Creating A Luxurious Life For Your Loved Ones Through Your Estate - A Story
By: Gregory Dobson, CMA, CFP, EPC

The facts are true. Only the names have been changed. My story is about Winter. She lived a full life of 93 years. Winter invested wisely. At 93, her estate was worth $1,650,000. She had prepared a will. She didn’t do it alone. She used a lawyer. Everyone thought that she was doing everything right

Winter’s granddaughter, Susan had POA and called me in 2003 to help settle the estate. She showed me the will. I saw quickly that it was a “cookie cutter” will. Her family friend was a lawyer, but he didn’t specialize in estate planning. Big mistake! You see this “will” caused delays that could have been avoided. And, the delays created SUBSTANTIAL COSTS.

Also, another BIG PROBLEM occurred. How many of you have heard of a book, “The Family Fight & How to Avoid It?” Very good book written by two Canadian Estate lawyers.

Well, the situation with Winter’s estate turned into a nightmare movie script from that book.

Here’s what Winter intended in her last Will & T.

  • 2/3 of her assets to be divided among her 2 remaining children and 3 grandchildren.
  • Remaining 1/3 divided among all her great grandchildren.

Let’s see what really happened because of poor estate planning. Besides the cookie cutter will, Winter made another mistake. She had named a local financial institution as executor while the lawyer prepared the will as co-executor.  Neither organization knew Winter’s family circumstances.

  • Her son contested the will. He hired a lawyer to do this. Big expenses.
  • The government got involved because some assets were left to minor children. More delays.
  • Winter left many different types of assets including a house. The delays meant that the house had to be appraised 3 times. It took the executor 18 months to account for the entire estate.

What were the financial consequences? Well Winter left an estate worth $1,650,000.

Here is the breakdown.

Starting with $1,650,000

  1. $ 25,000   Ontario Probate Fees paid immediately - standard amount based upon the size of the estate;
  2. $ 82,500   Paid in executor fees to manage the estate for 3 yrs. Non-accountants doing an accounting function operating under a fee schedule that starts at 5% per year;
  3. $196,000         Legal Fees paid to represent three parties in lawsuit, some of which could have been avoided by having in place certain legal and non-legal documents and strategies;
  4. $325,000         Income Taxes for Capital Gains and RRSP/RRIF taxes which could have been substantially reduced;
  5. Balance of $1,021,500 
  6. $121,500   10% holding account by executor until Clearance certificate received from CRA;
  7. $350,000 Public Guardian and Trustee to mange the assets for those beneficiary’s that are under the age of 18; because they are minors and no provisions in the Will were properly set up;
  8. $550,000 Divided immediately among intended beneficiaries.

Everyone underestimates the amount of taxes and fees payable upon death, Winter sure did.  38% of  her estate went to pay taxes and fees.

Here are some simple steps to follow to ensure this doesn’t happen:

  1. Make a family tree!
  2. Plan early, and put it in writing;
  3. Prepare a Legal “Last Will and Testament” and ensure all beneficiaries

considerations are accounted for;

  1. Ensure all tax consequences are considered;
  2. Review every few years.

Now as September 11 has tragically proven, you need to face the world and sensible financial planning can be crucial.