Saturday, 21 June 2008

Book Review: You Can't Take It With You by Sandra E. Foster

... and You Can't Do What You Want With IT either. A key message of this popular book, now in its fifth edition revised in 2007, is that various people and governments have a claim on what you leave behind when you die. Estate planning in large measure consists of arrangements to maximize the chances that as much as possible of your property goes to whom you wish within the constraints of laws and taxes.

Everyone needs to know something about estate planning, that is unless, you:
a) die penniless with no assets to your name or
b) have never married, co-habited common law, or had children or
c) don't care about the hassle those you leave behind will go through to sort out your affairs

This book, subtitled Common-Sense Estate Planning for Canadians, covers the financial and legal aspects of incapacity and death:
  • estate - what is in or out
  • wills and dying intestate (without a will) - clauses explained, limits to your freedom to give away under Family Law
  • gifts - ways to give before death and after death
  • probate and ways to minimize this tax
  • powers of attorney for both financial and personal care
  • income tax returns due
  • family law, marriage and remarriage, divorce, separation
  • life insurance terms and uses
  • trusts - types and uses
  • executor choice and responsibility
  • funeral planning
  • business succession planning
The aim of this book is NOT to provide a DIY guide, as it says clearly on page xxiii of the introduction. It provides an introduction to what is a vast and highly technical topic. It explains informally, provides a lot of pros, cons and considerations and is very useful as a general checklist on each of the topic areas, enough to know whether in one's own case, it is worth looking into further.

An example of the level of depth in the book is the Q&A on page 202 in which it describes setting up a trust for children that you don't want to receive their inheritance till they are older, say 25 or 30. This is not the end of the story, apparently. Lawyer Lloyd Duhaime's website cites the 1832 case of Saunders v. Vautier whereby a beneficiary, having reached the age of majority, got a court to have assets in a trust handed over to himself despite a condition of the trust that he would receive the assets at age 25. Another example is the explanation of the prudent investor rule on page 197, which allows trustees some latitude to choose investments. The book cites the Ontario general conditions (in section 27 of the Trustee Act, though it does not reference that) but fails to mention the key implication in that it allows a trust to hold mutual funds (and presumably ETFs?), as lawyer Kenneth Pope points out in this article at Professional Referrals.

The book does not provide the further delving into, nor links and references as to where to obtain that information, a disappointment to me. There is the constant refrain to go consult a lawyer, an accountant or a specialized estate financial planner. Sometimes this reminds me of my teaching days when a student would ask a tricky question to which I could not explain the answer, so I would buy time by saying, "that's a very good question, we will be dealing with that tomorrow".

One topic the book should, but does not, cover is how to pick a good professional to deal with. Going to a lawyer to have a will drafted merely improves the chances that it will accomplish what you want. A bad lawyer can screw it up just as much as you doing it yourself. Note the necessity for a book giving guidance to lawyers on how to draft wills with the blurb "practitioners Mary-Alice Thompson and Robyn Solnik demonstrate the most common errors made by solicitors in drafting wills".

The book's attempt to cover rules all through Canada is very helpful but it makes apparent the variety of sometimes critical differences between provinces. Things are bad enough with one set of complex laws, why do we Canadians such a confusing multiplication? Should I need to revise my estate plan if I move provinces for a new job?

  • "Any particular strategy or technique, considered in isolation, may appear to make sense until it combined with other objectives or considerations." i.e. tax and probate minimization carried to an extreme may cause big problems among your heirs
  • "... you can't do whatever you want or write whoever you want out of your will." even having a signed contracting out of an inheritance may be over-turned!
  • "You don't go into surgery thinking, 'Boy, am I glad my paperwork is in order and that we've reduced the amount of tax that will be due...'." ... my wife isn't so sure about me ;-)
  • "Warren Buffett said that, '[the perfect inheritance] is enough money so that they feel they could do anything, but not so much that they could do nothing."
Every reader who is going to die will find something useful in this book. Even as someone who has been through a lot of it as the executor of a will and a trustee, there were a number of things I learned. Everyone will realize the importance of preparing a will.

My rating: 4 out of 5

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