How estate planning is evolving in Canada

The traditional family has changed dramatically in recent decades, including the wishes for the ways people choose to look after their loved ones. Add the digitalization of today’s world and the increased net worth of many Canadians and it’s clear that traditional estate planning could be fraught with limitations.

Today, estate planning includes several new considerations like accounting for cryptocurrencies in an asset mix, adding beloved pets to your will and finding new ways to give to beneficiaries and charities.

“Estate planning has really evolved over the years,” says Jag Gandhi, vice-president of wealth planning at Gluskin Sheff. “Many Canadians have more to consider, both in terms of assets and digital information, and that can make estate planning even more complex.”

Here are some of the emerging trends in estate planning that Canadians should consider in these changing times:

Account for digital assets in your estate plan

“We are one of the first generations to transfer digital assets,” notes Gandhi, including everything from social media accounts (e.g., Facebook), e-mail, cloud-storage accounts, online bank accounts, online loyalty programs and cryptocurrency. This could also include the photos and videos that you have stored online.

“Accessing digital assets can be really frustrating and difficult for executors because there is no straightforward procedure to help them figure out how to do it,” Gandhi adds. Therefore, it’s important that the will provides your executors with the right powers to help them access your digital assets.

Gandhi also strongly recommends that people create a digital inventory—which can be done with the help of a professional advisor or through a growing number of online resources—and make it accessible. The information can be provided to the executor in advance or instructions can be included in or with the will on how and where to access it.

The goal is to make your executor’s job easier at a time when dealing with your digital assets, adds Angus Gordon, wealth planning, philanthropy at Gluskin Sheff.

“There’s so much information that is locked away and can be difficult to get access to,” Gordon says. “It’s always easier for executors to have as much information as possible so they know where things are and don’t have to search for it.”

Planning for pets

A growing number of people have added pets to their households since the pandemic began, which has increased the need to add these furry and feathered friends to estate plans.

“Pets are a part of the family these days,” Gandhi says.

Gandhi says more people are adding clauses in their wills on how to deal with their pets if they were to pass away. Such clauses may include appointing who would take care of their pets and setting aside funds to pay for the cost of food and other expenses like pet daycare and vet bills. For some, she says the best option is to set up a trust for the caregiver of the pet that includes funds for the pet’s ongoing care and maintenance, so that the appointed pet caregiver is not burdened with such expenses personally.

“It doesn’t help anyone if the pet is going somewhere where someone doesn’t want it, or can’t handle having it,” Gordon says.

Charitable giving in your estate plan

Many Canadians are including charitable giving in their wills as part of their strategic philanthropic plan, and there’s a growing number of ways to give.

Some high-net-worth families have set up private family foundations to handle their charitable donations. A private family foundation is a corporation or trust registered with the Canada Revenue Agency. In recent years, a growing number of high-net-worth families have turned to donor-advised funds (DAFs), which are administered by a charity  to manage donations on behalf of the families.  Toronto-based research firm Investor Economics forecasts the value of donor-advised funds in Canada to nearly double to $10-billion over the next five years.

Gandhi says DAFs are helping to make philanthropy more accessible because donors don’t need to get involved in the management and administration of running a foundation like with private family foundations, which can be costly, onerous, and time-consuming.

“Donor-advised funds can provide the flexibility of giving, that many people are looking for as part of their strategic philanthropic plan,” Gandhi says.

Gordon also points to campaigns like Will Power, launched this fall, which encourages Canadians to leave a gift to charity in their estate. The goal of this campaign is to inspire $40 billion in gifts to charities by the end of the decade.

“A big part of it is to create awareness about leaving money to a charity in your will and how you can do it,” Gordon says. “It’s not that people don’t realize and want to give to charities when they pass away: It’s more that they don’t know how to structure it.”

More people are also donating artwork, marketable securities, insurance policies or other assets to charities, using the different giving structures that are available, some of which can have additional tax advantages.

Gordon recommends anyone looking to donate to a charity in their will discuss it with a professional advisor and the charity to ensure the donation can be made as efficiently and tax effectively as possible.

Letter of wishes

It is becoming increasingly common to add an addendum to a will typically called a letter of wishes, which is a set of private instructions or comments addressed towards the executors, beneficiaries, or other specific individuals.

“A letter of wishes can add an explanation or guidance for certain clauses included in the will which can remain private” Gandhi says. An example could be why a beneficiary received fewer assets or wasn’t included in the will.

“We suggest preparing letters of wishes to provide context and intention” Gandhi says. And while the letters may not be legally binding, they can be morally binding on the executor, she adds.

Time to update your estate plan

Our lives are constantly changing, including the people in our lives and assets that we own. Estate planning may not be top-of-mind with so many other immediate priorities, but it’s important to ensure your estate plan is updated so that your loved ones will be looked after—the way you intended—when you die.

“It’s always good to review your estate plan every few years,” Gordon says. “Even if you don’t change your will, you want to make sure that you’re still comfortable with how everything will be handled.”

It’s also a good idea to review your will with a qualified team of professionals who can ensure your estate plan includes traditional and non-traditional considerations.

According to Gordon “It’s best to work with an advisor who has the experience and knowledge to help you achieve your in-life goals and to leave the kind of legacy that you want”.