Hey there, time traveller!
This article was published 22/6/2012 (1674 days ago), so information in it may no longer be current.
TORONTO -- Two new polls suggest Canadians may not be investing enough time and energy in estate planning.
A survey by CIBC released this week found 84 per cent of Canadians with a will say they have named a family member or friend as executor, a move the bank says could be risky.
About eight in 10 respondents said they had no prior experience in administering a will.
"If you appoint a family member or friend without the appropriate experience or knowledge, it could cost your estate thousands of dollars, as well as months or even years of angst for your loved ones," says Jamie Golombek, managing director of tax & estate planning at CIBC.
"An executor should have the time, skill and knowledge to effectively undertake the numerous duties."
The duties of an executor include making funeral arrangements, assessing the value of estate assets and liabilities, filing individual and estate tax returns, collecting any insurance proceeds and accounting for the estate financial activities.
Golombek says there are some common mistakes to avoid when planning a will.
First, he advises, don't underestimate the time involved in dealing with the finances of someone who has died.
The poll found 38 per cent of Canadians thought winding up an estate could be completed in less than six months, while nearly two-thirds thought it would take a year or less.
"The reality is that even if everything goes well, the estate administration process typically takes between 12 to 18 months. However, complications, tax errors and litigation can delay estate administration for months or even years," Golombek says.
"When naming an executor, consider if the individual has the time and ability to dedicate to the task for a period of up to two years or possibly longer."
Second, it's important to choose the right person or it could end up costing money. Your executor will need to have the time and skills to deal with many different people including lawyers, accountants, financial institutions, insurance companies, government agencies and beneficiaries.
"For many estates, a corporate executor, named either as the sole executor or a co-executor, is an excellent option," Golombek says.
Not only does it relieve family and friends of a difficult burden and a time consuming task, it can actually save you thousands of dollars, he said.
For example, he says, elderly individuals are sometimes unaware they qualify for the disability tax credit and an executor can change personal tax returns even after someone has died to claim these type of credits.
In addition, don't prepare your will then forget about it. Golombek suggests a review every five years at minimum, or whenever there is a major life event such as a marriage, divorce, birth of a child or move to another province or country. But the survey showed that 37 per cent of respondents had not updated their will in more than five years.
Finally, be sure to keep good records and ensure your executor knows where to find your will and other important information so as not to delay the process of administration.
Results of the poll were based on a survey of 1,002 Canadians conducted for CIBC by Harris/Decima in March.
Meanwhile, an RBC report on estate planning, also released this week, says most Canadians wrongly believe having a will is enough to protect them in a troubling time. The bank says Canadians also need to prepare for aging and health concerns.
"For many Canadians, health directives and a general power of attorney or other financial directives will likely be needed before your will is invoked," the RBC report said.
The RBC poll found 81 per cent of retired boomers had a will. But only 49 per cent had a current health directive -- a written document explaining how they want to be treated medically if no longer able to communicate.
Meanwhile, while just 39 per cent had a current financial directive, which appoints someone to be responsible for their financial affairs.
"Financial planning is not complete without planning for potential unforeseen health issues or incapacity," said Suzanne Michaud, senior advisory counsel at RBC Law Group.
-- The Canadian Press