Why making a Will is choosing caring over chaos

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:

It was Benjamin Franklin who’s attributed with coining the phrase, “The only certainties in life are death and taxes.” I happen to work in an industry where both topics come up more than most people are comfortable with. But, Franklin’s words are true, no one can live forever. We all know that we need to prepare for it eventually, but why is it that so many of us delay or avoid altogether putting an estate plan in place?

Hello, I’m Leanne Kaufman and welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. Today I’m delighted to be joined by Michael Sherman, head of RBC’s Behavioral Economics team. Michael is an authority on the practical application of behavioral science with a distinguished background that spans business, law and the social sciences. Together, Michael’s going to help us explore how behavioral science can inform and transform the way we approach estate planning, empowering you to take control of your legacy today.

Michael, thanks for being here with me today to talk about how behavior drives our estate plans and why this matters beyond wealth.

Michael Sherman:

Thank you, Leanne. It’s a pleasure to be invited.

Leanne Kaufman:

So maybe you can start by giving those of us who don’t know a lot about behavioral economics a little background. What is it and why do we consider it relevant?

Michael Sherman:

Well, behavioral economics is all about how people actually think and make decisions. Now, a good way to look at it is to compare it to traditional economics, which was kind of based on the premise that if people have ultimate amounts of information, if people have a lot of time to digest that information, they’ll make rational and logical decisions. But in real life, people don’t have that ability and often they make decisions based on mental shortcuts, they might procrastinate, and sometimes they don’t do the things that they should do. And what’s really interesting is there are a whole bunch of biases that are connected to behavioral science and it’s predictable when those biases might kick in. And a perfect example of when behavioral economics is useful is to help understand why people know that they should be making a Will, but somehow, irrationally, they don’t.

Leanne Kaufman:

Well, and this is a topic, of course, you and I have had a few conversations on before, particularly around that making a Will. I know we’re going to have to talk in generalities of course, but broad brush to get us started here. What does get in the way of people wanting to plan their estates based on what you’ve studied?

Michael Sherman:

I think it’s great that we can look at it generally at first because what you need to make a decision or to encourage somebody to adopt a new behavior is that person has to be motivated to change their behavior. They have to have something that really pushes them forward so that they say, “Yes, I want to do it.” And I think what’s interesting is a lot of people are motivated to create their Wills. I think the report that the National Institute on Ageing and Royal Trust put out showed probably 91% of people knew that a Will was a part of an estate plan that should be adopted.

But on the other hand, it has to be easy because even though we’re motivated to do something, if we find that somehow it’s just too complicated or we don’t know where to turn, that will stymie us. And the third thing you need, if you have enough motivation and ease, is a trigger or a prompt. Something that makes you say, “Aha, I’ve got to do this.” I think what the problem is, and this is why under half of Canadians don’t have Wills, is because they haven’t had those three elements all at the same time. My goal is to try and help them put everything in place that they need to make that decision and make the jump and go forward and say, “Hey, I want to get a Will.”

Leanne Kaufman:

I’m glad you raised the National Institute on Ageing report because you were part of a panel that we did coming out of that report. So if our listeners want to learn more, they can go and find that, Where There’s a Will, There’s a Way, recording that we did as well that dives really quite a bit deeper into some of these topics, not just the behavioral economics. But it also came out in that report that—to one of your points—the biggest reason that people cited for not having a Will was that they didn’t know where to start. So that was interesting too, but I’m sure we’ll go deeper.

What do you think are some of the common myths or what does your research show you some of the common myths or biases that people may have that do prevent them from being motivated to start the process, have the necessary conversations, etcetera?

Michael Sherman:

Well, there’s so many of them. It’s almost like a petri dish for all the different biases at once. So from the top of my mind, there’s a bias called status quo bias, which is all about inertia. People tend to continue doing what they’re doing unless there’s a force that pushes them to change their behavior. I’ll leave it for the future, I’ll procrastinate.

Another one is present bias. We like to live for the day and almost by definition making a Will is looking into the future. And in our panel, I was telling you how people sometimes treat their future self as being a completely separate individual. They did studies to show that preparing for the future is not our priorities and we tend to want to live for today.

Another one is loss aversion. There’s perhaps some time and some money that might go involved into making a Will and people want to put that off for as long as possible. But when you think about it, the benefits of creating a Will and not being in a situation where you’re leaving a burden for the ones you love should outweigh these biases and there are ways to overcome them and really put it to the top of the agenda to try and make the decision that is in our client’s best interest. It’s in Canadian’s best interest.

Leanne Kaufman:

Yeah. Well, and hopefully conversations like this help them at least identify the bias. I mean, I probably harbor a few of those myself, even though I work in this, and I do have a Will, full disclosure. But what do you think about—even getting the conversation started back to the point of people don’t know even where to start in some cases—do you think it’s easier for people to start that conversation with the professional network that they have, like their financial advisors, their lawyers, their accountants? Or do most people start that conversation on a more personal note, do you think?

Michael Sherman:

That’s a great question. I do think that an important element is to speak with a professional, to make sure that you understand the subtleties of creating a Will. On the other hand, there’s nothing to stop you from putting some thought to what your assets are and where you might want to allocate them after your death.

So getting back to the ease, I think one of the problems might be people don’t know where to turn. If you put down on your to-do list “get a Will.” Well, the sequence of events that you actually have to take is not clear. So what I often like to say is maybe reach out to somebody you trust, a friend, an accountant, another lawyer and say, “Do you know a good lawyer who can help me create a Will?” Because not all lawyers are estate lawyers, so they wouldn’t be surprised if you approach them. And knowing the steps that you have to take, literally writing it on your to-do list “find a lawyer.” Or there are some online tools that I realized that Royal Trust is supportive of that are also great. But I do think that it’s really important to do it step-by-step and try to avoid the broad goals just simply saying, “I got to get my estate plan in order.” Do it step-by-step.

Leanne Kaufman:

Yeah, great advice for most tasks that seem kind of monumental or overwhelming, but this one’s no different. So what do you think ends up triggering people to motivate them to take that first step, ultimately?

Michael Sherman:

Yeah, that’s a great question, and it’s interesting when you say trigger to motivate because you have to have sufficient motivation. If something triggers you but you’re not motivated, you probably won’t act. It’s got to be easy. So it could be a host of different things that finally triggers you.

Some of them could be intrinsic, internal, like the idea that you’re worried about the people that you love and what’ll happen if your Will’s not in place. That nagging feeling, that’s internal. But it could be extrinsic as well, like the idea that there’s a family milestone, you get married, you have a child, that makes people think about their legacy.

It could be your age, if you hit a milestone age or your health, the loss of a loved one is something that makes people stand up and say, “Hey, that could happen to me.”

Another bias is we tend to be overconfident and think, it’ll never happen to me. Life changing events like divorce or remarriage and all the issues that might arise if you don’t update your Will and you undergo those. Then finally, global events. We just underwent a pandemic and there’s reason to say, “Hey, it’s unlikely that I’ll need a Will in the near term, but I got to protect myself and make sure that I take care of everything that I need.” So those are some of the triggers.

Leanne Kaufman:

That last one you mentioned, the pandemic was actually the reason that we went out and did the survey that led to the report with the National Institute on Ageing, because we thought [there was] so much focus on healthcare, advanced care planning, estate planning during the pandemic, so many people much more willing to talk about it. We thought, surely the dials moved. Surely, we have something far less than 50 percent of Canadians living without a Will these days, but that wasn’t the case, at least when we did the survey. Maybe it’s a lagging indicator, but it’s fascinating nonetheless.

So what would you give our listeners as tips on how to overcome the lack of motivation, the inertia, the fear, whatever the problem seems to be that’s stopping them from getting this little task done?

Michael Sherman:

It’s important that you mention, you have to identify what’s stopping them. If it’s that it’s not easy, we already spoke about the idea of taking small steps. So put it on your to-do list, actually tell the people you love, “Hey, I’m going to reach out to friends and find a good lawyer, or find a good online approach to creating a Will.”

Another thing that you can do to overcome status quo bias is almost budget in your own mind that if you do see a lawyer, there might be a cost associated with it, but it’s inevitable. It’s almost like once you’ve accepted, yes, there will be perhaps a modest cost to create a Will, then it’s not something that is a loss, you basically put it aside for the future. It’s inevitable, so you have to do it. And talk to people about it, realize what the consequences are if you don’t make a Will. The report we talked about earlier goes into some of the consequences, and it could be chaos. The burden on your family and your loved ones can be immense if you don’t have an estate plan in place. So think about caring for them, think about making it easy, and in the end, hopefully you’ll make the decision “I’ve got to act” and hopefully act soon.

Leanne Kaufman:

Wow, this is fascinating stuff, the area you live in, and I hope that maybe anyone who listens to this podcast takes it as a little bit of a nudge to get over whatever it is that’s stopping them from taking the step if they’re one of the people that we’ve talked about that doesn’t have their affairs in order yet.

Michael, if you could just ask listeners to remember one key message from our conversation today, what would that be?

Michael Sherman:

As we talked about before, Leanne, I think preparing an estate plan that takes care of your family is an act of caring. So, if I had to come up with a memorable message, it would be choose caring over chaos.

Leanne Kaufman:

I like that one. Well, maybe we’ll put a little TM on that one, Michael. Well, thank you so much for joining me today to talk about identifying the reasons and the strategies to help us start or update maybe our estate plans and why all this matters beyond wealth.

Michael Sherman:

Thank you very much for having me.

Leanne Kaufman:

You can find out more about Michael Sherman on LinkedIn, and if you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. Until next time, I’m Leanne Kaufman. Thank you for joining us.

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.