Common Fears of Estate Planning

No matter how you look at things, Estate Planning involves emotions. Some common emotions include the joy of giving to loved ones, sadness that you won’t be around to see how loved ones might enjoy your gifts, concern about how your beneficiaries will use your money or maybe guilt about not being able to provide enough for your family. One of the most common emotions in estate planning is fear. Let’s look at some of the common fears of estate planning.

Fear of losing capital

Many investors worry that the value of their investments will be eroded with poor investment decisions. For that reason, some people choose more conservative investments.

Protecting an inheritance is relatively simple by using investments that provide a guarantee of capital such as GICs. Segregated funds can also be an excellent estate-planning tool because they provide death benefit guarantee. These respective guarantees ensure that the value of an investment will not end up beneath an established minimum either at the end of the maturity guarantee period or upon the death. The guarantee components make these products an attractive way to ensure that the value of a legacy will not fall below a certain minimum.  These guarantees do not come without a cost so be aware of what fees are being charge to provide peace of mind.

Fear of taxes and fees

Declining markets aren’t the only things that can cause the value of an inheritance to shrink. Estates are subject to various taxes and fees that can run into thousands of dollars. Probate fees, executor’s fees, legal and accounting fees can add up quickly. Taxes, however, are often the biggest bite out of an estate.

Certain taxes on death can be avoided by leaving specific assets, including RRSPs and RRIFs, to a spouse instead of another beneficiary. Other costs to the estate can be reduced through careful tax planning that may involve selling assets or transferring them to the beneficiaries before death.

Related article:  Understanding taxes on your estate

Investments purchased through an insurance company can also help to minimize the impact of estate expenses on the value of a legacy. If a beneficiary is named, the value of a segregated fund or GIC will not form part of the estate and will not be subject to probate because the death benefit will be paid directly to the beneficiaries. As a result, probate, executor, legal and accounting fees are avoided.

Life insurance is another useful tool. If you anticipate a large tax liability on your death, you can prepare in advance to cover these costs by purchasing an appropriate amount of life insurance.

Fear of giving up privacy

Help TeamworkWhen a Will is submitted to the courts for probate, it becomes a matter of public record. That means that anyone – including the general public, the media or even fraud artists – can view a copy of it. The size of your estate, the identity of your beneficiaries and the amount of their inheritance are now in the public domain.

Related article:  What are probate Fees?

Investments with insurance companies like GICs, segregated funds and life insurance allow assets to be transferred privately outside the public glare of the courts because they bypass probate. They avoid the whole probate process, so their details are not accessible to the public.

Fear of delays

The days and weeks that follow a loved one’s death are extremely stressful. Not only are family members coping with their grief, but they must also arrange funeral and memorial services and put the estate settlement process in motion. Obtaining probate often takes time especially if the estate is complicated or if the Will is challenged.

Related article:  Estate planning starts by getting organized

The key to avoiding delays is to make sure proper planning is done in advance. Make sure your Will is up to date and done properly. Once again, you can use products from life insurance companies to help with efficient transfer of assets.

Fear of giving too much

Sometimes, parents are worried about giving too much money to their children and their ability to manage and invest the money sensibly. They can be concerned that their legacy will be squandered or that their kids may fall under the influence of people who will take advantage of their beneficiaries. They also might fear that their children will lose the drive to succeed if they suddenly receive a large inheritance.

The fact is receiving a sizeable bequest is a tremendous responsibility that some beneficiaries simply aren’t ready to take on. To avoid transferring an inheritance to a specific heir all at once, you can set up a trust. Trusts can be a very effective wealth transfer vehicle, There are some drawbacks that should be carefully weighed, such as cost, complexity and ongoing management.

Fears about estate planning are natural. What fears do you have about estate planning?

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

3 Responses to Common Fears of Estate Planning

  1. Jim!!!!!

    How did you know? I’ve been working on organizing some of my assets and disposing of some accumulated “stuff”, and procrastinating, and trying to decide a comfortable approach to all this. Especially finding more about executors and living wills.

    95% of my assets are in my Margin account and my TFSA; I’m liquidating the last of my RRSP this fall.

    Of the topics in your article, the only one that I’m very comfortable with is how the kids will use the money I leave them. It’ll be their money, they can do whatever they want with it, they’re adults… I won’t be upset or ecstatic.

    Ditto for taxes, probate, expenses, etc. I’ve given my body for research to the BC Generations Project.

    I’m very concerned about living. Especially being alive and incapacitated. I haven’t really resolved that issue.

    I’ll find out more about the lawyers appearing in the blog.

  2. Changes to Old Age Security and Guaranteed Income Supplement from the Federal Budget

    For the first time ever, seniors outnumber children under the age of 15. With millions of baby boomers set to leave the workforce in the coming years, this gap will only grow over time. Maybe that’s why Seniors came out one of the big winners in last month’s federal budget. The Liberals…

    Hi JIM,



    • Ray,

      OAS and GIS increase every year based on a cryptic cost of living increase which, honestly, doesn’t match the real cost-of-living increase.

      In the meantime, we retirees need to increase our income. Either by investing in income producing financial products, or getting some income from part time work.

      For a few years I worked as a food demonstrator – y’know those people in the grocery stores who get you to taste new products or during marketing campaigns for mosquito repellent. At least half of us were retirees.

      As retirees, we’re good prospects for them because they don’t have to pay CPP (because we’re collecting CPP) and we’re usually more reliable than many 20 year olds looking for full-time work. The pay was about $14 an hour a decade ago and they also paid mileage which is tax free; you would also get a form that allowed you to deduct proportionate car expenses from you income tax.

      I was a fun job for 4 or 5 years.

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