12 ‘Must Do’ tasks for end of life planning

The news is chilling, almost anaesthetic, and the last thing you’re thinking about are dollars and cents. But as reality sinks in, many are able to be practical and can plan for the future. This is my story.

Executive Summary

You or a family member just received bad medical news, the doctors call it a terminal disease with an exceptionally low probability of survival, what do you do next?

This was the diagnosis my wife and I heard in 2015, just before she started five years of chemotherapy and other brutal cancer treatments. Sadly, she passed away in January 2020 of ovarian cancer.

With the help of an estate lawyer and accountant, Mary and I painfully prepared for her death. We revisited our Wills and Powers of Attorney, we reread my employee health coverage, we transferred our home to joint ownership, we ensured all registered accounts had my name as her beneficiary, and we cried a lot.

This is a summary of all Mary’s end of life financial planning. I hope that you never ever have to read this article, but if you do, please know that Dri Financial Group’s mission is to help people who are experiencing a major life transition, such as end of life situations or the loss of a spouse.

End of life news is chilling

Your doctor delivers the bad news and advises you to ‘put things in order.’ Do you know what to do? Do you even know where to start? Here are my 12 important financial planning ‘Must Do’s’ for end of life situations.

If you’re reading this, it probably means that you or a loved one has received some very bad health news, possibly a terminal diagnosis, and you’re wondering what must be done from a financial perspective.

Although I have not personally received this type of medical news, I walked every mile of this tragic and painful road with my wife. She was initially diagnosed with breast cancer, but after additional tests, her diagnosis was upgraded to terminal cancer. This article goes over all of the financial planning steps we took as we planned the end of her life.

1) Wills

A new Angus Reid Institute poll finds that half of Canadians (51%) say they have no last Will and Testament in place, while only one-third (35%) say they have one that is up to date and 15% say that their Will is not up to date¹.

In Canada, if you die without a Will, the law assumes that you die “intestate” and your assets are distributed according to the laws in the deceased’s home province. Usually, the assets go to the legal spouse and the children, but the laws are different for each province and things get complicated if you do not have a spouse and/or kids. Here are the rules if you live in Ontario².

My End of life checklist begins with a review of the Will — assuming it exists. If you don’t have a Will or it is outdated, it’s critical to sit down and prepare one immediately. For Mary and I, it meant an appointment with an estate planning lawyer.

We had Wills but they were both drafted when our first son was born some 20+ years before. Without going into the fine detail, the most critical issues for us were: our beneficiaries, an executor, a guardian for our youngest child (under 18) and a secondary Will for corporate assets.

In our case, on first death, all assets are inherited by the surviving spouse and on the second death, assets are inherited equally by our three children. We selected ScotiaTrust as our executor and we chose our eldest son as the guardian for our daughter. In order to bypass probate, we prepared a secondary Will for our corporate assets.

My podcast guest, Nicholas Fidei is the president of Treasure Hill Corporation and Treasure Hill Commercial, which develop land and build commercial homes throughout the Greater Toronto Area. He understands the need to separate personal and corporate assets in the estate planning process.

Wills and secondary Wills are very complicated documents and prone to disputes by beneficiaries and potential beneficiaries, for this reason, I suggest hiring a professional (e.g. an estate lawyer) to prepare the legal forms.

2) Powers of Attorney³

If your illness prevents you from making financial or health care decisions — for example: you’re in a coma — you’ll need to appoint someone to act on your behalf, which is known as a Power of Attorney (POA). In Ontario we have two POAs:

Personal care: for medical treatments, such as: do not resuscitate orders, and
Property: for financial assets.

If you don’t have POAs and become incapacitated, your spouse or family may not be able to make financial and medical decisions on your behalf. They may need to apply to the court to become an appointed guardian.

In our case, we selected each other as our Attorney and selected our three children (with equal rights) as alternate Attorneys, in the event of a common event.

It’s simple, your end of life checklist must include POAs and they’re usually completed together with the Wills.

3) Life Insurance policies

The next step of the end of life checklist is to locate your life insurance policies, to discuss the death benefit with your beneficiaries (spouse) and to store them in an easily accessible location.

Life insurance policies aren’t as simple as they may seem. Often, they’re in plain sight, however, sometimes life insurance coverage is hidden. For instance:

Mortgage or line of credit insurance.
Employer’s basic life insurance coverage (usually 1-3X salary) for you and your spouse.
Premium credit cards offer basic life insurance coverage.
Affinity groups (or alumni groups) may cover members for basic insurance coverage.

In our case, Mary didn’t have life insurance other than a small ( $30,000) group insurance policy offered by my employer ( Scotiabank). In hindsight, we should have bought an insurance policy on Mary’s life, the benefit could have been applied toward the costly housing needs of our kids.

4) Critical Illness insurance

You may have purchased Critical Illness (CI) insurance directly or through your employer’s group plan. If so, a terminal illness (such as cancer) will most likely qualify as a CI and you will be entitled to a payout for the amount insured.

The benefit from the policy may be used to help fund the cost of drugs or treatments that aren’t covered by your Ontario Health Insurance Plan (OHIP), group/private health insurance etc.

In our case, Mary did not have CI (again a mistake), but we were fortunate that, other than a few deductibles, Mary’s treatment and care was covered by her OHIP and my group benefit.

5) Disability Insurance

If you are unable to work because of the illness or the side effects from the treatments (or for any other medical reason) you may be eligible for Disability Insurance (DI). This usually entitles

the employee to continue receiving income (usually 2/3rds of pre-illness income) for the foreseeable future.

If you’re self employed, you may have purchased a DI policy and the inability to work should entitle you to DI benefits.

Since Mary worked part time, and her income was inconsistent, she was unable to qualify for DI. In hindsight, I do not think the lack of DI for Mary made a significant difference in our financial planning decisions.

6) Health Insurance

During the treatment phase, you may be advised by your doctors to take specific drugs that are not covered by your health plan (OHIP in Ontario). These drugs will be your financial responsibility unless they are covered by any employer/private health insurance. Your employer or your spouse’s employer may offer health insurance covering the cost of catastrophic drugs.

End of Life resources may be significantly affected by the cost of experimental drugs, so it’s important to check your coverage before agreeing to take drugs that are not covered by the provincial health insurance or private insurance.

7) Registered Retirement Plans

The next step in determining your end of life wishes is to determine who inherits your Registered Retirement Savings Plans (RRSPs). In Ontario, RRSPs may pass tax free to the following people:

A spouse or common law spouse,
A financially dependent child or grandchild under 18 years of age, or
A financially dependent mentally or physically infirm child or grandchild of any age.

However, the above individuals must be named as beneficiaries in the RRSP application. If the plans do not have a beneficiary, or the beneficiary is a person other than a person listed above, the after-tax assets will be distributed according to your Will⁴.

If your goal is to defer tax, select one of the three options above. In our case, I was the beneficiary of all Mary’s RRSP accounts, as such, I inherited her tax-free RRSP and spousal RRSP.

Note, if you die with unused RRSP contribution room, the unused amount may be contributed to your spouse’s spousal plan.

8) Tax-Free Savings Accounts

Any Tax-Free Savings Accounts (TFSA) are the next item on your end of life checklist. You may select your spouse or common law spouse as your beneficiary or as your designated successor.

I suggest designating your spouse/common law spouse as the designated successor, this allows you to combine the TFSAs into the surviving spouse’s TFSA and continue growing funds tax free.

If you select the beneficiary option, your spouse (or someone else) receives the funds outside of a TFSA.

In my case, I was Mary’s designated successor hence, I was able to combine her plan with mine and continue growing TFSAs funds tax free⁵.

9) Joint ownership of personal assets

The biggest asset my wife and I owned together was our family home, and for creditor protection reasons, it was owned by Mary. Under this ownership structure, our house would pass to me, but I would have to probate the home and the cost would be 1.5% (for assets above $50,000) of the value of the home. And my kids would have to probate the home again after my death.

An uncomplicated way to avoid probate is to place the principal residence in joint ownership with rights of survivorship with your spouse. This allows the home to pass automatically to the surviving spouse on first death. In our case, we hired a real estate lawyer to transfer the principal residence to joint ownership with right of survivorship and later it was transferred to my name only.

The same applies to bank accounts, non-registered investment accounts and other real-estate assets.

So, as part of your end of life planning, it’s important to evaluate whether each personal asset should be moved to joint ownership with rights of survivorship or left in your name.

10) Employer pension plans

Most employers offer a pension plan for their employees and the plans often include survivor pensions in the event that the employee dies while married. The survivor pension usually ranges from 60% to 70% of the full pension entitlement and is payable for the remainder of the spouse’s life.

If you are part of an employer pension plan, ensure your spouse is chosen as your beneficiary of the plan. This ensures that he/she will receive the survivor portion of your employee pension.

In my case, Mary didn’t have a pension plan so this was not an issue.

11) Canada Pension Plan survivor pension

Under certain circumstances, a widow or widower is entitled to a Canada Pension Plan (CPP) survivor pension. The calculation is complicated, but it’s important to note that the maximum CPP benefit you can receive is the maximum personal CPP benefit allowance (currently $1,203.75 per month), no doubling up of CPP entitlements⁶.

In my case, since I was younger then 65 when Mary passed, I now receive about $500/month of CPP survivor benefit until age 65, afterwards, I expect my personal CPP benefit to equal the maximum allowable CPP benefit so, I expect to lose the CPP survivor benefit. Read more about CPP benefits in my blog.

12) Retirement projections

After the death of the first spouse, the surviving spouse’s financial life will change. For many spouses, their financial life is not as rosy after the passing of their spouse. In fact, without careful planning with a certified financial planner, income can be extremely tight. Read more about income sources for widows and widowers in my blog.

Firstly, do not expect a 50% drop in lifestyle expenses instead, from my experience, a 30% reduction is more reasonable.

Secondly, some sources of family income may stop or be reduced such as a lower survivor employer pension, a lower combined CPP, the loss of one Old Age Security, the loss of one or both salaries etc.

Given the spouse’s new financial reality of living alone, as part of end of life planning, I suggest reviewing the retirement goals and recalculating the retirement income projections. If you’re not sure how to recalculate your retirement income. Read my blog or contact our office.

In my case, the loss of Mary also caused the death of many of my retirement dreams and completely changed my retirement income requirements. I’m currently working on creating new dreams and reassessing my income requirement as I move forward alone.

Final Thoughts

If you or a family member received bad medical news, I am sorry! I understand that end of life financial planning isn’t at the top of your ‘to do’ list. When you are ready (and I truly hope you will be) I recommend visiting your estate lawyer, your accountant and your financial planner. With your team of professionals, discuss your wishes and organize your financial affairs to ensure a simple transition and maximum financial benefits to your family.

If you need assistance with end of life planning, book an appointment to speak with me. I will personally walk you through the process and will coordinate with your other professionals. In fact, if you have any goal in mind — big or small — that requires some financial planning, but you’re struggling with where to start, reach out to our team. We have the expertise and life experiences to help guide you to achieving your goals.

Learn more:

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We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.
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