Ensure your clients have a properly drafted will

By Rosemary McCracken | January 19 2011 06:15PM

Financial advisors should make sure their clients’ wills aren’t recipes for family feuds, estate lawyer Les Kotzer told the Retirement Planning Association of Canada’s annual conference in October.He said his Thornhill, Ont., law firm, Fish & Associates, has seen “an explosion” of squabbling within families. Much of it is baby boomers fighting over their Depression-era parents’ money, and the manner in which the parents’ wills have been drawn up often fuels the fight.
A mother who names her three adult children as equal beneficiaries, and who appoints one of them to act as the executor of her estate is setting the stage for a family war if this executor makes decisions that are not favoured by the siblings – such as selling the family home or vacation property.
“The courts are not going to overturn the decision of an executor acting in what seems to be the best interest of the estate,” said Mr. Kotzer, the author of Family Fight: Planning to Avoid It.
Your clients should give considerable thought to whom they appoint as executor of their estates, and not just automatically name their eldest child. They’ll need to consider the kind of decisions that person will probably make and the relationship he has with the other beneficiaries.
They’ll also need to find out whether the person being considered for executor wants the job. “If your client doesn’t ask him, he may turn it down when the client dies,” Mr. Kotzer said. “Then the beneficiaries will have to name a new executor and go to court to have him appointed.”
Backup executors and backup beneficiaries should also be named in the will.
Executors are entitled to a fee, which Mr. Kotzer said is usually about 5% of the value of the estate. This can also spark jealousy among family members.
“Sometimes a neutral person who is not a beneficiary may be the best choice as executor,” he said, “or your client can appoint all three of his children and include a tie-breaker clause so the decision of the majority rules.”
Think twice about having the same person act as executor and as guardian of your client’s children, he added. “Having different people in these roles will create proper checks and balances because the guardian will have to ask the executor for money from the estate for the children.”
And Mr. Kotzer noted that equal bequests may not always be fair. If, for example, one of the children named as beneficiaries has spent years as the client’s caregiver, dividing the estate equally between this child and her siblings may not be sufficient to support her after the parent’s death. The client may want to consider leaving assets to this child in proportion to the time and effort she has devoted to him, Mr. Kotzer said. And the client should tell the other beneficiaries why he is doing this so they won’t have false expectations.
“We’re seeing a lot of expectations of legacies among the boomers,” he added.
Forfeiture clauses in wills are designed to discourage beneficiaries from challenging a will, because they’ll lose their bequest if they do so. “The problem is,” Mr. Kotzer said, “that the client needs to leave the beneficiary a large enough gift to discourage him from challenging the will. If he only stands to lose only a small portion of the estate, why wouldn’t he challenge it? And if he’s left enough, he probably won’t.”
Do-it-yourself wills often pose problems, he noted. Some aren’t signed or dated properly, which renders them invalid. “And people often use inaccurate language in homemade wills,” he said. “Saying that you leave your antiques, memorabilia or ‘personal stuff’ to a beneficiary opens the door to arguments about what exactly antiques, memorabilia or ‘personal stuff’ are.
“And personal family items can trigger strong emotions among survivors,” he added.
In all provinces except Quebec, marriage revokes existing wills, but separation does not. “A man may have been separated from his spouse for 25 years but can still be a beneficiary of the spouse’s will,” Mr. Kotzer said. “A person needs to make a new will upon separation if he doesn’t want this person to inherit.”