One year later, what has mattered beyond wealth?

Transcript

Intro Speaker:

Hello, and welcome to Matters Beyond Wealth with your host, Leanne Kaufman, president and CEO of RBC Royal Trust. For most of us, talking about subjects like aging, late life, and estate planning isn’t easy. That’s why we’re going to help get the conversation started on this podcast while benefiting from the insights and expertise of some of the country’s top experts. We want to bring you information today that will help to protect you and your family in the future. Now, here’s your host, Leanne.

Leanne Kaufman:

When it comes to matters beyond wealth, perhaps the first things that come to mind are your health and your loved ones. Thinking about what will happen when we have passed or we become incapacitated… these are topics that many will find difficult to talk about, but it is so important that we do. These are the hard but critical conversations that this podcast aims to bring to our audience.

As we reach our one-year anniversary of this podcast, I would like to thank the many experts who have shared their insights and tips to help you, our listeners, prepare for the unexpected and to provide you and your families with peace of mind as you craft your estate and longevity plans.

Today, we’re highlighting some of the top episodes that resonated with you most over this past year. To start us off, we’re diving into an area that impacts so many Canadians: dementia and cognitive impairment. Both from the perspective of those who are diagnosed with dementia and those caregivers who support them and their loved ones. Let’s start with the facts.

According to the 2021 census data, the number of Canadians over age 85 is expected to triple in the next 25 years. Canada’s public health agency has published statistics indicating that the prevalence of diagnosed dementia is about 25 percent of the population over 85. That’s diagnosed dementia, so the real number could even be higher. This means we can expect the number of Canadians suffering from dementia to expand almost exponentially in Canada in the coming decades. If you’ve been following the media, we know our country is not adequately prepared to support the number of people with dementia now, let alone the growth in the future.

Leanne Kaufman:

Laura Tamblyn Watts is the founder and CEO of CanAge, Canada’s National Seniors Advocacy Organization, which analyzed this in their most recent Dementia in Canada Cross-Country Report. Here’s what she had to say.

Laura Tamblyn Watts:

There is no single jurisdiction in the country that was considered ready after we did this report. The statistic that really speaks to me most: in 2020, in Canada, there were about 6,500,000 or so thousand children, 17 or younger, so about 6.5 million, and there were about 2,300 pediatricians. What that means is there’s one pediatrician for every, something like, 2,800 children. In that same year, there’s more seniors. So, in 2020 there’s 6.8 million seniors and only, in that year, 327 geriatricians in the whole country. That means there’s one geriatrician, a specialist doctor in older adults—not just dementia, just anything to do with older people. So, one geriatrician for every 21,000 seniors, and that number is getting starker because that 327 geriatricians, lots of them are retiring and we’re not bringing more in.

Leanne Kaufman:

As you heard from Laura, that’s an astonishing gap in our healthcare system. Dementia diagnosis alone will increase as the population ages, not to mention the many other health issues aging Canadians will face. So, let’s look into what that time span is between when impairment or signs of impairment begin and when someone gets a diagnosis.

Laura Tamblyn Watts:

We know that there’s about 10 years where we have something called mild cognitive impairment. The first thing that goes is that higher level abstract thinking and risk tolerance. This is one of those reasons that where we’re talking beyond wealth, it affects your wealth because this is where people get into really risky financial behaviour, and we need to make sure that there are supports. Then you get into trying to get a diagnosis, which can take an additional one to five years, so you may be managing cognitive impairment for up to 15 years before you get a diagnosis.

Leanne Kaufman:

So it can take potentially 15 years before you get a diagnosis, and the number of geriatricians in Canada is dramatically low, but there’s hope.

Laura Tamblyn Watts:

There’s lots you can do to prevent dementia, and not every dementia but many forms of dementia. It’s kind of the same thing that prevents anything: eat right and exercise. If you reduce your alcohol, it helps. If you reduce your obesity, it helps. If you stop or reduce smoking, it helps. And if you start any physical activity, it helps. There’s some really interesting research around keeping your brain active. What we talk about is brain health.

Picking up a musical instrument, even if you’re bad at it like I am, the act of trying crosshatches between the globes of your brain and that keeps going. Learn a new language. Again, you don’t have to be good, but the act of learning. That lifelong learning and planning for things also reduces worry later. So, wealth management, playing around the “what if’s” is key. Personal family planning around what can happen is really helpful. Just the acts of confronting the “what if’s” and making a plan could actually, in some cases, not just reduce your stress, but actually keep your brain going. Early diagnosis is key, technology is going to help, and there’s some new treatments coming down the pipe.

Leanne Kaufman:

Laura’s message is clear: be proactive, prepared, and plan ahead while you still have your full cognitive abilities. This includes having your estate plan in place. Let’s start with a way you can plan to protect yourself in the case that you become incapacitated by having a power of attorney. There are two types of powers of attorney that are needed: a power of attorney for property and a power of attorney for care—they have slightly different names in other parts of the country. Kimberly Whaley, founding partner of Whaley Estate Litigation Partners explains what the difference is between these two types.

Kimberly Whaley:

So, more generally, a power of attorney obviously is a legal document. It allows capable adults who appoint one or more individuals as an attorney and to grant powers to that chosen attorney and to provide direction in a document to the attorney to make decisions for them. So, with respect to property, it permits a person chosen by the grantor to manage finances, for example, to pay bills, to manage investments, to pay taxes. And part of the responsibility includes ensuring that the finances are available for their personal care, which is a nice segue into the power of attorney for personal care. Which is also a legal document. You are able to appoint an individual who can provide consent to healthcare and treatment decisions, including health, medical care, shelter, nutrition, clothing, safety, and hygiene. And the role of the attorney is actually to arrange for care, not necessarily to provide the care. And then there’s a distinction between the power of attorney for property and a continuing power of attorney for property, Leanne. If it is a continuing power of attorney for property, it means it survives the grantors incapacity.

Leanne Kaufman:

To preface this takeaway…

Kimberly Whaley:

Concentrate, focus on the choice of the attorney. You don’t want to appoint somebody who doesn’t get along with their siblings, who’s fiscally irresponsible, who maybe can’t even manage their own affairs, or is in a different country, or under disability that prevents them from acting in a manner that’s prudent. So, I think the best takeaway would be the choice of the attorney, but also to communicate to the attorney that you are appointing that person, and get their agreement to act. And then maybe sit down with the family to say, “Hey, this is what’s going to happen in the event that I should be unable to manage my affairs. This is the person I’ve chosen. This is why.” And make it as straightforward as possible and give as many, whether they be oral or written, directions or instructions to the attorney to help them succeed in the role that you’ve appointed them in.

Leanne Kaufman:

Now, to help you through your estate planning, there are tools you can use in your plan that are sometimes overlooked, like insurance. Few of us really understand the way that insurance can be used effectively in our estate plans. It can cover costs associated with wealth transfer, but it can also protect and enhance the wealth we leave behind. As Robin Goodman, Vice President of Insurance, Trust and Estate Planning at RBC Wealth Management and Financial Services puts it…

Robin Goodman:

I wish we could call it something other than insurance just so that they can see the difference, but it’s one of the most efficient tools and it’s one of the few tax preferred tools that we have left in our tax planning arsenal for our families.

I think the biggest myth, actually, is that life insurance is something that you only need if you don’t have wealth. A lot of people think of insurance, as you described it, as something that’s there for protection and it’s really there for protection if you don’t have other resources to adequately provide for your family. The reality is that that is absolutely one of the very fundamental purposes of insurance and one of its great uses, but it can be used for so many different things. Quite frankly, the wealthier the family is, the more insurance becomes appealing to them. It’s just how we structure it that really changes.

Insurance isn’t just there for people who don’t otherwise have wealth. Insurance, in fact, is a really, really, really efficient tool for people who do have wealth. You have to think about it differently. Don’t worry about how old you are. Don’t worry about whether you have the wealth or you don’t have the wealth. If you’re interested in a tax-efficient estate planning tool to add to your plans (it doesn’t change them) we’re just adding to them. Then I think people should consider insurance, it’s really interesting to plan with.

Leanne Kaufman:

Another estate planning tool that is not widely understood and is underutilized, just like insurance: trusts.

Despite those depictions as trusts, as tools for the ultra-wealthy, the use of trusts here in Canada has really evolved. I would say, from my own perspective, a move from a largely patriarchal tool for widows to then what became maybe more of a tax planning tool to where we are today. And I will still say, pardon the pun, but in my opinion, trusts are definitely not dead in Canada and there are lots of great ways family can use the flexible tool to meet their succession planning needs. My longtime friend, and colleague Elena Hoffstein who is a lawyer with Miller Thomson LLP focusing on all areas of estate planning, family business succession, and corporate reorganization, describes how she sees clients using trust in their estate plans today.

Elena Hoffstein:

Trusts are used in estate planning during lifetime and to deal with assets after death, and death is the defining moment. So, trusts are used, to a large part, to eliminate or defer tax on death. That’s the relevant factor, so, I always deal with death as the starting point for the discussion. It’s to reduce or eliminate income tax or U.S. estate tax to the extent it applies or in jurisdictions, such as Ontario, that have high probate tax to reduce or eliminate probate tax. What the main objective is to pass wealth to the next generation in a tax-efficient manner. And just by way of example in the inter vivos, or lifetime planning, situation would be a common one is an estate freeze where a client wishes to freeze the value of his or her assets with the future growth going to be held by a trust where the beneficiaries include the next generations. So, you’re skipping over the tax on the future growth of the “freezor,” and passing it on in an efficient manner. I think that’s the most important reason why we use trusts.

The second reason, and they’re all kind of intertwined, is to deal with successive interests. An example, especially more prevalent in this day and age, is the blended family where the desire is to ensure that the current spouse is well looked after, but also the desire to ensure that the estate passes to children of either that relationship or that relationship and prior relationships on the death of the spouse. Another testamentary reason would be to, when the next generation receives those assets, depending on the values, is to delay distribution for the children to a certain age beyond age 18.

And the third one as a means to provide financial protection for vulnerable family members, such as family members who are subject to drug addiction or who are spend thrifts and don’t know how to manage money, or family members who have mental issues or age restrictions as I mentioned earlier.

Leanne Kaufman:

As much as trusts are a great tool, Elena also recommends…

Elena Hoffstein:

They have to be used with caution both during lifetime and on death situations. There are a lot of moving parts, and the selection of the trustees and other factors really have to be considered.

Leanne Kaufman:

Insurance and trust can be valuable tools in your estate plan. But another part of your estate plan that you don’t want to overlook are the dynamics between the friends and family you choose to act on your behalf as executor, trustee or attorney and the rest of your family. Before you brush it off and say, “It won’t be an issue for my family,” maybe think again. Joining me to dispel the myth and highlighting some examples to watch out for is Howard Black, a partner at Miller Thompson LLP.

Howard Black:

I would say that family dynamics play a role in 100 percent of all estate litigation disputes. Even without being so bold, I’d certainly say that it is a dominant factor in the vast majority of the estate disputes.

Some, but certainly not all of the red flags may include some of the following. For example, a parent marries a new spouse at a later age in life or even earlier in life, which then creates a step-parent/stepchild relationship, blended families. One or more potential beneficiaries being financially dependent on the parent during their lifetime. Another one may be the nature of the existing relationships among the siblings and their partners with each other, and I put the sibling and their partner as one entity. Even though relationships may appear to be seemingly fine, one shouldn’t be misled about this. I believe that the real colours sometimes don’t reveal themselves until after the second parent has passed away.

Leanne Kaufman:

There are truly few areas that can push buttons and pull triggers more on longstanding family dynamics than estate planning or the death of a relative. That’s why taking family dynamics into consideration is so important, especially when appointing executors and trustees. If you find yourself in this position, here’s the advice we leave you with.

Howard Black:

Seek appropriate advice from someone who’s knowledgeable not only in the technical legal aspects of estate planning, but who’s also knowledgeable and experienced in designing ways as part of the estate plan to minimize the potential for disputes down the road. That’s the key message, and then I think there’s an onus on the party, that when seeking that advice, keep an open mind, be honest. Although you may not want to necessarily anticipate a problem, at least be open to the remote possibility that there may be a problem down the line.

Leanne Kaufman:

So, plan thoughtfully beforehand to minimize any potential family friction. Great advice from Howard.

Another area that could present potential issues if you haven’t considered proper estate planning is the process of probate. And what exactly is probate? Richard Niedermayer, a partner at Stewart McKelvey explains.

Richard Niedermayer:

It is recognition through a formal process in every province and a court order that results, that says this person has died, this is either the document they’ve left or they’ve left no document, and this is the person that you as a third party—a bank, or the government, or whoever—should be dealing with in respect of that person’s estate because they’re the rightful administrator or executor of the estate.

Typically, if there’s land held solely in the name of that deceased person, you’re going to need probate in that province, wherever that land is. Also, if there are accounts—financial accounts, bank accounts and brokerage accounts, etc.—in the name of that deceased person, that financial institution is again going to look to a grant of probate or certificate from the court in the relevant province to confirm that they’re dealing with the right person as the executor or administrator to deal with the estate, and to take instructions from them so that they’re protected.

Leanne Kaufman:

That’s a clear definition of what probate is. We often hear that many Canadians may approach their estate planning with an emphasis to avoid probate. Richard breaks down why people try so hard to avoid it.

Richard Niedermayer:

There’s a number of different reasons, but I think it really comes down to three reasons.

One is there is a process involved. You have to submit the document to the court and some provinces are very quick to give their court orders, some take much longer. So, there can be delays built into the process, but once you start.

Secondly, the fees and taxes that relate to probate and they can be very high. So, people are concerned about that because these are wealth taxes effectively in the sense they apply to the total value of the estate, not necessarily gains on them. So, it’s applied to a very high number for many Canadians and then it’s a cost that’s paid to the government and draws out of what’s available to the beneficiaries.

The third issue—big issue—is really the confidentiality or privacy piece because these are court processes in every province, they are public, and it’s very difficult to get an order keeping the particulars of an estate confidential. People don’t want their Will being public or their value of their assets being made public. In addition to saving the tax, they also want to maintain the privacy.

I think those are the three broad reasons why people do try to avoid probate.

Leanne Kaufman:

If you are concerned about probate, some advice Richard left us with was…

Richard Niedermayer:

Have a Will. I think having a Will is important. There’s still 50 percent of Canadians that don’t have a Will. I think that’s critical.In terms of what we’ve talked about on the probate plan, as part of a holistic estate plan, in addition to having a Will and making sure it’s clear where things are supposed to go. Do consider as part of that plan, how your estate will be dealt with, whether it’s in probate or not. Are there things you can do to avoid it? It’s really making sure you’re purposeful in thinking about this topic when you’re looking at the overall estate plan because it is something that can create some important consequences to you that aren’t anticipated, and you can gain that confidentiality. You can avoid the probate tax and still have a very well-planned estate if you’re purposeful about how you do it.

Leanne Kaufman:

Richard makes an important point about having a Will. We know from a recent RBC Royal Trust survey through Ipsos that over half of Canadians still don’t have a Will. And that jumps to 70 percent for those in the age 18 to 34 group and two-thirds for those 35 to 54. We also learned that 25 percent of respondents don’t know where to start and many simply don’t think they need one. As Arin Klug from Epilogue Wills puts it…

Arin Klug:

It’s not like filing your taxes, there’s no deadline that you have to get your Will done by. Add on top of that, the fact that people think about making a Will going to a lawyer is something that’s expensive, could be time-consuming, and it’s really the perfect recipe for procrastination.

Leanne Kaufman:

The good news is with the innovation of technology, we have seen how it can help dramatically change how we work and learn. So, what about when it comes to our Wills? Well, there are two lawyers that look to technology as part of the solution to this estate planning gap that we have in Canada. Those two lawyers are Arin Klug, who you just heard from, and Daniel Goldgut, the founders of Epilogue Wills—an online platform that helps people create their own Wills, powers of attorney, and other estate planning documents. The most important thing, as Daniel puts it…

Daniel Goldgut:

Just start somewhere. I think there’s a lot of things like this where people procrastinate and it’s really hard to get started, because it just feels daunting. It feels like you need to be fully prepared to go all the way down this road for this long drawn-out experience, and that just might not be the case. So, I think it’s important for people to just start. That it can look different ways. It could be looking online; it could be calling a lawyer. But just starting the conversation somewhere, and people I think will find out it’s not as scary as they thought it was going to be, whichever path they end up going down. And there’s a lot of peace of mind waiting on the other side of it. It’s one of those things that sits on people’s to-do list for a really long time, and a weight can be lifted off your shoulders a little bit once you’ve finally gone ahead and done it, and you feel that knowledge that you’ve named an executor, you’ve named guardians, you’ve put basic planning in place. So just start. Start somewhere.

Leanne Kaufman:

And as for me, what’s the one thing that I want to leave the audience with today? Keep listening. The better informed you are on these topics, the more comfortable you will get with the conversation and the better off you will leave your family. Thanks for listening.

Outro speaker:

Whether you are planning for your own estate, the needs of your family or business, or you are an executor for a loved one’s estate, we can help guide you, simplify the complex, and support your life’s vision. Partner with RBC Royal Trust and ensure your legacy will thrive for generations to come. Leave a legacy, not a burden™. Visit rbc.com/royaltrust.

Thank you for joining us on this episode of Matters Beyond Wealth. If you would like more information about RBC Royal Trust, please visit our website at rbc.com/royaltrust.