Category Archives: Asset Protection

Life Insurance is just one of many ways to protect your family in the event of an unexpected event. Jamie List from Bearing Capital Partners will share his ideas and views on how to mitigate risk, protect your assets and support your family. Peace of mind to know if things go wrong, you are covered.

Protecting your Estate: Where there’s a Will…
To love what is lovely, but will not last

There are a variety of things that we don’t like to do. Taking out the garbage comes to mind, as a task that is unpleasant, but absolutely necessary to the proper functioning of a household.

So it is with a legal Will. Many families, particularly young families, put off the inevitable conversation about their Will. It is an unpleasant conversation, and there are a good deal of difficult decisions to be made and discussions to be had, to solve some problems that will (hopefully) never arise.

Its not about you…

At the end of the day, there is nothing more important than protecting your family and their future in the event of an untimely meeting with your maker. Everything you have done, every nickel you have saved, every asset you have accumulated does not want to be tied up in court while they try to figure out what to do with it. You don’t want your creditors, government, family, any of your beneficiaries to be arguing, fighting, negotiating over your assets at a time when they should be taking the time to deal with their own losses and come to terms with their new realities.

Bottom line: Drafting a legal Will and a Power of Attorney is a necessary and fundamental part of the financial planning process.

The downside to dying without a Will is that there is a time lag between that event and when your estate is cleaned up. When someone dies, the courts need to probate your estate, and then approve the passing of assets on, even if that person is a spouse. With a proper Will, the courts can quickly move things along. Without a proper Will, this can draw out and lengthen the process—which is already full of emotional burden.

There are two significant roles and responsibilities you need to appoint before you begin:

  1. Executor – this is the person that is in charge of carrying out the terms of the will.  Many spouses appoint each other, but often there is an alternate appointed in the event of a common disaster (i.e. both parents pass away).
  2. Guardian – this is the person that you appoint to take care of your children should you not be able to.
  3. Powers of Attorney – this is a person who will be able to make decisions on your behalf if you are incapacitated.

Once you have these roles determined, and before you see a lawyer, you should also take account of the following:

  • make a list of all assets (investments, RRSP’s, pensions plans, real estate, family heirlooms, i.e. anything you own of significance financially or emotionally)
  • make a list of all debt (mortgage, student loans, etc.)
  • identify all insurance policies (personally owned, group/employer policies)
  • identify any other legal arrangements that may impact your planning (pre-nuptial agreements, shareholders agreements, etc.)

Finally, when you go to see the lawyer to draft your will (I would encourage spending the money on a lawyer, and not using a will planning kit), you should also prepare your powers of attorney.  A power of attorney outlines who has the legal right to make decisions if you are incapable of making those decisions for yourself.  Usually people draft two powers of attorney: one is for their wealth (for decisions about their money), and the other is about health, (decisions about healthcare).

Identifying the key roles in your will and POA planning, as well as a thorough list of assets, liabilities and insurance in advance will go a long way to speeding up the process of drafting the will.  As with Life Insurance, a small investment of time and money well spent and a few prudent but simple and easy steps today, will make things that much easier for those that are left behind. The good news is that this will help you save some money on legal fees, even if you won’t be around to spend it.

In the end, you will have a document that will protect your family and will streamline a stressful process during what will certainly be a very difficult, tragic and traumatic time (unless by chance you are not only dead, but a Deadbeat Dad—but of course you are not one of those. You would not be here right now, sitting with that concerned look on your face, reading this post while looking up your lawyer’s telephone number on your Blackberry or your iPhone—there it is, that was not so hard now was it? Go ahead, hit the dial button).

Questions? Concerns?

Please feel free to post your comments and questions here. We’ll be happy to help.

Do I really Need Life Insurance?

Yes, you do.

As a parent, life insurance is a necessary part of planning, because it takes care of your family if something happens to you.  It is not an enjoyable topic, but it is something you should look into.  You will likely be surprised at how inexpensive a program can be.  The big questions is “how much should I get?”  That is different for everyone, but basically, there are three main reasons we buy life insurance:

  • To pay off debt (usually the mortgage and/or student loans)
  • To replace the lost income of the person who is gone
  • To pay for expenses what may arise when one or both parents are gone.

In the first example above, the amount is easy to understand.  If you have a mortgage of $200,000, you should have a corresponding amount of insurance to pay off the debt should something happen.

Replacing lost income is a bit more complicated.  What industry experts recommend is that you should have approximately 60-70% of your family’s annual income available should something happen to either spouse.  So, if both parents are earning $50,000, the family income is $100,000.  If something should happen to one of them, then there should be funds available to create an additional $10,000 to $20,000 per year, likely until the kids are finished at least high school.  If the children are young, this could mean that the surviving spouse needs this income for 15-20 years.  The insurance amount for this situation would be to create a benefit of $150,000 to $250,000 in the event that one of the two income earners is gone (this would be in addition to the insurance that is earmarked for debt repayment).  Here are two calculators to explore – Sun Life, LSM Insurance or there is a good one available at the Bearing Capital Partners website.

Finally, families should consider the added costs to the family if one of the parents is gone.  Will there be an increased need for daycare or housekeeping as the surviving spouse continues to work?  This could cost an additional $15,000 to $20,000 per year, depending on the number of children, etc.  For two children, a working single parent would need to have some kind of back-up, and we estimate that cost at an additional $15,000, until the kids are 16.  This would be funded in much the same way as the lost income, and would require approximately $100,000 to $200,000 (in our example) of insurance benefit.

Last, you might want to consider adding some small extras, such as an education fund and some final expenses, in order to deal with added burdens to the surviving spouse. The big question is “where do I get this stuff?”  There are two sources.  First, your company employee benefits plan likely has some kind of benefit, and there might be the opportunity to apply for more.  These company plans tend to be less expensive, but you run the risk of losing coverage if you leave your employer.

Your other option is to find a licensed insurance broker who can take you through the options.  Most young families should consider term insurance, which is an inexpensive method of providing a benefit.  There are other plans that have more permanent options, and that build up an investment value over time, but these can be looked at later, when you have some excess savings.  The important thing is to get some insurance in place and make sure that everyone is taken care of.