RBC Insurance simplifies inheritance

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Canadians are worried about the cost of settling their estates, but segregated funds provide a convenient alternative

WITH $400 billion expected to be inherited in the next 10 years, Canadians clearly have a lot to think about – especially when this transfer of wealth gets tangled up in a legal process called probate, which comes with a raft of often unnecessary fees and complications. Yet a lack of knowledge about the estate process is preventing Canadians from realizing their wishes for end-of-life, which often include a desire to transfer a sizable inheritance to loved ones as quickly and simply as possible, as revealed by a recent survey by RBC Insurance about estate planning. The good news is most respondents believe inheritance

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“Since segregated funds are an insurance product, they bypass probate entirely. They avoid the fees and taxes that can siphon away upwards of 10% of your estate”

Selene Soo, director of wealth products at RBC Insurance

planning is important. The not-so-good news is they often don’t want to talk about it – whether with their loved ones or financial planners. For Selene Soo, director of wealth products at RBC Insurance, the results are a familiar mix of optimism and concern. While it’s good that Canadians realize the importance of planning their estate, the reluctance to discuss it with others is a persistent problem. During a recent interview with Wealth Professional, Soo discussed the survey’s findings, while outlining solutions that have the potential to save a significant amount of time and money.

RBC Insurance’s survey of 1,500 Canadian adults aged 18 years and older illustrates a number of issues, including a lack of knowledge about the estate planning process, probate, and the solutions that can help them meet their goals. While Canadians are worried about saddling others with a costly and complicated process to settle a will, they don’t always know what happens to their money when they die, and that there are alternatives that could save money while perhaps making estate planning a little easier to discuss.

Segregated funds offer a way to avoid the legal wrangling over a will and make inheritance more efficient for everyone. Segregated funds such as RBC Guaranteed Investment Funds not only provide the growth potential of a mutual fund with the security of a guaranteed principal, but they can also skirt the costs and complications that come with a conventional will. “Since segregated funds are an insurance product, they bypass probate entirely,” explains Soo. “They avoid the fees and taxes that can siphon away upwards of 10 percent of your estate – and the proceeds can be distributed to your loved ones in days instead of the months and sometimes years it takes with probate.” Along with saving time and money, segregated funds offer another advantage. As Soo points out, “While wills are public documents and can be seen by anyone who pays a small fee, segregated funds aren’t part of a will, so they’re completely private.” After all, although a transparent discussion about estate planning is encouraged, it’s understandable that in certain cases people will want to limit this transparency with their loved ones.

As someone with 20 years of experience in wealth management and insurance, Soo is an expert when it comes to navigating the financial landscape of estate planning. However, personal experiences with her own family have also helped Soo relate to the sorts of emotional hurdles that saw more than half of survey respondents say they’re not comfortable discussing inheritance. Soo underlines that there are two certainties in life – death and taxes – and inheritance just happens to deal with both. While talking about them isn’t easy, the conversation really needs to happen sooner rather than later. “My parents have always been very open about their inheritance plans,” Soo says. “But it’s hard because you don’t want to think about their mortality.” Drawing upon experiences within her own family, as well as her observations of others over the years, Soo believes there are four steps one can take to overcome reluctance to discuss inheritance.

1. Be thoughtful. Take some time to consider who needs to be present and where the discussion should take place. For some, it’s better in person, but for others, the phone or video might be easier. 2. No surprises. Let people know that you want to talk about your estate plans. Call a family meeting and establish a tone that prepares people for what might be an uncomfortable discussion. 3. Use sensitivity. Just because you’re ready to discuss these things, it doesn’t mean others will be. 4. Small steps. When people are uncomfortable, take it one step at a time. Maybe let your loved ones know where important documents are located, and see whether a discussion can evolve from there.

“My parents revisited their will a couple of months ago and discussed the details with my brothers and me. It was difficult and emotional, but in the end, it was a good discussion. They communicated what they want, and now we know how to act on their wishes.” Each person and each family is unique. You may be living with a common-law partner, or have stepchildren or life-long dependents who you want to ensure are cared for. You may be a small business owner looking to protect your inheritance in case of bankruptcy, or a single person who wants to be clear about what will happen to your estate. It may be important to you to leave a legacy to charity, or you may feel like you don’t have a lot to give. Wherever you are in life, it’s important to plan for what you would prefer to have happen to your assets when you’re gone – and alleviate stress and complexity for loved ones who will be settling your estate. While it’s a difficult topic involving the law, taxes, and uncomfortable conversations, the survey by RBC Insurance also revealed that people who discuss estate planning openly are more likely to feel confident about the legacy they leave for loved ones. With the help of financial advisors and cost-effective solutions like segregated funds, it’s possible to make the discussion about inheritance less difficult than it has to be. And the best time to start is today.

What do Canadians think?

Discussing inheritance

Published 15 May 2023

“My parents revisited their will a couple of months ago and discussed the details with my brothers and me. It was difficult and emotional, but in the end, it was a good discussion”

Selene Soo, director of wealth products at RBC Insurance

Source: RBC Insurance

don’t feel comfortable discussing their will with others

51%

want to minimize out-of-pocket settlement costs

86%

of Canadians want to avoid unnecessary estate fees

87%

CANADIANS AND THEIR ESTATES

have little to no knowledge of the probate process

61%

aren’t aware that insurance can reduce estate taxes

57%

of Canadians aren’t talking openly about their inheritance

37%

of Canadians aged 55+ are not talking openly about their estate plans

42%

of Canadians aged 55+ say their financial affairs are private

38%

of Canadians say discussing their financial affairs with their family will cause infighting

21%

of Canadians say that their spouse/partner is not familiar with their estate plan

34%

of Canadians say their financial planner is not familiar with their estate plan

51%

87% of respondents want to avoid unnecessary estate fees 86% want to minimize out-of-pocket settlement costs 61% have little to no knowledge of the probate process 57% aren’t aware that insurance can reduce estate taxes 51% don’t feel comfortable discussing their will with others

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