Raising children is a decades-long financial drain.
But kids are such a comfort when you get old – emotionally and in a financial sense as well. Without kids to act as a power of attorney (PoA) for property and executor of your will, you’ll have to find – and possibly pay – someone to do the work for you.
Aging without the support of children may seem like a niche issue, but it’s not. More people are single today. And the high cost of living, notably housing, is persuading many young couples not to have children. My colleague Salmaan Farooqui recently looked at the financial benefits of life without kids.
When there are children in the picture, they may live far away or be estranged or too unreliable to take on the complexities of managing a parent’s property and health decisions, then executing their will.
So what do you do if kids aren’t an option?
Start with nieces and nephews, says Mallory McGrath, the founder and chief executive officer of Viive Planning, which helps clients develop aging and end-of-life plans. From there, consider the children of close friends you’ve known all their lives and, if necessary, your friends.
“Whoever you pick to do this role, even if it’s your own kids, I always say you should really look at their life,” Ms. McGrath said. “Can they do this? Do they have the time? And then, do they have the skill set?”
Giving someone PoA for property allows them to manage your finances if you are unable to carry on or if you choose to delegate that responsibility. You might rely on this person to pay your bills and manage your investments and taxes. An executor’s job includes settling debts, distributing money to beneficiaries and filing your final tax return. Obviously, financial acumen is a must.
Do not plan to use a trusted financial planner as an executor or PoA for property. FP Canada, which oversees the widely held and respected certified financial planner designation, has opened consultations on a rule that would largely prohibit CFPs from serving as an estate trustee, executor or PoA for property for a client while also providing financial planning.
Banks typically have a trust company division that can take on executor or PoA for property duties, but Ms. McGrath sees them as a second choice because of the cost and because she leans toward a family-oriented solution where possible.
She said her clients typically have assets of $2-$5-million, much of it in real estate. Even at that level of wealth, she feels a corporate executor is expensive.
Whoever you give PoA for property to and designate as your executor, make the job easier for them. Ensure they know where your will is kept, what financial accounts and other assets you have and what your wishes and preferences are. Ms. McGrath also believes in prepaying for your funeral and burial or cremation to lighten the duties of your executor.
“It’s just super smart to lock into prices now by prepaying for any big funeral-, burial- or cremation-related expenses,” she said. “Make it so that your executor doesn’t have to make decisions.”
Trust companies provide corporate executor services and take on power of attorney for property on a client’s behalf, but expect them to decline to serve as power of attorney for personal care. If you can’t speak for yourself, a PoA for personal care would empower someone to explain your wishes to healthcare providers.
Executor and power of attorney services from a trust company are priced according to the client’s assets. Tanya Postlewaite, vice-president of trust and credit union services at Concentra Trust, said a client with $1.5-million in assets and a normal to higher level of estate complexity would pay between $40,000 and $50,000 for full executor services. This assumes something like 18 months to settle the estate. Note that you can also arrange for a child, niece, nephew or friend to be paid a fee to act as your executor.
PoA for property services for someone with $1.5-million in assets would cost approximately $18,000 to set up and then roughly $15,000 annually at Concentra, which is the country’s seventh-largest bank-owned trust. Concentra is owned by Equitable Bank.
Ms. Postlewaite said corporate executors make sense for people with no children or with kids who live far away, as well as for families with conflicts that are best dealt with by a professional outsider.
“The whole administration of the estate goes so much smoother when a true trust professional is administrator,” she said. “Estates can be very messy.”
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.
Rob Carrick