As the old saying goes, “you can’t take it with you.” Associate Colin Flannigan recently spoke with Phil Johnson on AM 1150 regarding what happens to your personal belongings in the event of your death.
It is very important to layout your wishes through estate planning and a Will. This makes dealing with you assets in a crystal clear manner and family members know exactly what they are entitled to.
That said, there can be some conflict when dealing with the estate and around personal belongings. Colin gives several options to solve issues before they arise.
Phil Johnson: As always on a Tuesday morning, we have Tuesday Morning Law Talk and pleasure to welcome the lawyers from FH&P to our radio program. Associate Colin Flannigan for a conversation this morning and he's indicated that he wants to talk about personal belongings and the options that are available to people who will find themselves inside and outside the Will, Mr. Flannigan good morning to you.
Colin Flannigan: Good morning Phil, how are you doing today?
Phil Johnson: Well I'm stuck by part of what you wrote to me that says it gets particularly difficult at times when it comes to family heirlooms and sentimental items and people don't know how to handle this. Good on you I'm glad you came forward with this conversation.
Colin Flannigan: Absolutely. This is something that comes up often because as they say, “you can’t take it with you.” When we pass, we want to make plans for what's going to happen when we leave this earth. In that situation there are a lot of options available to people that we don’t necessarily think of. There’s the question about our personal items. Most people when thinking about their will and their estate planning they are planning for the big picture items, what happens to the bulk of everything? What about the other items, like those family heirlooms? There might be sentimental value, there might be dollar value, but there's also a lot of questions what do I actually just do with everything?
The question comes down to, do I give it away or does it get sold? It always depends on the circumstances because the thing about good estate planning is that it's very custom, there is not an “one-size-fits-all.” Sure the one consistent is the fact that everyone should have a will and a plan, but what you actually want to happen there's a lot of options available to people.
Let's jump right into some of the different ways people can deal with this. You can either have it dealt with inside your will or possibly outside as well. When people are looking inside the Will, there's a question about, “What are the options on how I can address personal belongings?” You can do it as a bequest which is a particular item for particular person. The benefits on doing it this way is that it is clear its saying “I give my antique chest to my friend Phil Johnson” and it is perfectly clear, its settled in the Will and it's binding. That's the positive side on doing this as a bequest.
Phil Johnson: But what about the three kids that all loved that cedar chest that mom had next to the couch in the middle of the living room and every time you open the door there was that beautiful smell of cedar that wafted into the room. Three kids are not going to be pleased that this good friend decided that Phil is the person should have the chest.
Colin Flannigan: Well that’s one of the benefits of doing it as a bequest because then it’s binding on the estate. Chances are if the kids wanted to do a potential Wills variation claim of that, it might not make a whole lot of sense. The benefit on doing it as the bequest as I said, it's clear and legally binding “my friend Phil gets that cedar chest.”
With every choice or every option there's always negatives involved as well. If I change my mind and told my kids I want to give the cedar chest to my friend Phil but it resulted in some contention, my kids aren't happy they think it should stay in the family. If I want to make that change, I actually have to change my will and I have to go to the formal process of either doing a codicil or a new Will to make that change. So if you do it as the bequest, its clear in the Will but it's a little more difficult to make a change.
Sometimes in different circumstances we might want to create more flexibility and there are different options on how we can address the personal belongings. For example, it's not just the cedar chest but all of my other personal belongings and maybe I want to give my executor the discretion to deal with those. You could give an option to the family members on who might want particular items and then anything else that people don't want they could get sold. The positive is that it is less regimented and can create the flexibility if everyone gets along. That said it could give rise to some complications, for example, what if more than one family member wants the same item or who gets to choose first? To solve that we always start looking into what are the actual circumstances, what are the relationships and what's appropriate? You can set out in your Will “orders” that will indicate who will be able to pick from my personal belongings and this is the order they pick and we do rounds. Another option is not choosing who picks first because every parent loves their kids equally, so you could create a draw on who picks first, second or third. But then the question could come up, do you do a draw for every round, it’s completely up to you and you can set this out. There is flexibility to plan the section out.
Some people might even do a hybrid where everyone picks an item in one round and then just deal with the question on a tiebreak scenario. In that situation is it going to be in one round each person gets to pick their top three items and if there is a tie that both people pick the same item at number one, at that point you could do it as a draw or does the executor decides? There are a lot of options available to people and it just comes down to the question what is appropriate in this circumstance?
Phil Johnson: I’m aware of a family program that when I heard about it, it has stuck in my mind forever and it is called the “post-it note program.” Somebody had the green post-it note, somebody had yellow, somebody had pink and somebody had orange and you walked around the house with the parent still alive putting post-it notes on all the things that you wanted. Suddenly if you had four post-it notes of all varying colours on the same thing there was a conversation held right then and there in the room that everybody put their case why they believe that it should go to them. Then ultimately either it happened as you're describing as a draw or when one of the individuals that had the coloured post-it note, presented their case of why this was important to them the other three kids looked and said “you know what it's yours.”
Colin Flannigan: It’s a great idea to work it out nicely in the right circumstance. It comes down to what is the relationship among those family members? Is there going to be a situation where everyone will respect everyone else's opinions and their cases that they state, or perhaps is there a little more acrimony involved in the family where they might need to worry about people moving notes? Unfortunately stuff like that can happen so when we are setting out this type of process its always about trying to figure out what is the best and most appropriate for the circumstance.
One of the other options to work together with this is a memorandum clause. That is you can put in your Will saying that “I'm not ready to make the decision right now.” Perhaps people are still going through the process of the post a note system and I'm not ready to make the decision and it might be subject to change. You can put the clause in your Will saying that notwithstanding that it's not in testamentary form, it’s not in the form of a formal Will, I could do a memorandum to my Will which sets out the personal belongings who I want to go to a particular people and if circumstances change I can carry out that memorandum and then do a new memorandum without needing to change the Will itself. So that circumstance can be appropriate because it gives flexibility in that situation particularly giving the Will maker that option that while we will do the post-it-note system now, what happens if one of those people passes away? If you got the three kids you've done the post-it note system everyone made their choices, there was a couple of draws and everyone came to the same understanding what's appropriate and what's fair and then one of the kids passes away. In that situation you might want to redo that post-it-note system and might want to record it in one of these memorandums. These are some of those types of options available to people to try to give that clarity to everyone.
Phil Johnson: Wouldn’t that come to a point that the things that have been accorded to the individual that had the blue posted notes that now tragically and unfortunately died would the things that had the blue post-It notes on it automatically fall to their estate and indeed be passed on to their kids?
Colin Flannigan: Only if you set it out in the Will that that’s what happens.
Phil Johnson: Colin Flanagan from FH&P, good guy to know if you're talking about wills and the disposition of assists contained within.
VIDEO - Succession Planning
Something that is often overlooked when running your business day-to-day is your succession plan.
Round 2 of Express Entry
Canada invites 4,750 to apply for Express Entry Permanent Residency in the second round of invitations
VIDEO - Business Risk
Associate Dan Shea talks about the risks of doing business as yourself compared to a corporation.