term “estate planning”, however, is one that I’ve never really understood. It seems that different people in the same industry use it differently. Whereas financial planners usually mean “planning for your heirs,” insurance salespeople use the term to mean “buy more insurance”. I am reminded of the saying, “to a man with a hammer, everything is a nail.” Salespeople who are only licenced to sell insurance seem to be able to solve every problem with insurance.

A client, the middle-aged father of a family,  recently passed away. Insurance  played a beneficial role in helping his family, as well as other actions we took to ease the transition. When he was diagnosed with cancer a few years ago, he knew that he wouldn’t live long. None of us live forever, so it’s useful to, like him, plan to take care of our loved ones. Prior to becoming ill, he had put in place two types of insurance, both through his employer. Disability insurance provided an income for him during the years he couldn’t work. I believe that he honestly wanted to work and to feel that he was a productive member of his family, but his health prevented him. The disability income was adequate to support his family during those years. We met about two years ago to discuss how he could best provide for his family after his death. By then it was too late to apply for life insurance, since he’d been diagnosed with cancer a couple years prior. His employer offered one or two times salary, but that wouldn’t be enough to provide an income for his family for more than two years. Depending on debt, around ten times salary would be more appropriate.

Once their finances were in order, as much as possible, he wanted to make sure that his wife could handle the accounts. The first thing we did was to set up joint ownership of the investment accounts (that we could). They also completed a full power of attorney, allowing her full control over his accounts. This way, she could place trades and move money in or out even if he wasn’t able to give instructions or sign forms. I suggested they do the same with their bank accounts.

Then I stressed the importance of a will. There are laws that dictate what will happen if a person dies without a will, which may not be what you expect. It’s much easier to lay out what your wishes are, even if it’s only written out by hand, dated and signed. Ideally a lawyer would help draft it, to ensure everything is clear and complete, but not everyone has a complex situation or the ability to pay.

Even though we had prepared, this client’s passing came as a surprise. Even so, his wife and I had a working relationship of trust, so that she knew who to turn to for help with their finances. She knew where all the insurance was (through work) and was able to use that money to get through an emotionally difficult time without adding financial worries. She knew the will would help her move the assets from his accounts to hers and the children’s. And now I will work with her to make the insurance money go as far as possible. Finally, it’s nice to know that they can expect about $1000 per month from CPP survivor benefits to supplement their resources.

Death is not a pleasant topic to contemplate. It happens to each of us, and we can make the transition easier by planning ahead. There should be enough insurance to avoid financial hardship, the surviving spouse should know where all the insurance, bank accounts and investments are and have control of all of them. Having a will ensures that the transition is as smooth as possible. They should also have enough knowledge to either manage the remaining family’s affairs or to work with an advisor who can help them. These relatively simple steps will help minimise the turmoil of an already emotional event.

Estate Planning

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