Direct and Indirect Approaches to Estate Planning - Part 1
Listen to Direct and Indirect Approaches to Estate Planning - Part 1
This week on Hull on Estate and Succession Planning, Ian and Suzana start a discussion on their global philosophy toward the estate planning process. There are direct and indirect approaches to capacity and estate planning and in this episode, Ian and Suzana explore these approaches as they pertain to the choice of attorney.
If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.
Direct and Indirect Approaches to Estate Planning - Part 1 - Hull on Estate and Succession Planning - Podcast #140
Posted on November 25, 2008 by Hull & Hull LLP
Welcome to Hull on Estates and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull & Hull in Toronto.
Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to episode #140 of our podcast on Tuesday, November 25th, 2008.
Hi there, Ian.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: How are you today?
Ian Hull: I’m terrific.
Suzana Popovic-Montag: That’s good.
Ian Hull: It’s a big day today. It’s the founder of our firm’s birthday.
Suzana Popovic-Montag: That’s right.
Ian Hull: Rodney Hull turns something significantly more than 70. I’m not sure what. And it’s a big day for him. So…
Suzana Popovic-Montag: Congratulations Rodney.
Ian Hull: The topic that we wanted to cover today and we don’t know if we’ll get it done in one podcast, so we’re happy to do it in two, would interest I think a lot of listeners on a couple of levels. So we do remind you that you’re free to send some input to us. And e-mail us at hullandhull@gmail.com.
Suzana Popovic-Montag: Or of course, feel free to send us an e-mail at estatelaw.hullandhull.com.
Ian Hull: Alright. So one of the topics that has come up in the past six months in our blog and one that we wanted to sort of flesh out a little bit today was some of our sort of global approach to estate planning and how that dove-tails into the different kinds of contentious matters that can arise. And one of the most difficult contentious matters is when you get into a Power of Attorney fight. When you are fighting over the body, so to speak, while it’s alive. And when you have a person who’s in that grey zone of incapacity, who should control what and so on. So let’s, before we get into how that works, let’s talk a little bit about sort of our global philosophy that we kind of break down when we think about how we’re going to manage people’s estate plans. And we’ve sort of broken it down into three categories: one is the direct; one is the indirect approach; and the third is sort of a meshing of the two.
Suzana Popovic-Montag: That’s right.
Ian Hull: So let’s start with defining the estate planning process as we have with the indirect. What do we mean by that?
Suzana Popovic-Montag: Well that, Ian, I think is more or less what people would recognize as the traditional way of planning an estate. So it’s the documents that you create, for instance, in a Power of Attorney situation, the Power of Attorney document. It is a testamentary instrument, a Will perhaps. Those are the things that we have a comfort level with as lawyers, and probably a lot of lay people as well. Those are those documents that we typically identify with an estate plan.
Ian Hull: So we call them indirect because they are people’s efforts to estate plan or capacity plan without actually talking to anyone typically.
Suzana Popovic-Montag: That’s right.
Ian Hull: Because the document does the talking.
Suzana Popovic-Montag: That’s right.
Ian Hull: When you become incapable, the Power of Attorney does the talking. When you pass away, the Will does the talking. And that’s not to say that people don’t talk about those documents with their beneficiaries and their attorneys before they fall into those categories, those gruesome categories. But that’s how we look at indirect.
Alright. So then let’s step back again and if we’ve got sort of two categories, the indirect, what’s the direct estate planning techniques that we have used in the past that are of some help?
Suzana Popovic-Montag: Well those, Ian, are what we sort of call the eyeball effect planning methods. And we talked a little bit during our last podcast about the family meeting, for instance, as a suggestion of a way to do that, where you’re actually sitting around a table or in some informal environment with your family members and telling them what your plan is. What you would like to happen if something were to become of your capacity. What you would like to do with your estate upon your death. So you’re having that conversation with individuals. You’re looking them in the eye as we say, and explaining to them why you’re perhaps treating them differently than they might otherwise have expected.
Ian Hull: Alright. Well for today, we no doubt will talk in some detail about the family meeting. But we want to remind people that the first probably thirty podcasts of Hull on Estates and Succession Planning really particularize the process in extensive detail. So should they be interested, they’ve got a resource there. We always like to remind ourselves that we have done some hopefully useful things in the past.
Suzana Popovic-Montag: That’s right.
Ian Hull: So this indirect approach and the direct approach, these two options, what do we mean by the sort of third, hybrid option? What are we talking about in terms of the general concepts?
Suzana Popovic-Montag: Well both processes, Ian, are so fluid because they really, you can mold them to whatever your particular circumstances are. And so when we say a hybrid, what we’re talking about is the fact that some plans will have these kinds of informal arrangements where there is the meeting, there is the discussion which will then be turned into some kind of document, the traditional kind of estate planning documents that we typically see. And you’ll gear your particular circumstances to your situation. And so you’ll have maybe a written part, verbal part discussion or whatever it is, and you’ll come to something where its not sort of the, you know, cookie-cutter expectation of either the direct with the family meeting, or ADR or we call it Alternative Dispute Resolution mechanisms, or the actual traditional documentation.
Ian Hull: Okay. So a good illustration I’ve seen in the past with the hybrid approach is that an easy one would be someone does a Will, wants to give their gifts to certain individuals in the family and they tell them that. So they tell them who the executor is and who the beneficiaries are. So that (a) there’s no surprises; and (b) that if there’s some time to get feedback, they may as well do it while you’re alive.
Suzana Popovic-Montag: That’s right.
Ian Hull: So that’s our hybrid analysis.
Okay, let’s spend some time talking about how the indirect, direct and sometimes hybrid approaches are used sort of, let’s put some real tangibles to it, alright? And we talked earlier in this podcast about Power of Attorney litigation and those kinds of fights. Because there is really capacity planning which is Power of Attorneys, and then there’s Will planning. So let’s start with capacity planning and how we can use the indirect and direct form of communication to properly and effectively capacity plan. And let’s use one illustration that comes to mind. The first illustration that comes to mind is choice of attorney. So how are we going to deal with choice of attorney in the two different models?
Suzana Popovic-Montag: That’s a great set-up, Ian, for a discussion and I think, you know, we start of course with an individual saying or doing the planning, doing the determination of who he or she would ultimately want to take care of their affairs if something were to happen to their faculties and their own ability to do so. And so they will have an individual or two probably in mind, or, you know, other family members. They’ll call a meeting.
Ian Hull: Okay, so sorry, we’ll stop there. We’ve picked the person, right? So we’ve done our homework and that’s a personal step that we’re going to take, with maybe consultation. So there is some, that’s indirect because it’s ultimately, we’re not talking to anyone yet, but it might become more direct because we might say, geez you know, I’m thinking of x, y and z with our friends or our trusted advisors, not our family yet.
Suzana Popovic-Montag: Okay.
Ian Hull: Okay? So then you’re saying we need to call a meeting of some sort.
Suzana Popovic-Montag: It’s certainly a suggestion in those circumstances. If you do want to steer away from just having it become a surprise at the end of the day, then you’ll set up that kind of arrangement where you can have these discussions. And I think its really important to have them with your proposed attorneys. In particular, you want to make sure that they know how it is that you would ultimately like things to be handled once you can no longer handle them yourself, and also consider anyone else who might be affected by that decision, and perhaps consider bringing them into it.
Ian Hull: Good, alright. So we’re talking now, we’re leaving it from just this indirect; it will pop into the system when I become incapable and we’re bringing in some direct steps.
Suzana Popovic-Montag: That’s right.
Ian Hull: So let’s break down those two direct steps. The first is you say we should talk to our attorney. Alright, first of all, why would we talk to our attorney? And second of all, what are some of the things that we want to talk to them about?
Suzana Popovic-Montag: Well clearly, the fact that you are contemplating them as an attorney would be one of the first things that you’d want to discuss with them, I’d expect. And then beyond that, how you would like them to deal with this. And how you would like them to, for instance, if its your property that you’re dealing with, you’d like your assets managed during your lifetime. If its your personal care, you would want to discuss what kinds of things are important to you so that if these decisions have to be made one day, they’ll have some ideas as to how you would have liked them to have been executed.
Ian Hull: Well look, I think what we’ve done is we’ve started the process of how we’re going to use the two communication models, direct and indirect. We’re starting to put some illustration to that with the choice of attorney. The next podcast, let’s move on to talking a little bit about with some particulars, what are some of the actual things we’re going to talk about to our attorney. Before we’ve come out to them and once we’ve decided it, we’ve done our testing the waters. We come out to them, we’ve chosen the person who we’re going to deal with, and what are some of the issues we’ll want to talk to them about. And we can do that both in indirect ways and direct ways, and we’ll talk a little bit about that in our next podcast.
So please, again, we remind you that we welcome and look forward to any feedback you may have. Easiest way to do it might be at hullandhull@gmail.com if you’re liking the e-mail from that venue.
Suzana Popovic-Montag: Or feel free to visit our blog at estatelaw.hullandhull.com.
Ian Hull: Thanks Suzana.
Suzana Popovic-Montag: Thanks Ian.
You have been listening to Hull on Estates and Succession Planning by Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current issues in estates and estate planning. It is not legal advice and you are always reminded to talk with a legal professional regarding your specific circumstance.
To listen to other Hull on Estate podcasts, or leave any questions or comments, please visit our website at hullestatemediation.com.
/mem
