For many years I have been helping clients keep the financial affairs of their business and personal life in order, ensuring proper records are kept and tax returns filed.
By nature, this is reassuring for my clients. They can clearly see the importance of getting regular reports on their corporate finances, and everyone wants to avoid big problems with the Canada Revenue Agency.
But these same people who have such a common sense attitude about handling their everyday affairs often balk at the idea of taking the three most important steps in ensuring their financial legacy is handled well should something bad happen to them.
They procrastinate over writing their will and they often outright refuse to name a power of attorney.
If they do write a will, the third problem is they often name a close relative or trusted friend to be their executor, without even questioning whether the person they trust has the actual skills to do what is often quite a complicated job.
If you are making New Year’s resolutions about keeping your business and personal financial affairs in better shape, addressing these issues is vital.
You need a will, and in my professional opinion, involving a lawyer in drawing it up is important. Legally you can make a will on your own without legal advice, but be aware that your best intentions may not be followed if your will is not comprehensive and conscious of the tax laws of your province.
A will can ensure that if you spent years building up a business that it goes to the person of your choice or is sold at the best price. It can also help your estate pay less taxes and ensure that what you want happens quickly and efficiently, and does not drag on for years.
In naming an executor or trustee, take the time to ask the person if they are willing to help and if they know what will be expected of them.
If your estate is complicated, you may be better served by hiring a professional executor to do the job. Never just write down the name of your executor on the hunch that they will do it without asking them. That can have disastrous results.
Lining up a power of attorney while you are thinking rationally and in good health is also important.
This is particularly vital if your estate involves a business and the livelihood of many people depends on it.
Putting it off until you think you need it is like playing Russian roulette.
What happens if you are suddenly stricken with a debilitating stroke or brain tumor?
What happens if you are involved in a car accident and unable to run your business or your life for several months?
What happens if the torment of dementia has already started but you are unaware of its presence?
Just because we want to stay positive and not consider all the bad things that could happen doesn’t mean that we can protect ourselves by wishing it so.
It really pays to have a will prepared and a power of attorney so that if something happens to you, when you recover you still have a business and your assets intact.
There are little things that people don’t consider, but which I have seen cause huge problems.
You may have a safety deposit box but only you can access it, for example.
If your will or final directions leave no reference to this or grant permission for another to get into it, you may tie up riches that you want your grieving spouse to have.
Once you make a will and select a power of attorney, I recommend that you update it at least once every five years, or any time you undergo a significant life change such as a separation or divorce.
It won’t cost you much in the grand scheme of life, and it will protect the assets you worked so hard to acquire.
Certified professional bookkeeper and certified tax specialist Elena Ivanova is managing director of Piligrim Accounting Inc., a national accounting and tax preparation service based in Richmond Hill, Ont. You can reach her at email@example.com.