Canadians lack estate planning knowledge, study finds

IG Wealth Management reveals most Canadians are unaware of key estate planning components

Canadians lack estate planning knowledge, study finds

According to IG Wealth Management's (IG) annual estate planning study, most Canadians are not familiar with many of the key components needed for a comprehensive estate plan.

The results are concerning given the increased importance of estate planning due to Canada's aging population.

The study, conducted in partnership with Pollara Strategic Insights, found that just 46 percent of adult Canadians report having general knowledge about estate plans.

When asked further, less than half are familiar with many key features:

  • Only 50 percent are aware of how the power of attorney works
  • Forty-seven percent understand the role a will plays
  • Only 37 percent are familiar with how taxes impact assets after death
  • Forty-five percent appreciate the important role life insurance can play in protecting the value of one's estate
  • Only one-third of Canadians have an estate plan in place (up from 25 percent a year ago)

“While it's encouraging that there's been an increase in the number of Canadians who report having an estate plan, it's still quite low,” said Christine Van Cauwenberghe, head of Financial Planning, IG Wealth Management.

“It's also concerning that a majority of us are unfamiliar with so many of the critical pieces that make one up. It's important because eventually we'll all have to deal with estate planning directly as we age or through a parent or elderly relative.”

Cauwenberghe noted that a properly constructed estate plan allows for the distribution of assets according to an individual's wishes, in a tax-efficient manner.

“Take, for example, life insurance. Not only does it play an important role in helping provide financial security for one's family in the event of death, it can also help offset the associated costs of a wealth transfer, including probate fees and taxation, to ensure the next generation receives an inheritance amount from the estate as intended.”

She continued, “The reality is that passing down assets, like a family cottage, can often result in a significant tax burden. Life insurance payouts, which are tax-exempt, can help offset these costs and allow the property to remain in the family.”

The study also uncovered that, of those who work with a financial advisor, just half (52 percent) have had conversations with their advisor about the need for an estate plan.

“You should expect more from your advisor and only work with one who not only understands how a comprehensive estate plan can safeguard your assets for the long-term, but who also has the experience and foresight to build one out,” concluded Van Cauwenberghe.