A few years ago, Vancouver advisor Andrew Hoffman, a vice-president at Leith Wheeler Investment Counsel, had a client facing an unpleasant family problem.
The client had one living parent who was experiencing severe mental deterioration—so much so that B.C.’s public guardian had been brought in to oversee affairs because there was no power of attorney.
Eventually, the parent died, leaving no will. Under B.C. law, a court oversees the division of such estates according to a pre-set formula, which may not have been what the deceased parent wanted for the children—in this case, Hoffman’s client and a sibling.
And there was a hitch, recalls Hoffman. The sibling had borrowed “a sizable amount of money” from the parent in previous years, but there were no papers documenting those loans.
So when the public trustee divided the assets, the client was shortchanged by more than $100,000. “If that was me,” Hoffman adds, “the dollar figure is not as important as the equitableness of the situation.”
Considering the large numbers of Canadians who die intestate, Hoffman is surprised such situations don’t come up more often in wealth management practices like his. But when they do, advisors may find themselves drawn into the muck of family politics.
“Money corrupts families,” says Hoffman, adding advisors should make it a practice to not just push clients to draw up wills, but also ask if their aging parents have done their own estate planning.
Having a will insulates clients
Not true. If the will’s improperly drawn up, or isn’t updated to reflect changing family or financial circumstances, it can cause just as many problems as intestacy.
To that end, Dave Lougheed, a Calgary-based investment advisor with Macquarie Private Wealth, encourages his clients to talk to their aging parents about a positive inheritance scenario—for example, bequeathing money to their favourite charities or having their cottage stay within the family—as a means of encouraging them to do their estate planning.
The goal, he says, is giving the parent “a vision of what life can look like afterwards.”
The alternative courts disaster. The financial problems associated with intestacy begin almost immediately: all accounts are frozen, so family members may have to pay bills or cover funeral expenses out of their own accounts until an administrator or executor is named.
Since provincial estate laws closely regulate the process of carving up the estate, advisors often say they’ll bring in lawyers early on to provide guidance.
A key step: knowing what you don’t know, and then ensuring the firm maintains a stable of strong referral partnerships with those who do. “The investment advisor has a limited role because a lot of it is happening outside our sphere of competence,” says Hoffman.
Advisor Ted Polci, a partner at First York Insurance in Toronto, agrees. “If a [difficult] situation comes up, I don’t want someone who does 10 to 20 wills a year. I want someone who specializes in wills and estates.”