Why You Need A Will

Why You Need A Will

Do you have a will?

Talking about death is something that we all look forward to, no doubt…  But the reality is that contemplating our own mortality is less about the impact that it has on ourselves, but rather the effect that it has on those around us.  Estate planning is not just for the uber-rich, but rather a critical aspect of financial planning for all Canadians.

According to a recent study by the Angus Reid Institute, 49% of Canadians surveyed either don’t have a will in place, or their will is outdated.  This number skyrockets to 85% for those in the 18-34 age bracket.  With so many Canadians leaving themselves exposed, it is probably a good idea to go over what happens if you die without a will.

NOTE: This post should not be considered legal advice.  If you have any estate planning questions, please consult with a professional to assess your individual situation.

Why You Need A Will

In Ontario, the Succession Law Reform Act governs what happens when someone passes away without a will in place, known as dying “intestate”.  In this case, your affairs will be handled in a prescribed manner.

Personal Representative

A key reason why you need a will is that you can name the executor of your estate.  The executor is responsible for the administration and distribution of your estate along with the wishes that you have expressed in your will.  When you pass away intestate, you have no executor named.  As such, your closest relative will likely be appointed as your personal representative.  In many cases, this may not be an issue.  However, in some cases, you may not want the individual named to be acting on your estate’s behalf.

The added benefit of naming an executor is that they can be adequately prepared for the responsibility.  Before appointing someone as your executor, you should have a conversation with them to ensure that they are up to the task and related responsibilities.  The role of executor tends to be time-consuming, and you should be mindful of this when naming someone to the position.

Child Care Without a Will

If you have children, it is non-negotiable that you have a will.  If you die intestate, you will have lost the opportunity to dictate who should be responsible for your children.  In this scenario, the courts will determine who is the most suitable to become your children’s guardian.

An added piece of importance is in the situation where you have a dependent child.  Without leaving instructions for their care, or setting aside specific funds, your dependent child may not receive the long-term care that you had intended.

Division of Estate Property

Your property is distributed based on the following:

1) You have a spouse, but no children

Your entire estate goes to your spouse. However, this only applies to legally married spouses. Common-law spouses are not automatically entitled to receive anything if you die intestate.

2) You have a spouse and children

Your spouse is entitled to a preferential share of your estate, up-to-the first $200,000. What remains is now referred to as the residue. If anything is left over, the residue will be divided between your spouse and your children.

3) You have children, but no spouse

The children each inherit an equal portion of your estate. If any of your children have passed away, then their share would pass on to their children (i.e. your grandchildren).

4) You have no spouse and no children

Your parents inherit your estate.

5) You have no spouse, no children, and no parents

Your brothers and sisters (or their children if a sibling has passed away) receive an equal share of your estate.

6) You also have no brothers and sisters

Your nieces and nephews each inherit an equal portion of your estate.

7) You have no nieces and nephews

All other next of kin inherit an equal portion of your estate.  The determination of next of kin is performed using the table of Consanguinity (courtesy of Wikipedia).

8) You have no living next of kin:

Your estate goes to the Ontario government.  Not who you had in mind for a charitable donation to as part of your estate plan was it?

Here is a helpful infographic on the topic.

How your property is distributed in Ontario if you die without a will

Pet Care Without a Will

Unlike your children, the courts will not make a separate determination of whom the best caregiver will be.  Pets under Ontario law are considered Property.  As such, they will be subject to the division of property rules above.

Tax Efficiency

When you pass away, your representatives must file a final income tax return on your behalf.  This return comes with very particular tax planning opportunities, which are lost when you don’t leave a will behind.

When it comes time to validate your will, it goes through a process called probate. Probate is also required for those that die without a will.  According to the Ministry of the Attorney General, the probate process exists to:

  • give a person the authority to act as the estate trustee of an estate; or
  • confirm the authority of a person named as the estate trustee in the deceased’s will
  • formally approve that the deceased’s will is their valid last will.

Part of the process involves the Estate Administration Tax (EAT), or what is more commonly referred to as the ‘Probate Tax’.  EAT is charged on your residual estate (i.e. everything that is left over after filing your final tax return).  Between your final income tax return and the EAT, significant taxes could end up being paid that could have been avoided if you do not have a legal will in place.

Funeral and Burial Arrangements

Without a legal will in place, the arrangements will be left solely up to the discretion of your personal representative.  As mentioned above, this individual will be court appointed and may not know your wishes.

So, What’s Keeping Canadians From Getting A Will?

As per the Angus Reid study, there are a few key reasons that our estates are not adequately planned for.

“Of course, 18-34-year-olds without a will are significantly more likely than other Canadians to say they are too young to worry about having one written – nearly half (46%) indicate as much. As they get older, Canadians are more likely to cite a lack of assets as the reason they do not have a will in place.”

Surprisingly, only 8% of respondents listed “not wanting to think about death” as their primary reason for not having a legal will in place.  So, it appears the morbidity of the topic is not the deterrent that we may have thought it was.

The 3rd most frequent answer provided as their deterrent was cost.  18% of respondents indicated that ‘It’s too expensive to get a will written’.  As with many industries, estate planning has seen its share of ‘disruption’.  No longer do you have to travel to a stuffy lawyer’s office and be gouged for their expertise. Not requiring a lawyer is especially true for the average Canadian whose estates are not very complicated.  This is likely the case for the 48% of respondents who thought that they were either too young or didn’t have any assets to consider.

For those with simple estates, who live in Alberta or Ontario, Novel recommends Willful as a great option to obtain a legal will in as little as 30 minutes. Their premium package includes a will as well as a power of attorney for property and a living will for $150 plus tax.  Also, we have negotiated a 10% discount with them if you use the promotional code ‘Novel10’ at checkout (read more about our affiliate policy).

The best part of using Willful’s service is that your will can be updated as many times as you would like, for free, forever!
Yes, free.
Yes, forever!

That means that there won’t be any legal costs incurred to update your estate when you move to a new home, purchase a new car, or welcome a newborn for example.  Just remember, when you do make updates to your will, all previous copies should be destroyed.

Do I Need A Lawyer To Write My Will?

No!

Similar to Willful, there are a number of options out there that can provide you with templates or documents that you can work with.  That said, you should never draft your own documents and any templates that you use should have been reviewed by a lawyer.  And rest assured, Willful has had a many lawyers aid in the drafting of their documents.

Once you have a will drafted using one of the various methods out there, you need to have the documents witnessed/signed by two parties who are not named in the will.  For example, your executor cannot serve as the witness.

Once signed, the hard copy location needs to be shared with your executor.  This will ensure that your executor can quickly access it and begin the process.  Unfortunately, at present, digital wills are not acceptable.  Hard copies with signatures must be kept as the official document for your will and power of attorneys.

That’s it.  You now have a legal will!

The Brass Tacks On Why You Need A Will

In 2019, far too many Canadians still either don’t have a will or their will is out of date.  Don’t leave your loved ones in a precarious position, by not having a will.  Not having an up to date legal will can create many complications for your estate, and your wishes may not be addressed appropriately.  Many tools are available for you to create your will and keep it up to date.

If you would like to discuss your estate planning or discuss it as part of a Fee-Only Financial Plan, please contact us to set up a consultation.

Did you find this article helpful?  Did we miss anything?  Please let us know in the comments.


Two women talking while sitting on a window sill

The Stigma Around Money

Let’s Break The Stigma Around Money

Many people living with a mental illness report that negative stereotypes about mental illness, and the resulting potential for discrimination, cause them more suffering than the illness itself. As a result, two-thirds of those suffering from mental illness are too afraid to seek the help that they need.

Mental illness affects people of all ages and from all walks of life. It can take many forms, including depression, anxiety and schizophrenia. Most individuals find ways to live with their illnesses but how they are treated by others often proves to be more of a challenge than the illness itself.

As another successful Bell Let’s Talk Day draws to a close, breaking stigmas and changing the conversation is top of mind for many Canadians.

Your finances are a key building block to your overall life goals.  When we are on a solid financial footing, the rest of our lives become easier.

Unfortunately, one of the largest causes of stress and anxiety for most people is around money and their financial situation. 

The Research

According to a study commissioned by the Financial Planning Standards Council, stress caused by money isn’t getting any better.  This study was performed in 2014 and updated in May of 2018.  This study did not include participants from Quebec.

  • 41% of respondents indicated money as their largest stressor, which was the #1 answer.
    • 41% was also the score in the 2014 survey, and it was also the #1 answer
    • Other potential responses included health (23%, up from 19%), work (22%), relationships (14%, down from 17%)

Embarrassment & Keeping up with the Joneses

An interesting metric from the study was whether or not people felt pressured to keep up with their peers’ financial status.  This metric increased since the 2014 survey from 20% to 23% in the most recent survey.  This rate was most pronounced within the 18-34 age bracket at 52%.  This is hardly surprising given this demographic’s use of social media to share their best selves with each other and the world.

“Too many people spend money they earned… to buy things they don’t want… to impress people that they don’t like.” –Will Rogers

Adding to the stigma is that Canadians tend to be embarrassed when it comes to money.  They seem to think that they might be the only ones making financial mistakes. 

The FPSC study found that 51% of Canadians are either always or sometimes embarrassed about lacking control around their current financial situation, up from 44% in 2014.  Similar to the pressure measure above, this was most prevalent in the age bracket of 18-34 which sat at 70%.  The embarrassment rate also declined as the age of the respondent increased.

However, given the levels of consumer debt in Canada, this embarrassment may not be warranted.  You are not alone in your concern around your money decisions. 

Debt

Our financial planning services tend to cater more toward those with manageable debt and assets that they need to manage.  Their stress tends to come from not knowing if they will have enough for retirement, or not knowing how much they need to save for their children’s education, etc.  These are examples of very common concerns experienced by the typical Canadian.

However, there is a significant portion of the population that live paycheck to paycheck and have sizable concerns about their debt.

BDO published their first inaugural affordability index and found that 3 in 4 Canadians have personal debt and that the average non-mortgage personal debt is nearly $20,000 per person.  This would include car loans, lines of credit, credit cards, etc.  This means that the average Canadian couple carries nearly $40,000 in non-mortgage debt.  These are alarming numbers.

For the segment of the population in debt trouble, the situation can snowball quickly.  High-interest debt, such as payday loans or credit cards, are a primary cause of the growing debt problem.  High-interest debt payments can often have little-to-no impact on reducing the balance owing.

Compounding this problem is that the social stigma around money makes it difficult for people to discuss these issues openly, even with finance professionals.

The debt carriers often don’t know where to turn.  

They don’t think that there is a light at the end of the tunnel. 

But there is.

Feeling like you need help is okay. 

Most people need help when it comes to their finances.  For those that feel like they need help with their debt, there is a solution.  Credit Counselling Canada (CCC) is the national association of not-for-profit credit counselling agencies that work provincially, regionally and locally throughout Canada. Only not-for-profit or charitable organizations are accepted as association members according to their website.  One such member organization is Credit Counseling Society (CCS).

These organizations can help those with debt issues develop a plan to tackle their money issues head-on.  CCS has a summary of their recommended approach to dealing with debt stress and tackling your debt problem.

This is only one example of the CCC member organizations, and anyone of their member organizations will be able to assist you.

“You must gain control over your money or the lack of it will forever control you.” –Dave Ramsey

The Brass Tacks

Studies show that money is the #1 cause of stress for Canadians.  Social stigma prevents us from speaking openly about our financial situations, as we often feel pressured to keep up with the lifestyles of our peers.  This is only exacerbated in the social media era. 

As money anxiety grows, people need to be aware of their options.  For those with significant debt, a non-profit member organization from Credit Counselling Canada will assist you in tackling your debt challenges.  For those with manageable debt and assets to manage, fee-only financial planners can ensure that you receive unprejudiced advice to help you establish a solid financial footing, take control of your finances and reduce your stress.

Don’t let social stigma around money prevent you from addressing your challenges.  You are not alone.  There is light at the end of the tunnel.

The Canadian Association for Suicide PreventionDepression Hurts and Kids Help Phone all offer ways for getting help if you, or someone you know, is suffering from mental health issues.

In case of an emergency, please call 911 for immediate help.

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Account Opening Form

How To Open a Self-Directed Brokerage Account

Opening a self-directed brokerage account is an essential step toward taking control of your finances.  This forms an integral component of the Execution phase of the Fee-Only Financial Planning Process.  A self-directed brokerage account allows you to buy and sell stocks, ETFs and other securities.

In order to open an account, you will need some information accessible before you begin, as it will be required as part of the process:

  • Government-issued Photo ID
    • Driver’s License or Passport
  • Current account information if you will be transferring funds into your new account
    • Account #s for each account (RRSP, TFSA, etc.)
    • Institution name and address

The below walkthrough is specifically for our recommended brokerage Questrade, but the steps will be similar for any self-directed brokerage.  This process should take you about 30 minutes to complete but can be done in phases.

Note: We only recommend that you open an account if you will be transferring $5,000 or more.  When you have $5,000 or more, you will not be charged fees for inactivity in your accounts.

Self-Directed Brokerage Account Opening Steps:

  1. Go to questrade.com

  2. Click on “Open An Account” in the top right portion of the landing page

  3. Select the accounts that you wish to open.

Our recommendation is to open an Individual Margin, RRSP, and TFSA account.  These are the 3 basic account types that are appropriate for all Canadians.

Select the Self-Directed account options, not the Questwealth options. Questwealth accounts charge management fees for pre-packaged portfolios.  We have covered elsewhere how management fees negatively impact your portfolio

Questrade Account Opening Selection Screen

On the right-hand side of the screen, you will have the opportunity to enter an offer code.

If you enter the code “uajekubi” you will receive a $50 trade commission rebate.  This is offered as part of the Questrade affiliate program. To understand more, please read our affiliate policy.

  1. Create a user ID and enter your basic personal information

The name that you enter on this screen must match the government issued photo id that you will upload as part of the account opening process.

  1. Build Your Profile

Next, you will expand on the personal information provided in the previous step.

The questions that you answer in the next steps are standard procedure when opening an account with a financial institution.  These questions help to prevent money laundering and sanctions avoidance.  This is a good thing.  You can refer to the Questrade Privacy Policy if you have any questions or concerns.

You will have to enter information in 4 different categories:

      • Personal Information
      • Employment Information
      • Financial Information
      • Citizenship Information

Questrade Build Your Profile Screen

  1. Account Opening Questions and Documents.

For this next step, you have to complete some paperwork and answer questions for each account that you are opening.

From the account summary screen, click on an account to complete the setup.

Questrade Account Setup Selection Screen

There are a separate set of questions for each account, as well as paperwork that must be signed and submitted prior to being able to open your account.  It is during this step where you must upload the copy of your photo-id to the website.

Questrade Account Questions and Documents

  1. Fund your account

Now it’s time to put some of that hard-earned money of yours into your new account.

You have a few options at your disposal.

Questrade Account Funding Options

If you are transferring an RRSP or TFSA to your new accounts, you must use the ‘Transfer account to Questrade’ option.  Any other form of funding would result in a contribution to your account, which may put you over your contribution limits for either your RRSP or TFSA.

When transferring accounts, they can only be transferred into the same type of account (i.e. RRSP into an RRSP).

For a limited time, if you are transferring an account of $25,000 or more, you may be eligible to have your transfer fees that are charged by your current institution (the transfer out) covered up to $150 by Questrade.

If you are transferring your account, you will have 3 options available to you. 

      • Transfer in-kind
      • Transfer in cash
      • Partial

Transferring in cash means that your stock/ETF positions will be liquidated by your current institution and converted to cash.  This can have some unintended consequences, such as incurring brokerage trade commissions, or tax bills for realized gains (or losses) in your non-registered accounts.

Transferring in-kind means that you are moving your stocks and ETFs over while keeping your adjusted cost base/book values intact for tax purposes.  This is the recommended option.

A partial transfer would be for only a portion of your account, as opposed to the full value.  A cash transfer is appropriate if you are holding securities, such as mutual funds, which are unable to be held in your brokerage account.

Account transfers can take up to a month or more, depending on the financial institution.

Minimum initial funding in order to buy stocks or ETFs is $1,000 per account.

 

And that’s it!

Once your accounts are funded, you are now able to trade stocks, ETFs and other securities.

We have prepared a guide on how to execute a stock or ETF trade  for your reference.

Was this guide helpful?  Are there other guides that you would find useful? Let us know in the comments.


Desk with phone notebook and plants

A Novel Beginning

You’re probably thinking, “Great.  Another financial services firm”.

You are probably not alone.

If that were the case I would completely understand.  There are literally thousands of organizations out there that address some component of the financial services market.

The problem is that most of them don’t care about you.

The average fund manager cares about their performance relative to their benchmark and the amount of their assets under management (AUM).

The average financial advisor cares about their commissions and their management fees charged on assets under management.

The typical bank wants to direct you to products that they sell, not the best available products, or products that are best suited for you.

The fee-only financial planning approach works in stark contrast to these conflicts of interest.

How The Fee-Only Financial Planning Journey Began

The unfortunate realities of the typical advisor model played out for me recently.  My Mother invited me to join her at a meeting with her financial advisor, as she wanted to make sure she was on the right track.  She recently retired from a career as a teacher and was transitioning from the accumulation phase of her life into the drawdown phase.  The plan that was set out for her to follow was a logical one.  The options presented were very reasonable from an approach and strategy standpoint. 

When it came time for execution, this is where the reasonability went off the proverbial cliff.  This came to light as I asked 3 critical questions:

  1. What is the fee structure of this financial plan/arrangement?
  2. What product options do we have within the financial plan framework?
  3. Is there a more cost-effective way to implement this financial plan?

With respect to the fee structure, the advisor was going to be investing in a balanced fund charging 2% of AUM.  In addition, the advisor would be taking a 1% of AUM management fee on top of the costs of the funds.  In total, this plan would cost 3% of AUM each and every year.  Something to keep in mind is that we could substitute AUM with life savings in any sentence in this article.  What this ultimately means is that the investments would have to return 3% just to break-even!  As you know, interest rates are very low in the current environment and earning 3% is not a given.  How do you think you would do in the 100-metre dash if you started from 130 meters away?  Why would you want to put your life savings in the same situation?

When it came to product options, we did have some to choose from.  Segregated funds, mutual funds and annuities were all provided as options.  Each of these options has their own merit and can provide value to certain individuals depending on their situation.  However, I asked if there was a way to move to a lower cost ETF based approach.  The advisor’s response was, “I am not licensed to sell ETFs”.  So, now you only get to choose from products that they have agreed to sell? 

These investment products undoubtedly have a commission being paid to the advisor from the fund company, because for every client an advisor can direct to them, it means that the fund company will now get paid each and every year that you invest with them.  For 1% of my life savings, I would expect that an advisor could bring all appropriate options to the table for me.

Lastly, I asked if they would be open to moving to a flat fee-based model as opposed to the percentage of AUM model that they were currently utilizing.  They declined to entertain the idea. That’s their prerogative as a business person, but it was worth a shot. 

At the end of the day, this is a classic example of an expensive advisor using expensive products because it suits them best, not their client.  Luckily, it’s your prerogative to explore other options!

Harsh Reality of Working With a Typical Financial Advisor

My mother and I inevitably left their office following the meeting. We had some discussion and she quickly realized how much money had been paid to this advisor over the years. Literally 3% of her hard earned money was given away every year.

It was this day that drove me to launch Novel Financial.  I wanted to be able to provide quality financial planning advice to all Canadians at a cost that was commensurate with the service being provided.  Thanks to this meeting, it turned out that on this day Novel had inadvertently also found its first fee-only financial planning client.

Your best interests are our best interests.  That’s Novel.

Learn more about the Fee-Only Financial Planning Advantage.


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