life-insurance-policy

David Bassett’s client recently wondered about his adult son’s motives.

The man lived in a retirement home and told Bassett, a vice-president with Macquarie Private Wealth in Vancouver, B.C., he thought his only child was after his money.

Most advisors have had clients hint something’s amiss in their families, so much so that the problems could result in a change in beneficiary designations.

So when Bassett’s client began complaining about his son’s influence over his private affairs, he thought it could have been a sign the man wanted to change his will.

As Bassett probed, however, it became apparent the elder man’s suspicions were unfounded. The son had considerably more money than his father, and nothing in the transaction records indicated Bassett’s client had been transferring cash. “All evidence suggested that dad was delusional on that issue.”

Still, proactive advisors listen closely for clues—complaints about adult children, expressions of profuse admiration for a caregiver, passing mention of a new flame—that clients are gearing up to change the beneficiaries on wills, insurance policies, RRSPs and other elements of an estate plan.

Warning

Document unusual client behaviour, and if it persists, you may want to broach the topic of incapacity with the client’s family.

But how should they act on that information?

Some experts take a strict legal view. Aside from handling the mechanics, beneficiary choices “are none of the advisor’s business,” says Elaine Blades, a TEP with Scotia Private Client Group. “Some clients change beneficiaries all the time. People are entitled to do that.”

That said, she says a request to change beneficiaries may raise concerns about the client’s capacity or undue influence if there’s also other evidence.

Wealth management professionals should heed the signs and make sure clients understand the repercussions of shuffling the deck. What’s more, advisors can ask whether anything else is going on besides family dynamics—for example, someone pressuring the client to alter an inheritance plan for fraudulent purposes. While only doctors and lawyers can make formal determinations about capacity or undue influence, advisors may be first to pick up on problems.

Discover motivations

“The first question will be why,” observes David Shlagbaum, a partner at Robins Appleby & Taub LLP in Toronto.

Advisors should know the state of the relationships with adult children, other relatives and spouses, and how those dynamics play into the estate plan, Shlagbaum points out.

He adds advisors should explain the potentially cascading impact on an overall plan, including potential for lingering tensions among the next generation. He uses the example of a company owner with two adult children: one who wants to run the business, and one who doesn’t.

The parent may opt to give the child in the business all the shares of the corporation, and then bequeath to the other child the equivalent value in other assets. Doing so avoids the potential complication of joint ownership when one child has nothing to do with the company.

If the parent decides to exclude one child from the will, Shlagbaum says, that child may try to go to court to seek redress. So the decision to disinherit, in this case, could lead directly to a court fight.

And, sometimes straightforward fixes aren’t actually straightforward.

A client may come in and say all she wants to do is draw up a codicil to augment an existing will. But codicils are for making quick adjustments to a will, and if the estate owner decides to make significant alterations, a new will is required.

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