The Inheritance Dilemma!

By La rédaction | October 21 2014 09:00AM

We’ve all heard many times that somewhere around one Trillion dollars is changing generations over the next 20-30 years in Canada. One Trillion Dollars! While the number is surreal, alarming and almost unimaginable in magnitude the question is what are the implications, and how do advisors prepare?The statistics around the aging demographics, specifically the sheer volume of people over the age of 80 clearly show the boomer tidal wave is coming right at us. And while the suggestion that 80-90% of inheritance monies is going to either debt reduction or another advisor or bank would indicate today’s advisor is at risk; the fact that 50% of people don’t have Wills and of those that do the majority are seriously outdated, is putting clients at risk as well. People need advisor help more than ever and advisors need new tools. Not products targeted at asset and liabilities but tools that facilitate ‘soft issue’ discussions that address concerns, build trust, and can position tomorrow’s advisor as a catalyst of change to the inheritance dilemma. There are a Trillion reasons to get involved!

Challenging and complex

The reality is that when a client dies, someone else’s efforts are just beginning. It starts day one with the funeral plans. Thereafter, beneficiaries are identified, creditors notified, assets gathered and liabilities addressed. Probate is granted, fees paid, taxes settled and the executor begins to distribute assets to the beneficiaries as per Will instructions. It might sound simple but for anyone that has been involved in an estate, estate administration is complex, dynamic and challenging, creating a host of opportunities for an advisor to participate, advise and add value.

Advisor involvement begins with understanding that estate litigation is one of the fastest growing areas of litigation today – like family law since the seventies.

The reasons are many: estates today are larger and more complex in nature; volatile investment and real estate markets have increased the potential for error and timing related issues; Canadians’ propensity to litigate to solve disputes is as prevalent as our American counterparts, and; the smart phone and the internet not only require immediate response to beneficiary queries, they make every beneficiary with an hour on Google an expert in everything from real estate and investments to antique appraisals.

Add to this a beneficiary group, the most debt laden generation ever that has built a dwindling inheritance into their financial plans and then proceeded to spend it in advance, the role of the executor has never been more challenging and the risk to every estate has never been higher.

So here we are, feverishly looking for ways to sell a tax driven life insurance solution or find a means to avoid probate fees while 80-90% of a Trillion dollars is going to debt reduction or another advisor or bank. Our client dies, the tax solution is resolved, and we have one less client. That’s lost revenue and lost equity and it’s the inheritance dilemma unless we decide to change the equation!

Change the equation

Let’s start with your clients’ executor. As the personal representative of the decedent, they act as fiduciary with unlimited personal liability and they need your help. Getting to know them is easy because every executor needs to put an ‘estate specific’ investment policy in place. Aside from executor E&O insurance, an estate investment policy is the most important defence they have against litigation for improper handling of estate assets. Remember the executors are your clients trusted friends. They are middle aged, have assets and appreciate high value service.

For your clients it is only human nature to ‘hope’ their estate transition will go smoothly. Unfortunately mistakes happen frequently, often at significant financial cost to all parties involved and almost always at the expense of family relationships, the damage often lasting a lifetime.

High value service

Cottages, personal loans, caregiver efforts, anxious beneficiaries, Power of Attorney mismanagement, family dynamics, relationships, second marriages, charities, beneficiary financial problems, and significant health issues are all catalysts for estate problems. Understanding and documenting these issues, reading the Will and ensuring the Will is current to desires and intents, and incorporating insurance protection in the Will for the executor, estate and beneficiaries are critical. They are also the kind of high value service that builds client trust and opens opportunities.

And don’t forget the beneficiaries. They too are important to your client and they are the ones receiving what is left and their personal situation may be of significant concern to your client. They may not have assets today but they need advisor help with budgeting, insurance and Will planning. If you engage them today and prepare them for an inheritance tomorrow you have increased your odds of retaining assets and participating in the wealth transfer.

Every estate has risk, every client needs an estate risk discussion and every discussion brings with it organic sales opportunity, new prospects and a business perpetuation plan. ERAssure and education providers such as the CICEA can help you understand and mitigate the risk, add client value and participate in the Trillion dollars transferring generations. It’s how to change an inheritance dilemma into opportunity!

By Myron G. Neufeld, MBA
President, Estate Risk Protection Plan Inc. –

Estate Risk Protection Plan Inc. is the national provider (excluding Quebec) of E&O insurance for executors, trustees and administrators under the brand ERAssure and is the preferred provider of Executor E&O insurance to the Canadian Bar Association and its members.

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