While most adult Canadians acknowledge the need to prepare for the transfer of their wealth to the next generation, there is merit in preparing for the transfer of wealth from the prior generation. Both the parent and child can benefit from engagement in a discussion about how, when and why the wealth is going to be transferred.
Let’s assume your clients agree that a comprehensive, integrated estate plan that contemplates possible future incapacity is important. Assume further that they understand it’s important to review that plan regularly to ensure it continues to meet their needs and wishes.
Perceptive clients may then ask whether they should share the contents of their will or larger estate plan with their beneficiaries, generally their children. (There are, of course, many other possible beneficiaries — friends, family members other than children, charities — but the discussion in this article is most relevant when adult children are the intended heirs.)
There is no one right answer to that question. Legally, the testator is not obligated to divulge the contents of his or her will to beneficiaries — or anyone else, for that matter, including the executor.
While it may be imprudent not to do so, the testator isn’t even required to consult the person and/or trust company they’ve named as executor before appointing them. The same holds true with guardians — no need to seek their permission before naming them to such an important role. Of course, failure to consult or seek pre-approval of the appointment may result in the party declining the appointment when the time comes.
Not only is there no obligation for a client to let his children know what the will says, many estate practitioners would argue against letting them know.
A will has no force or effect until the testator’s death. So long as the client retains the requisite legal capacity, he is, with certain limited exceptions, free to change his will whenever he wants. This is a strong argument in favour of keeping the contents of the current incarnation of a will private.
Moreover, in our experience, many parents are rightly concerned with the potentially de-motivating effect inherent in the promise of a large inheritance. What happens to the incentive to work hard when you know you’re in line for a substantial windfall down the road?
There is debate in the estate- planning community as to whether sharing one’s estate plan with beneficiaries should be considered a standard best practice. Notwithstanding such dissensus, there are a few situations where disclosure is always in order. Three general situations come to mind:
- where the inheritance comes with obligations attached;
- where the plan has the potential to cause discomfort or tension among the beneficiaries; and
- where some prep work on the part of the beneficiaries may be warranted.
The gift that keeps on giving…
The family cottage and the family business are two assets which should not be bequeathed in a vacuum. These assets entail both rights and obligations. Moreover, family dynamics being what they are, an equal distribution will seldom be the fairest distribution. As such, the succession of these particular assets falls squarely into the first category and may also stray into the second and third.
The succession of the family cottage plays a starring role in a great many estate litigation files. Failure on the part of the parents to realistically explore the options with all interested parties is often to blame. At a minimum, you should ask your client to address the following questions:
- Are any or all children interested in owning the cottage?
- Are any or all children in a position to shoulder the costs and other obligations inherent in ownership?
- Is co-ownership truly realistic?