Estate Talk with Yens Pedersen

 

In this episode, lawyer Yens Pedersen and I are navigating common mistakes in estate planning choices. Here’s a sneak peak at the 3 three key takeaways…

✔️Executor fees vary by province, and compensation depends on factors like complexity and assets. Some opt for percentage-based fees, while banks and trust companies may have higher charges.

✔️Estate planning is crucial, and procrastination is a major hurdle. Setting up a professional appointment is the pivotal first step. The cost of creating an estate plan is reasonable compared to the potential high cost of not having one.

✔️Neglecting beneficiary updates and navigating multiple spousal situations are common mistakes. Seeking expert guidance and avoiding DIY approaches is vital to prevent complications for loved ones.

👉 Unlock the keys to seamless estate planning – Listen now to “Episode 101” for expert insights! 💼

P.S. Get our free checklist “What Should I Consider When Reviewing My Estate Planning Documents?

Show Notes:

Hey there. Welcome back. This is episode 101. Today, I’m excited to have a guest, Yens Pedersen from Pedersen Law. Yens is a lawyer specializing in estate planning. He’s been doing it for 25 years, although you wouldn’t know by looking. I’m looking at him right now on the screen and I’m thinking he must have started when he was 10, but he’s keenly interested in making our community a better place to live for everyone, and he has always been involved in working with various organizations to do that. I know you are a volunteer and leader here in our community. You’ve served as a member of the legislative assembly. I want to say thank you for all you do and also welcome you here today.

Yens: Thank you. Pleasure to be joining you.

Zena: Yeah. So I’m gonna ask, I’m gonna dive in. I’m going in right away. Loaded question for you, is having a will the same as having an estate plan?

Yens: No. That’s a great question because they’re not the same. There are so many moving parts to an estate plan, and it’s much bigger than having a will. What I like to make sure, and the reason we do estate plans, is we want to make things as simple and easy as possible for our loved ones, whoever’s there, whoever’s left to pick up the pieces when we’re gone. We want it to be as simple as possible for them. So a will is certainly an important part of that, but sometimes we’re not fortunate enough to just have a quick, easy, painless death. Sometimes we go through a period of incapacity. So things like having a power of attorney in place are important. Having a healthcare directive is important. Sometimes it might involve things like having title transfer authorization so that you can actually transfer property without probate. Sometimes it’s a matter of creating specialized trusts. Sometimes you might be doing things like life insurance or beneficiary designations and having trusts as part of that. Actually, something that’s becoming very important for estate planning is a digital estate plan, making sure that there’s some sort of plan in place so that your executor or your attorney can actually access your digital accounts.

With a lot of things, it’s easy to do a password reset for something like an email or social media, but if somebody doesn’t know how to get into your phone, they’re locked out, like Apple or Samsung. They’re not gonna unlock that phone for you. And for a lot of us, that smartphone is the hub of our entire digital life. So if you can’t get into the phone, your executor or power of attorney, or the person who has your private attorney, could be in a really difficult position. You see a lot of ads out there that talk about, “Oh, you can do your will online for free, or it’s $20, and it’s a perfectly valid will.” And it’s true, that might be a perfectly valid will, but I think that’s asking the wrong question because all you need for it to be valid is two witnesses, and it needs to be signed and dated, right?

Yeah. So your will could be as crazy as saying, “I appoint the Cookie Monster to be my executor. I give away half of my property to my kids, and I leave the other half to neighborhood stray dogs.” Like you could have absolutely crazy provisions in there, and it would still be a valid will. Yes, whether it’s valid isn’t the question. The real question you want to be asking is, do I have an estate plan that’s fully thought out? And you want to be talking to an expert about that. This is not something for dabblers. It’s not something to try at home. You need to be getting some expert advice.

Zena: A couple of things come to mind. Wow. Like a whole bunch of things. My father-in-law passed away last year, and so going through that, it was quite sudden, and exactly iCloud accounts, like you name it, all the digital online stuff. And he was a tech guru. So yeah, that right there hit really close to home. The other one is that the estate plan, you’re exactly right. The will is one thing, but no, it’s digging deeper. So asking all the questions. So every single thing in your life, and usually as we age or get a little bit older, I know you look like a baby, but some of us start to get a little bit older and life actually gets more complicated. It’s not like when you know and all I had was whatever, $1,000 in the bank account. Now, we’ve accumulated these assets and pots, whatever they are, you name it. And I think that the will online or whatever will say, yeah, okay, leave Cookie Monster doing this and leaving it to the kids, but no one’s actually saying, okay. What if? What are the consequences of that? So you have to look at each single thing in that person’s life and almost have that Debbie Downer conversation of, okay. Now, what if that? And I feel like, yeah, you’re bang on. Sometimes we ignore the estate plan piece.

Yens: One of the biggest and most important parts that you get from an expert is actually double-checking and verifying how stuff is owned because. And I see this all the time, people think that things are set up a certain way, but they haven’t been checking, they haven’t been looking at it. So I’m dealing with a file right now where the husband passed away, and the wife thought the title was in joint names. So she thought she was going to be able to transfer the title of their house into her name very easily, very cheaply. It turns out that’s not the case because it wasn’t in joint names. They each owned a half share, and so we now have to probate his estate. I’ve dealt with that so many times where people think they know how stuff is owned, but they haven’t actually checked. So part of the important process is us verifying, do you own this? Is it owned jointly? Is it owned by a corporation? There have actually been some huge lawsuits involving that because it can really change where the property actually goes to.

Zena: Wow. And again, I, I don’t mind sharing personally, and I know my family doesn’t mind, but we had that exact case. It was an old account from the early eighties, a non-registered account. So I don’t want to get too technical because for some of our listeners, it might be a bit overwhelming. I don’t want your eyes to glaze over from boredom. But it was set up joint with tenancy instead of being joint with rights. It was the exact example that you just gave, and now it’s just painful to fix down the road. And something as seemingly simple as the way it was held jointly has led to complications. But it gets a bit more complicated because now there are different variations of how it was held jointly. I’ve dealt with something similar, although not exactly the same.

How does an executor fit into the estate plan? I’m going to jump in because we could talk for hours. How does an executor fit into the estate plan? What is their role?

Yens: So, the executor is the person whose job it is. They’re appointed in your will, and it’s their responsibility to administer your estate. There are a couple of considerations. Obviously, it needs to be somebody who is trustworthy. But a significant part of the executor’s role involves filling out forms and paperwork. I don’t care who you are, almost nobody enjoys filling out forms. Most people find it tedious and annoying. So the last thing you want is somebody who can’t stand paperwork to be your executor. They don’t have to love paperwork, but they need to be comfortable, careful, and meticulous about it. That’s a crucial characteristic.

Another consideration with executors, and I tend to lean towards this approach, is if you have two or three children, I prefer to have them all as joint executors. It’s not necessarily that they’ll each be responsible for every single task. It’s more about them collectively handling the duties. One advantage I see in this is that estates don’t move swiftly, and tensions and conflicts often arise among siblings from their childhood. If they are all executors, they all stay informed, have to provide approval for decisions, and thus there’s less room for misunderstandings.

Let me give you a classic example. A brother emails his sister, asking about the estate. The sister replies, “I don’t know, it’s at the lawyer’s office.” Three months later, the brother asks again, and the sister responds similarly. The brother becomes suspicious, thinking something fishy is happening. He emails her the following week, and when she doesn’t respond, he becomes even more concerned. This lack of communication leads to suspicion and tension, simply because nothing is progressing and they lack clarity. The sister might not even know what’s happening herself, as she’s relying on the lawyer. However, if all siblings are joint executors, they’ll have equal access to information, stay informed, and collaborate more effectively. This doesn’t mean they all need to be working on every task together, but it’s a way to keep everyone in the loop.

That’s one of the reasons I find value in having joint executors. Of course, this approach might not always be feasible, but the role of an executor is truly significant. They are the ones who will communicate with the bank, interact with the Canada Revenue Agency, and sign the necessary legal documents, whether it’s selling a house or closing an account.

One thing is that a lot of people, I don’t think realize is when you actually need beneficiaries on things like RSPs and tax, like insurance that all passes outside of the estate. So the executor actually has no control over those things the executor has to pay the tax bill not personally outta their own pocket, but that’s right there, there can be taxes triggered from an RSP or a RIF collapse, and they’re the one who has to file the tax return.

Zena: Yeah, yeah. So what is one of the biggest surprises that executors commonly encounter? Are there any unforeseen, well, not really hidden since they’re governed by the law, but any aspects that catch them off guard? Perhaps related to fees, disbursement costs, or any common shockers for executors?

Yens: I’m not sure if I would call them real surprises in terms of fees or costs. I think one thing that perhaps executors find a combination of frustrating and surprising is how lengthy the processes can be and how intricate and bureaucratic some of the forms and procedures are. It’s partly due to what people expect, and often, they lack a realistic understanding of how much time these things can consume. So, sometimes they’re genuinely surprised and frustrated.

But I recall a file from a few years back where we had set up a scenario where the only asset was the family house. After the husband’s passing, we arranged for the forms to be signed. All the wife needed to do was register the property at the land titles office. It should have been the simplest and least expensive estate ever. Yet, when she came in to sign just one form and pay the land titles fees, she exclaimed how complicated and costly it all was. It struck me that she had no idea. Her husband had actually saved her a significant amount of money and trouble. People often have unrealistic expectations.

Zena: That’s so true. I often find that guidance is necessary. It’s reassuring that you mentioned having siblings as joint executors because support is needed to manage even seemingly straightforward matters, especially during a grieving period. Imagine if it hadn’t been streamlined as you suggested – it could have been a nightmare. Now, I have a significant question I encounter: People ask me if they should name me as an executor. For me, it’s a resounding no for several reasons. However, the common scenarios are when the person they’re considering lives in another province or is older without children, and they’re unsure who to appoint as an executor. What’s your advice for such situations, especially when the trusted person resides in a different province?

Yens: Having an executor in another province isn’t a major concern, especially if they’re within Canada. It’s manageable. It’s a bit more complicated and costly if they’re in a different country. However, within the same country, like different provinces, it’s not a significant issue. An executor doesn’t need to handle everything single-handedly. They can hire assistance, like house cleaners or movers. Documents can be signed remotely or digitally. For an executor, being physically present at the location of the deceased person isn’t usually essential.

With a power of attorney situation, which involves someone who’s still alive but possibly incapacitated, having a distant executor might present some challenges. Nevertheless, it’s not insurmountable. Caregivers can be hired, medical professionals can be consulted over the phone or through video calls. Financial and investment companies typically won’t allow their advisors or representatives to act as executors.

In some cases, I have agreed to be the executor, perhaps a few dozen times, especially when individuals have no children or there are conflicts among the children. However, that’s not a common scenario. Sometimes accountants might take on this role as well, although it’s less typical. Family friends could also be considered, particularly if there’s a strong relationship. There are instances, often involving family conflicts or issues related to handling money, where an outsider as an executor makes sense.

Zena: What about the standard practice? We’re in Saskatchewan, but I have listeners all across Canada. So I want to note that there might be variations based on jurisdiction. When it comes to executor fees, what’s the standard procedure you’ve observed, especially for someone who’s not a family member? Are there any common practices?

Yens: Certainly. There will be differences between each province in this matter. In Saskatchewan, there’s no fixed fee or schedule. According to the law, every executor, whether a family member or not, is entitled to receive a reasonable fee. The reasonableness of the fee depends on factors like the amount of work involved, the complexity of the estate, and the assets present. I’d say the most prevalent approach is paying the executor on a percentage basis. However, some cases involve a sliding scale based on percentages. There have been instances where an hourly rate was approved. Many banks have subsidiary trust companies that act as executors, and they have a fee structure. At the higher end, they may specify a minimum fee, often around $20,000 to $30,000, or a percentage, sometimes up to 5% of the estate’s value. Banks are profit-driven, and their services tend to be expensive. In my experience, when I agree to be an executor for my clients, I typically opt for an hourly fee. This way, I’m not charging my legal hourly rate for tasks like cleaning or moving furniture, as those services can be hired at a lower cost. I’ve found that charging lawyers’ fees based on a percentage often overcompensates them.

Zena: That’s interesting. Yes, it’s definitely a unique perspective. Okay, I have a quote from you, Jens: “Estate planning is a bit like sowing your own parachute. You can probably figure out how to do it, but if you make a mistake, it will probably have disastrous consequences, and when it is discovered, it’ll be too late to fix it.” Are you speaking from experience?

Yens: Absolutely. It’s been quite common for people to come to me and say, “I need to set up a power of attorney for my wife now.” When I ask if she has capacity, they respond with a “no.” It’s akin to closing the barn door after the horses have escaped. Or trying to get someone to create their will after they’ve passed away. Often, people who haven’t engaged an estate planning expert make mistakes, overlook certain properties, or find things not as they expected. Unfortunately, they only realize this after the individual has passed away, and by then, it’s often too late to rectify the situation.

Zena: That makes sense. I’ve encountered similar situations during my career, where not updating beneficiaries or wills caused significant complications, such as ex-spouses still being listed as beneficiaries while new partners were in the picture.

Yens: There are countless court cases involving situations where a person passes away, and there’s a new common-law partner while an old spouse is still legally tied to them, either through separation without divorce or other circumstances. This creates complex scenarios about entitlements and beneficiaries, leading to numerous errors and misunderstandings.

Zena: It’s quite the tangled web. Adding children into the mix can further complicate matters. Okay, so if you could leave us with your top piece of advice, what would it be?

Yens: For me, this is a point I once shared with a friend, and although she thought I was being persuasive, it’s genuinely the most critical step in estate planning. The biggest hurdle is procrastination and the failure to take action. The best thing you can do is to set up an appointment with an estate planning professional. You don’t have to schedule it for the immediate future; it could be in three days, three weeks, or six weeks. However, once you make that call and schedule the appointment, you’ve set a deadline. The process will start, the ball will be rolling, and you’ll have time to gather necessary information and consider your options. Taking that initial step of making the appointment is the single most vital action you can take.

Zena: That’s a fantastic piece of advice. Taking that first step is crucial. I recall sitting on the fence for years before finally getting a will in place, not to mention the broader estate planning conversations. Accountability plays a significant role there. Another quote to end on: “The cost of doing an estate plan is very affordable, but the cost of not doing one could be very high.” Nobody likes parting with their hard-earned money, whether during their lifetime or afterward. The key takeaway is to consult a professional, like yourself, and I’ll wrap this up. Our listeners can find our guest, Yens Pedersen, online. 

His firm’s website is pedersenlaw.ca, and we’ll include this information in our show notes and on our website. Yens, thank you so much for sharing your expertise. We could discuss this topic for hours.

Yens: You’re welcome. It’s my pleasure. Estate planning is a subject I could delve into extensively.

Zena: Your insights are greatly appreciated.

Yens: Thank you.