Estate planning for Martian pioneers

More than 60 Canadians have applied for a one-way ticket to Mars. They’re vying for four spots on a global mission to colonize the planet in 2023, courtesy of non-profit organization Mars One.

While pioneer wannabes may be dreaming of planet hopping and founding a new world, advisors should bring them down to Earth and ask what will happen to the estates they leave behind.

Read: Brit to make first trade in Space

“If clients are leaving the country permanently, they probably need to have a disposition of their assets,” says David Wm. Brown, life insurance professional with Al G. Brown & Associates.

That’s because if Canada Revenue Agency knows clients will never return, it will probably try to get asset taxes upfront. So help clients take inventory of their belongings.

“Do they own property they would have to pay tax on? That’s number one,” says Brown. Then, “If they have RRSPs, there’s [no] treaty with Mars at this time to deal with those tax issues.”

(Canada has a treaty with the U.S., though, so when clients immigrate they don’t have to de-register RRSPs.)

Read: Americans living in Canada face more tax considerations

To avoid that problem, clients can roll assets to spouses without triggering taxes. But don’t count on life insurance, which often funds tax bills when an unexpected death forces a fire sale of assets, since your clients won’t be dead.

Fortunately, these tax hits won’t affect quality of life on Mars. Currency isn’t needed since food, shelter and medical supplies will be provided.

Read: Move assets out of estates before death

WHAT TO DO ABOUT LIFE INSURANCE

If your client doesn’t have a policy, the chances of getting one after making the decision to abandon Earth are nil.

“No sane insurance company would offer one. Insurance companies don’t even like to underwrite people who go to the Middle East or other areas of concern,” says Brown. “We probably don’t have much happening on Mars right now in terms of battles but they also have no idea what healthcare will be like.”

So far, the Mars One project doesn’t require one of the four people selected to be a doctor or a nurse, so the no-return ticket is essentially a suicide mission.

Read: BoC launches new $5 bill from space

But if your soon-to-be Martian client has existing life insurance, the insurer is forced to honour the policy since Canadian policies do not exclude war or travel.

Yet it’ll still be nearly impossible to make a claim. If your client dies on the way to or after settling on Mars, beneficiaries need to provide the insurer with proof of claim, such as a death certificate or a physician’s report.

Administration is already hard enough on Earth when you have forms, printers, doctors and lawyers within reach. In outer space, getting the proper documents will be nearly impossible. So make sure beneficiaries don’t count on that inheritance in their financial planning.

Read: Tax problems with cross-border life insurance

TALK ABOUT MARS TO YOUR EARTH-BOUND CLIENTS

This interplanetary traveller may never walk through your door. Still, when it comes to estate planning, it wouldn’t be a bad idea if everyone pretended they were heading to Mars.

“The financial advice I would give someone is the same. What do you want to see happen to your estate? What do you want your will to say?” explains Brown. “We need to look at it as if we are stepping on a rocket ship tomorrow and disappearing because we don’t really know when we may be gone.”

With private space tourism growing, Brown suggests that in a few decades, a life insurance application may ask if clients travel, or intend to travel, into space. Until then, posing the question to your clients is another way to show how important it is to plan for their futures.

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