Financial Planning

My partners and I were saddened by the recent and unexpected death of one of our colleagues. It brought home the importance of proper financial planning.

First and foremost is an up-to-date will. A will is a legal document that sets out the terms and conditions for the precise disposition of one’s assets after death. It’s a topic that, for some reason, many people seem to avoid until it’s too late. If a person dies without a will, the situation is called “intestate” and loved ones will then have to follow guidelines established by provincial authorities. The legal difficulties can become expensive and nasty. I strongly urge everyone to consult with a legal professional and either review their existing will or establish a new one.

In addition to a will, I believe that you need to discuss with your legal advisor the need for power of attorney that can be used if you become incapacitated as a result of an accident, severe stroke, or coma. Under one of these conditions, you will not have the capacity to enter or exit legal contracts that might become crucial to the on-going benefit of your spouse, children, and business.

There are a few exceptions in which you can direct the disposition of your assets without the aid of a will, and two of the most important ones are the proceeds from an insurance policy and assets held inside a registered retirement savings plan with named beneficiaries. The financial death benefit from an insurance policy with a named beneficiary bypasses the estate and goes directly to those named in the policy. This can become very useful for many situations such as providing funds to pay down debts, mortgages, and other liabilities.


There are several types of insurance products for Canadian families and it is strongly advised that you contact your agent so that they can advise you on the various benefits and how they can be integrated into an appropriate financial plan. Your insurance advisor will perform a needs analysis and then recommend a suitable mix of insurance products. If you do not have a licensed insurance agent, then I would suggest that you interview at least two and then compare the recommendations and choose the one that you feel most comfortable with. Don’t be afraid to ask questions to make sure you understand what is guaranteed by an insurance contract and what is an illustration that is presented as sales material. Remember, for many Canadian families, the proceeds from insurance policies will provide the financial foundation for the surviving members to maintain their current standard of living.

For financial planning with mixed families, insurance products can be used to ensure the desired division of assets in the case of multiple marriages and divorces. Insurance contracts are also useful for the succession of family businesses in transitioning assets down to the next generation. For example, if a business owner has several children and not all of them are working in the business, then the proceeds of an insurance policy can be used as a source of cash to divide the assets in an equitable manner upon the death of the owner. An additional benefit is that the proceeds are creditor proof as long as there are named beneficiaries.

Registered retirement savings plans (RRSP) are another financial vehicle where the assets can be transferred to named beneficiaries without the benefit of a will. There are limitations on the designations, and it is best to consult a financial advisor to ensure that your wishes can be carried out the way you would like them to.

Some families try to simplify their financial affairs by maintaining their financial assets under joint tenancy with right of survivorship. While this certainly makes it easier for the transfer of investments and real estate, it can make it more difficult for the purposes of creating future financial loans and mortgages for families with dependent children.

I believe that it is important to create separate bank accounts for credit and emergency purposes. Financial institutions use credit measurement tools and past credit history to extend financial loans, credit cards, and mortgages to surviving spouses. Maintaining a good credit rating will allow you to access necessary funds that might otherwise be tied up during the death of a loved one and the settling of their estate. Financial hardships can occur if, for example, a loved one dies in a foreign country and the family assets are tied up until the presentation of a certified death certificate and a will that has been through probate.

Lastly, I cannot emphasize enough the need to maintain a list of assets including bank accounts, investment accounts, insurance contracts, powers of attorney, and, of course, the location of your most up-to-date will. The safest location is probably a safety deposit box just so long as your loved ones know where the key and safety deposit box are located.