The talk you didn't have with your parents could cost you

I'm in favour of adult children and their parents talking about the parents' legal and financial arrangements, so much so that I literally wrote a book about it. As long as the parents' privacy and independence are respected, the conversation is a valuable one for both sides.

Parents who are reluctant to have this kind of conversation should realize that they don't have to show up with bank statements and house appraisals. It's not about revealing "how much" you have, which I realize that most parents, understandably, don't want to divulge to their children. It's not about inviting the kids to take over looking after the things you are perfectly capable of doing for yourself.

The conversation is about whether you've appointed representatives under your will and power of attorney, and if so, who you've appointed and where they can find the documents. It's about giving your kids facts about where you bank and which insurance company holds  your policies so they know where to look when the time comes.

It isn't always an easy discussion and some parents simply refuse to co-operate. The New York Times recently did a story about a family in which the mother passed away without leaving any information, causing her kids to have to pay her mortgage out of their own money just to save the house. Click here to read the story.

I encourage parents to have a conversation about practical matters like wills, insurance and banking with their adult children. Your kids will be grateful for this later.

If you need to post an estate bond, read this

Did you know that if you appoint an executor who lives outside of the province in which you live, your executor must deal with the issue of a bond? Each province has rules in place which are intended to protect creditors and beneficiaries of an estate by preventing executors from legally accessing the deceased's assets, then leaving the jurisdiction without paying bills or distributing the estate to the right beneficiaries.

It's one of those "bad apple" rules. Some executors are dishonest or negligent, and so rules have been put into place that all executors, including the honest ones, must follow. A bond, in this context known as a fiduciary bond, is much like an insurance policy that an executor buys. If he defaults on the estate, he loses the bond. The bond is for the full value of the estate. Bonds may also be required when there is no will and someone comes forward to ask the court to appoint them as estate administrator.

The issue of bonding comes up on a regular basis, as many parents name children as executors even though the children have moved to a different province (or country) for work or for other reasons.

If you're an executor in this situation and you must post a bond, you may have had some trouble finding a company which sells the bonds. I've heard many clients say they've had to make a dozen phone calls before finding an insurance company that provides this service. I've recently found a reliable provider. Click here for information, for the bond application form, and for instructions on where/how to send the form for processing.

Sometimes an application for probate contains a request from the executor that the bond which would otherwise be needed should be waived. This is in the judge's discretion and cannot be guaranteed ahead of time. Your chances are better if the beneficiaries agree in writing to the bond being waived, and if you can show that the deceased's debts have been paid in full.

Another way to get around bond requirements is to appoint an executor who lives in your province. You could have co-executors with at least one of them living in the province. At the trust company where I work, we sometimes see customers who want us to act as a co-executor with their children, partly to address the bond question.

Can you do anything about being left out of your parent's will?

Most of the time, parents leave their estates to their children. When that doesn't happen, the child may take the news emotionally. Recently a reader wrote to me about this situation. Her note and my answer are below:

"My husband's mother passed away recently. My husband was surprised and hurt by the fact that he and his sister were left out of the will. Instead, all the money went to the 5 adult grandchildren. My husband said he felt "rejected" when he learned that he was left out of the will. It seems like this could have been avoided if the two children had been included in the will, along with the grandchildren (so the estate could be spit 7 ways instead of 5). Is there a way of addressing this without contesting the will? My husband doesn't like to "make waves" and so I'm not sure he will do anything (except remain angry and hurt the rest of his life) but it would be nice if he at least felt he had some options."

You  have very nicely summed up exactly what goes through a person's mind when they are not included in their parents' wills. Surprise, hurt and rejection are par for the course in this situation. It's not the law that parents must leave their estates to their children, but it is customary.

Yes, you're right that upset could have been avoided, if avoiding upset was the goal when your husband's made her will. However, it appears that she was motivated by wanting to help the grandchildren, for reasons that may never really be known. Perhaps your husband's mother simply felt that distribution among the grandchildren was the best use of her resources and didn't realize that it might result in upset.

It's not up to those of us left behind to re-write a will based on what we believe to be "more fair" than what the will actually says. The executor is bound by the will and can't decide to change it. So, to answer your question, no there is nothing that can be done about the will other than contesting it.

Even contesting the will may not result in a change. Contesting a will is not easy. You don't automatically get changes to the will just because you take it to court. Only BC has wills variation laws that allow a child to contest a parent's will on fairness or moral grounds. The rest of Canada takes the position that a parent is not required to support adult children who are financially independent of them.

A solution is available outside of the courts if all of the five beneficiaries agree to it. That is, the beneficiaries may voluntarily agree to take a 1/7 share rather than a 1/5 share and pay the balance to your husband and his sister. This would, in effect, be a redistribution of the estate, but only after the executor has paid it to the proper beneficiaries.

There are two problems with this idea. One is that people do not like to give up money. The other is that the beneficiaries may not wish to make changes from what the deceased specified in her will.

Did you know there's a limit to how much land you can include in a principal residence exemption?

In the attached article from www.allaboutestates.ca, Stephen Frye talks about the principal residence exemption from capital gains tax.

As most of you may know, you can sell your home or leave it to someone in your will without you (or your estate) having to pay tax on the transfer, as long as the home is your principal residence. Of course, like all rules, it has fine print. Mr. Frye goes a little deeper into the principal residence exemption by explaining how much land you get to claim within the exemption. This is definitely worth a look if you (or your parents) live on an acreage or old homestead. Click here to read the article.

Second marriage? Have a financial date before you tie the knot

In this post, I want to talk about marriage. Specifically, re-marriage after you've been divorced or widowed. What does marriage have to do with estate planning, you may ask? The answer is: more than you might think.

A person in a second or subsequent marriage may want to make a will that leaves some of his or her estate to the children of the first marriage. This can be a bit of a balancing act since he or she has an obligation to look after the new spouse too, and there are only so many assets to go around. An experienced estate planner can really help here.

I'm attaching a link to an article at freefrombroke.com which talks about several financial considerations arising out of a second marriage. It's not only about estate planning, but includes it. Click here to read the article.