Pandemic Observation #43: People are Finally Doing their Wills

Can you pandemic proof your death? Yup.

Six weeks ago — before the Time of Covid-19, when we did not have to wear face masks to go the grocery store and line up for two hours to buy bread — we were a happy-go-lucky species. Busy planning our next vacation, enjoying leisure time in (gasp) public parks or at events, meeting our friends and families for dinners or movies. We were living life. We didn't think about death — particularly our own. For those with families, businesses and other responsibilities, well, it was easy back in the pre-Covid days to postpone the practical stuff around death, such as writing a will. There was always something else to distract, more fun to be had.

About wills. Here’s a crazy statistic for you: more than 50% of adult Canadians don’t have a basic will. And most who do have a will have not updated it in years. I can confirm this anecdotally from working with the clients who join our practice – most of whom have large enterprises with hundreds of employees, as well as children and grandchildren. These are people who, if they died without a proper will, would leave behind an enormous mess for their loved ones and business colleagues to clean up. Not a great legacy for an accomplished life.

(Abe: Died without a will - didn't see it coming).

The pandemic, however, has brought death into the foreground of our thinking. As we watch the nightly news, many of us are weighing the likelihood of our own demise against the noise about mortality statistics, transmission rates, vaccines, treatments, second and third waves. And because we are sheltering in place with our families, freed from work routines and distractions, we are finally taking ‘getting that will done’ off the backburner.

Our wealth management planning teams at RBC have seen an exponential increase in the number of clients wanting to get their wills written, reviewed and updated. One client is a 70-year-old business owner who sat on a draft will for two years before finally signing within days of the quarantine going into effect. 

(Bob died without a will - but he thought everything's gonna be alright ).

I think people have a degree of superstition around signing a will. Hollywood has convinced us that when a will is signed, disaster follows. But 2020 is proving that one way or another, death is coming for us – superstitions or not. Ultimately the more people that are prepared for death with a proper will is a good thing to come out of this pandemic.

Why Do You Need a Will? 

Technically, you don’t need a will because you’re dead. You write a will for the people in your life whom you’re leaving behind.

When you are a person of means, it’s of the utmost importance to have a will to direct your business and allocate your wealth according to your wishes. This avoids confusion, misunderstandings, costly delays, and potentially disastrous involvement from the courts.

Matthew Getzler, a Partner in the Tax and Estate group at the legal firm Minden Gross, puts it nicely:

“For starters, you can’t choose the executors and trustees of your estate—the people you are entrusting to administer your estate—and instead, an application must be made to the court to have an estate trustee appointed. You would also not be providing any sort of guidance to the courts on who will be the guardian(s) of your minor children, if any—thereby relying on the courts themselves to make these decisions.”

In other words, things are thrown in limbo for weeks to months unnecessarily creating additional cost with absolutely no benefit to the people you care about. Matthew makes another good point about your assets that normally are meant to provide for your loved ones:

“Rather than being able to dictate how and to whom your assets will be distributed upon your death, you will be deemed to have died ‘intestate’ and the distribution of your assets will be governed by statute with no ability to provide for certain trust terms for beneficiaries (i.e., spousal trusts, trusts for children, grandchildren, etc.”

You do not want the courts to decide how to settle your estate. Especially if there is a lot of money. Consider the example of rock and roll god Prince, who died in 2016 without a will and distribution of his estate is STILL not settled.

(Prince - literally sung he would die 4 U to prove a point)

Super Bad Tax Outcomes

Dying without a will in place often means really bad tax outcomes. For example, let’s say you own a business worth $20 million and you have an accrued tax liability of about $5 million.   That tax liability may become due if you die without a will (called “intestate”). However, a simple will could transfer the ownership of the business to a spouse and defer this tax payment until the business is sold or the spouse dies.

(Picasso in picture above also died with no will)

Many business owners are unaware of this, and we have seen problems arise because there is insufficient liquidity (cash) to pay this tax liability. It’s an issue that can be avoided if business owners spend a few thousand dollars and a few hours and make a will while they are still alive. (Note that permanent insurance can also address a tax liability, but that is for another blog.)

Also, there is a court procedure in Ontario called probate that happens when one passes. Probate asks the court 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.

Note that there are standard fees that amount to about 1.5% of the total value of the assets that applies to this procedure with the Ontario courts. For someone with $1 million of assets the total probate fee would be $15,000. For a business owner with $20 million of assets, that 1.5% fee amounts to $300,000. 

In Ontario there is a concept of a secondary will (or corporate will) which can help reduce probates fees on corporately held assets – saving in the example above around $300,000. 

In almost all cases it pays you (or rather, your family and heirs) to have a will in place. The amounts can be quite significant the bigger your legacy – hundreds of thousands and even millions of dollars.

Speaking of Tax

The decline in broader markets and business valuations may have also created opportunities to review some advanced tax planning as well.

Robyn Solnik a Vice President and trained lawyer who supports our practice within RBC Wealth Management as a High Net Worth and Business Owner Planning Specialist has been recommending business owners look at some strategies that may have been put on the shelf over the last few years.

“With respect to tax planning, it might well be worth considering the implementation of an estate freeze or refreeze as a result of depressed share value. Other planning to look at may include whether it is a good time to consider purification strategies together with whether to take advantage of any capital losses.”

If you reduce future taxes because of current market and business disruption you should absolutely review it now.

Never let a crisis go to waste.

Fine I’ll Do It, but I am in Quarantine!

Over the past few weeks I‘ve had numerous conversations about how one can actually complete a will. In the Time of Covid-19, things have changed a lot when it comes to wills!

In the before time, you would need to have other people physically present to witness your will. But just weeks ago the Ontario Government issued an Emergency Order to allow people to get their estate planning done under current conditions.   

So yes, people are now using Zoom to get wills drawn up and signed without stepping foot in a lawyer’s office. I bet this change will stick around too.

Do I Need a Lawyer to Do a Will?

Technically no, you do not need a lawyer to draw up a basic will. But you do need a lawyer if you feel you need legal advice which is often the case the more complex your business and personal situation. We always recommend that our clients use a lawyer who can advise based on their particular needs.

For people with relatively simple finances, there are other options such as will kits. One service that also recently caught my attention is a Canadian startup company called Willful.   

Willful is an online service that helps you get a will set up quickly. In my opinion, it’s a good solution for those without business ownership or complex affairs.  

I asked Erin Bury, the CEO of Willful, about who uses their service the most:

“We find our most frequent users fit into two categories – first, those 30-50ish who are going through life events for the first time like buying a house, having kids, or getting married/divorced. These are the inflection points that cause them to create their will. The second category is those who are Baby Boomers & a bit older – they're approaching retirement and starting to organize their affairs. Our average customer age is 42, so it really is a mix of the two.”

Willful does not offer secondary or ‘corporate’ wills so I absolutely recommend you see a lawyer if you own a business. Also, and issues involving US citizenship or residency really should be reviewed by a lawyer – it gets more complex in these cases.

I know people feel that doing their will may be a daunting process, but it’s actually not. Having been in many estate planning meetings I can tell you that lawyers can quickly get to a draft will after a first meeting, and complete things fairly shortly thereafter.

I also asked Erin how much people really need to know about the will process for Willful and she responded

“you don't actually need to prep as much as you think to create your will. A lot of people think they have to list out their net worth, or have a list of all their assets; in fact your will covers everything you own, so it's more about deciding on key roles (executor, guardian, beneficiaries) and selecting those roles – and talking to executors and guardians to ensure they're okay with those roles.”

So, there you have it. Wills 101: an online will tutorial in the Time of Covid-19. (Thank you to Matthew, Erin and Robyn for their insights, allowing me to write the blog through their expert lens.)  

You will die, eventually, so why not be prepared and do your will today? You’ve got plenty of time. “Tiger King” will still be there tomorrow.

An original article by Michael Yhip CFA, Vice-President, Portfolio Manager & Wealth Advisor, RBC Wealth Management.

*Note this article is not a recommendation to use any one lawyer or service, and I do not receive any compensation from any external party. In fact, I have not even met Erin Bury in person - but I am sure she is nice*

Feel free to Like, Share, Follow Me or comment and I hope you find it helpful.

About the Contributors

Erin Bury is an entrepreneur, speaker, startup advisor, and former technology journalist. She is the co-founder and CEO at Willful, an online estate planning platform that makes it easy for Canadians to create a will in less than 20 minutes. At Willful she’s responsible for driving the company’s mission to make it easier for Canadians to prepare for and deal with death in a digital age.

Matthew Getzler, a 2019 Lexpert Rising Star: Leading Lawyer Under 40, is a Partner in the Tax and Wills & Estates groups at Minden Gross LLP. His practices focuses on corporate tax planning (primarily for business-owners and other private corporations), as well as personal tax and estate planning (including Wills and Powers of Attorney).

Robyn Solnik, LL.B, TEP is a Vice President with RBC Wealth Management obtained her law degree from Osgoode Hall in 1991. Robyn has completed her in-depth tax courses, levels 1 and 2, the Advanced Tax Issues for the Owner Managed Business Course and the Corporate Reorganizations Course. She has co-authored two books, “Drafting Wills in Ontario: A Lawyer’s Practical Guide” and “Drafting Wills in Canada: A Lawyer’s Practical Guide”. In addition, Robyn was an instructor at the Estate and Trust Bar Admission Course at the Law Society of Upper Canada. She is an active member of the Society of Trust and Estate Practitioners (STEP) and has obtained the STEP Advanced Certificate in Family Business Advising.

About The Michael Yhip Wealth Management Group

We are an award winning Canadian based wealth management team specializing in working with business owners, entrepreneurs and individuals who have created, or are in the process of creating, significant value. 

The individuals and families we work with are looking for the highest level of service, experience and knowledge to help them establish and execute full wealth management plans that include financial planning; tax efficiency and minimization strategies; investment management; insurance; estate planning; and banking.

Michael has more than 25 years of experience in banking, capital markets, and global investment management. Michael won a Morningstar Investment Management Award in 2011 as President and Chief Investment Officer of Garrison Hill Capital Management - a global macro based investment fund. Clients and partners appreciate his unique skill set and the invaluable guidance this allows. Throughout the most severe economic downturns in the 21st century thus far — the 2008 financial crisis and the present Covid-19 pandemic — Michael has protected client capital and solidified his reputation for excellence in investment and wealth management.