Women face unique challenges which make estate planning essential
Why an update to your estate plan is a good idea
Debunking the most common myths around estate plans
A checklist to get your estate plan in order
Nadia runs a successful consulting business in downtown Calgary. It struggled a bit during the pandemic but her “baby” is rebounding nicely. Recently divorced, Nadia lives with her three school-aged children and is also a part-time caregiver to her ailing mother who lost her husband to cancer three years ago.
A typical day for Nadia is one of constant juggling between her duties as an entrepreneur, mother and caregiver. And Nadia is not alone. According to Statistics Canada, one in four Canadians aged 15 years and older (7.8 million people) provide care for family members or friends, with women accounting for 54 percent of all Canadian caregivers. Caregivers who are part of the sandwich generation—who must simultaneously meet the needs of children and parents—often face greater challenges on the personal and financial front in attending to their obligations.
Nadia could really benefit from an estate plan. Women often believe that they need significant wealth to have an estate plan, simply don’t need one, or put off this important task because they have an overflowing to-do list. But making the time and getting it done—especially when facing unique challenges—can prove invaluable.
Estate Plan Defined
Contrary to popular assumptions, estate planning is more than just a Will. It refers to a variety of tasks focused on managing an individual's assets in the event of incapacitation or death. An estate plan can include everything from a “living Will” (also known in Ontario as a Power of Attorney for Personal Care) that sets out intentions for one’s health care upon mental or physical incapacity, to a “last Will and testament” that kicks in after your death.
It spans the naming of an executor to carry out your wishes, appointing a guardian for minor children as well as probate and tax minimization strategies. There are various reasons for planning an estate, including preserving family wealth, providing for a surviving spouse, children, or parents, or creating a charitable legacy.
Benefits of Estate Planning for Women
As Nadia’s story demonstrates, women caregivers—who bear a much greater burden caring for their loved ones than their male counterparts—must be mindful of the needs of those who depend on them. How would Nadia ensure her mother was cared for if she predeceased her? How can she be sure her wishes were communicated effectively in case of incapacity? Estate planning offers peace of mind by formalizing answers to those questions.
As an entrepreneur, moreover, Nadia faces other unique concerns, namely: who’s going to run her business if she no longer can? If Nadia falls ill, loses her mental capacity, or even dies, does she have a plan in place for the succession of her business? Has she communicated how she would like her corporate assets to be preserved or invested?
Nadia also serves as a good example for why divorced or separated women, particularly those with children, are good candidates for estate plans. It’s the best way to ensure dependents are taken care of in a way that’s consistent with their wishes. Blended families involving children from previous and current marriages can get even more complicated, with additional hands in need of financial support.
Family dynamics in blended families can impact relationships when money is involved. Friction among siblings can be avoided or minimized if an estate plan is put in place and communicated to family members, preventing any surprises at death. Women often want to ensure that family harmony is maintained after their death which makes it all the more important to have a well-thought-out estate plan.
How does the mother in a blended family make sure her children receive the share of her assets as she intended? With estate planning, she could leave money in a spousal trust, ensuring her partner receives the income, while the capital goes to her children upon her death. If she’s concerned that her child will be irresponsible with their share of the inheritance, a testamentary trust could also guarantee that her assets are issued incrementally over time, at the trustee’s discretion. Just some of the ways estate planning can ensure one’s wishes are met.
Keep in mind that, statistically, women also live longer than men, which means they’ll potentially incur greater long-term care expenses down the line. An estate plan can offer a sense of security, knowing that their future needs are taken care of. Women also tend to be more philanthropic by nature than men. An estate plan will allow them to create a legacy that specifically outlines the manner in which they would like to distribute their wealth after their passing, whether that be to their children or to their favourite charities.
Residents of Ontario should take note of recent amendments to Ontario estate legislation. As of January 2022, a marriage can no longer invalidate a Will, a change with significant consequences. The new law also states that the former spouse of a separated couple (even if not yet legally divorced) no longer has any property rights. And the legitimacy of an improperly executed Will can no longer be contested if the document clearly states the deceased’s wishes. This more flexible interpretation of the law will make it easier for assets to be distributed according to one’s true intentions. Of course, estate rules differ by province so best to check the legislation where you live.
How Women’s Estate Planning Needs Evolved
Women’s wealth is on the rise. In fact, by 2026, it’s estimated that Canadian women will hold more than half the personal wealth in Canada, a huge increase compared to even a decade earlier.
A 2015 BMO report, Women in Wealth, highlighted some of the significant strides women have made both professionally and personally over the last 50 years. Women, for example, are the primary breadwinners in over 31 percent of Canadian households, control about $1.1 trillion in personal wealth (expected to grow to $2.7 trillion by 2024), and will inherit $900 billion in financial and real assets over the next decade.
Let’s not forget that entrepreneurship is stronger than ever among women, with over 360,000 self-employed today, representing a 30 percent increase in women-owned businesses in the last ten years. As of 2017, women were majority owners of approximately 15.6 percent of Small Medium Enterprises (SMEs), representing approximately 114,000 companies. And in 2019, they accounted for over 37 percent of self-employed Canadians.
What’s more, close to $1 trillion in personal wealth is in the process of being transferred from one generation to the next in Canada, effectively shifting wealth demographics largely toward women. With many more women choosing to get married later in life, running their own businesses and earning higher incomes than ever before, their level of financial independence and accumulated wealth is at an all-time high. That evolving financial landscape should impact their financial decisions, with an estate plan playing a key role.
Estate Planning Documents
Estate planning takes a lot of thought and preparation. But, with the right documents in place, you can feel confident that your needs and those of your loved ones are in good hands. The following is a list of the most important documents that every estate plan should include—and unique considerations to keep in mind.
1. Power of Attorney for Property and Personal Care
A formal legal document whereby you can appoint someone to represent you or make decisions on your behalf in relation to your financial affairs such as your business or, for example, managing your investments. It can also outline your wishes regarding health care and medical treatment should you no longer be able to express informed consent.
2. Last will and testament
Also known as a Will, it’s a legal document that details your wishes should you die and the cornerstone of an estate plan. It often includes details on the distribution of your assets, including property, money and any personal items of value. You can also name an executor and guardian for any dependents.
An individual creates a trust by entrusting their property to a trustee who is now obligated to hold the property for the benefit of one or more people in the individual’s family. The terms of a trust are usually set out in writing in the document. There are different types of trusts that can be created during one’s lifetime called an inter vivos trust, or upon death called a testamentary trust.
4. Shareholder’s agreement
An arrangement among shareholders that describes how a company should be operated and outlines shareholders' rights and obligations. Shareholder’s agreements are important in estate planning as it details what occurs should a significant life event (e.g., death) or an important shareholder development (e.g., liquidation of shares) arises.
5. Schedule of assets
A document that details the value of your estate to ensure the distribution of your assets in accordance with your Will. It lists all your possessions (property, money, investments) as well as any debts. The document should also include named beneficiaries of any RRSPs, RRIFs, TFSAs and life insurance.
Time to Update Your Estate Plan?
You heeded the call to establish an estate plan years ago. Good for you; you’re one step ahead of many. But if your personal or professional life went through a significant change recently, it’s time to take another look.
Julie is a 39-year-old teacher who recently got remarried in her hometown of Halifax. She had her lawyer draft an estate plan before her first marriage and doesn’t see any reason to go back to the table. Her friend Sheryl is on a high after selling her business and feels similarly. Why revisit a certified document?
Here’s the thing: whether you got married, remarried, separated, divorced, introduced your home to a blended family, gave birth to a child, or purchased a business or property, every new circumstance would benefit from an estate plan update.
Julie, for example, may want to revisit the trust she established in her former husband’s name. Or address the matter of providing for her current husband’s two kids if she predeceases him. Life gets tricky when blended families are brought into the mix. It would behoove Sheryl, meanwhile, to stipulate in her revised estate plan how she would like to distribute the windfall from the sale of her business. As a single woman with no living parents, she needs to be exceptionally clear in her documentation as to where her money lands, lest it fall intestate upon her death. Dying intestate, or without a Will, results in the provincial legislation dictating how your assets will be divided. This means that family members who you never intended to benefit from your estate could very well receive a portion of your hard-earned wealth.
Six Myths About Estate Planning
There are some common misperceptions around estate planning. Let’s look at—and debunk—the most popular myths out there.
1. An estate plan is only valuable to older people
Without sounding grim, the reality is you can become incapacitated and/or pass away at any time. Life is unpredictable, after all. An estate plan simply provides a sense of security in the knowledge that—should the unthinkable occur—you and your loves ones are taken care of. That sense of wellbeing is beneficial no matter your age.
2. Men benefit most from estate plans
Let’s be clear: everyone needs an estate plan. That said, women often face unique challenges that make an estate plan even more valuable to their needs. Whether divorced, remarried, a single parent or an entrepreneur, women are increasingly learning the importance of taking empowered steps toward financial health and security. An estate plan fits well within those goals.
3. I don’t need an estate plan because I’m married without children
First, you may have children one day and you’ll want to protect them in the best way possible. Second, your marital status doesn’t preclude the benefits of an estate plan. If you die prematurely without setting one up, your assets may not end up where you think or want them to. They may end up in probate and your grieving spouse will now have to deal with that added hassle. Not only is the process long and expensive, a third party will now be appointed to decide what happens to your assets. Not exactly a scenario anyone would wish on their loved ones.
4. My family will take care of things
Sure, they can take care of things—if you detail your wishes for those things beforehand. If you don’t designate someone to make decisions on your behalf in case of incapacity or death, things can get messy. Your family may not be clear about your intentions. With a plan in place, you can feel confident that your wishes regarding your health care and assets are followed. And you can feel good knowing that you prevented unnecessary family disagreements over those decisions.
5. I need a lot of wealth to have an estate plan
Estate planning may sound like something reserved only for the wealthy, but that’s not the case. Whether you have a lot of money or very little, there is value in determining where it goes in case of the unpredictable. If you worked hard for your assets, why not protect them? Similarly, you don’t need to be wealthy to appoint someone to take care of your medical care decisions (via a living Will).
Besides, without a plan in place, your loved ones can incur significant expenses settling your affairs. And remember: even if you aren’t wealthy today, estate planning is about planning for the future—when you may have more assets to worry about.
6. It’s expensive to put an estate plan in place
While the cost of traditional estate planning is not cheap, the alternative can prove even pricier. Without a plan in place today, your friends, spouse and family may end up incurring significant expenses in legal and probate fees tomorrow. Moreover, there are a growing number of estate planning documents which can make your estate planning efforts much more affordable.
Women are taking significant steps forward in the workplace and in business. Their financial health is at an all-time high. But they also face unique challenges and are often expected to care for their ailing parents, while tending to their children and their business. That’s why there’s never been a better time for women to make smart and proactive decisions about their future. And an estate plan is at the heart of those decisions.
We can help
Women find themselves in a different situation today than they did fifty years ago, a time when it was assumed that women couldn’t and shouldn’t be in charge of financial decisions. Today, estate planning is as critical as financial planning for women. Documenting those wishes in an estate plan with a qualified legal professional is critical, no matter who you are and what you own. That’s why it’s important that you don’t put off this important exercise until it’s too late.
At BMO Private Wealth we understand women’s particular needs and concerns and we’re available to help you realize your financial goals, safeguard your assets and protect the ones you love.
For more information, please contact your BMO financial professional.
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