Working for more than 40 years as a trust and estate lawyer focused on high-net-worth clients, Margaret O’Sullivan is deeply aware of the challenges that the super-affluent face in estate planning.
She’s also seen a lot of changes in the field, from her start as a lawyer in 1983 at Osler, Hoskin & Harcourt LLP, as a partner at Stikeman Elliott and now as managing partner of O’Sullivan Estate Lawyers LLP, a boutique trust and estate law firm in Toronto that she established in 1998.
In an interview with Canadian Family Offices, O’Sullivan talks about misunderstandings about getting one’s affairs in order, the role of the family office in estate planning and how the field has changed—and continues to.
What’s the biggest mistake you see high-net-worth families make when it comes to their estate planning?
One of the biggest mistakes—or omissions—is not keeping their planning up to date. It’s surprising how people, although they might be very, very wealthy, may have estate plans that they have not updated in many years. And in a few cases, they have no planning at all.
Yet these are people who have very complex situations. They may own businesses, they may have various obligations they owe to people, including perhaps former spouses. They have children. They have assets in different countries. That’s a lot of complexity, and yet, if something happened to them, their lawn probably is looking a lot better than their estate plan.
Why does this happen?
I think people are so focused on success and doing what they do—entrepreneurs very much so—they’re not thinking of the fact that there could come a day they’re not here. They don’t want to think they could ever die. That’s something for somebody else, or somebody much older.
So they’ll eventually get to it when they finally realize they’re aging?
The problem with that philosophy is you are leaving things too late to make major decisions, which you should do when you are most capable, most competent, not when you have diminished capacity. For the estate planner, it’s very challenging to try to deal with someone who really should have done this 10 or 15 years ago.
So family offices should stay on top of this?
Family offices are about looking after their clients, and I think a major focus should be on the estate plan and making sure that it doesn’t get out of date. But sometimes the founder—the patriarch or the matriarch—isn’t inclined to do so. And that can be a bit of a challenge.
Is there a common misperception when it comes to estate planning?
The misperception is that this is a simple process. People say, ‘I just want a simple estate plan,’ but they may not have a simple situation.
At the end of the day, there will be a level of complexity. It’s a process of making a lot of complicated choices among various options that directly impact your children and your spouse and your other family members and whomever else might be the beneficiary of your wealth.
What is a particularly complicating factor?
I find that people tend to make decisions without getting advice beforehand. This could be on the acquisition of a property in a different country. They just assume that everything’s the same there. I always say, ‘Look before you leap.’ You need to get tax and estate-planning advice before making those decisions, not after.
Sometimes people make decisions that are not based on true professional advice. So that might be, ‘A friend told me.’ Or, ‘A planner at the bank told me.’ But those are not professionals who are legally liable and responsible to you for the advice they give.
How can family office advisors help, before they come to you?
Often family office advisors can be very helpful because they can get all the key information assembled in an efficient way. A lot of high-net-worth clients really don’t have a great understanding of the more complex structures that have been put together, and the values.
There has to be an understanding of the role of the family office advisor and the third-party advisors, whether it’s a tax advisor, an estate-planning lawyer, an investment advisor. It really helps to work collaboratively together.
You’ve been doing this since 1983. What have you seen change over that time?
When I first started practice, estate planning had a pretty low profile. The capital gains regime had been brought in in 1971. Planning before that was a lot more complicated, very tax-oriented, focused on reducing succession duties. There were intricate trusts to deal with the fact that when you passed away, you paid tax on how much you were worth.
Wills after that became a lot more simple, and people weren’t doing powers of attorney, because there wasn’t really any legislation to deal with people becoming incapable. When we did get that, in the early 1990s, incapacity planning became a big part of estate planning. It’s certainly a much more prominent area than ever before, and it will be in the future, because we have baby boomers who may live well into their 90s, sometimes with 20 years of diminished capacity.
So, we’ve got a big change in terms of the complexity we deal with now. One issue is trying to minimize probate fees, and we have a lot of people with assets in different countries, so there’s a whole push toward more globalization. They have children and grandchildren who are living around the world, and when they leave their assets, they’re going to have to look at the impact.
There’s also been a shift in societal values.
Indeed, there’s a lot more complexity in terms of relationships, from the nuclear family to the modern family. We have blended marriages, children of prior relationships, common-law spouses, and the whole issue of reproductive technology and how you define who a child is.
There’s also changing attitudes to wealth. In particular among Gen-Z and millennials, wealth is not a very popular word. People may want to pass down their wealth to their children, but do their children want to have it? Maybe not.
What estate-planning issues could this bring for family enterprises and their advisors in the future?
I think maybe the younger generations are going to be pushing more for issues dealing with social justice, global warming and income inequality. Perhaps they will want to try to improve society by using some of that wealth, whether it will be for philanthropic endeavors or some type of not-for-profit enterprise. Maybe not the traditional approach we have right now, where it’s all about getting the maximum returns, but essentially trying to deploy their wealth for the betterment of everyone.
Do you have any insights given the changing political landscapes in both Canada and the United States?
If one takes the view that south of the border there is a big shift, among a certain group, in societal values and some feeling that it’s taking us back to a former time, what impact will that have in terms of estate planning and attitudes on things like women, same-sex couples, transgender people? Could that maybe creep north of the border as well, in terms of some of our attitudes that we’ve had, how things are so different than 40 years ago?
Will we be a less inclusive society? Are some of the attitudes of the 1950s going to now resurge, and how will that impact family structures and attitudes and spousal relationships and property rights between spouses and common-law spouses and the whole landscape of rights?
You could see a full revolution, just in your tenure in this field.
Well, I’m hoping that we don’t come back to square one.
At the same time, it must be interesting for you to look at the future and what’s behind and see more change.
Things never stay the same, do they? That is the constant. Usually there’s reversion to the mean at some point, so we’ll see.
And the bottom line: Make sure you continue to do your estate planning?
That’s No. 1. And keep it up to date. Sometimes people say, ‘Well, I did my will.’ But estate planning is not a transaction. It’s not a one-shot thing. It’s a process.
So how often should people revisit their estate plan?
Every three to five years, have a look at what you’ve done, see if there’s anything that’s popping out at you, that is not sitting right. And, of course, do that sooner if there’s a major event that happens—a death in the family, a marital breakdown, grandchildren on the scene.
Anything else to mention?
We didn’t touch on communications. Within families, there does come a time when you have to open the kimono a little bit. It’s important for your children or other family members to understand not perhaps the details of your estate plan, but, for example, who the key decision makers are.
Who will be your attorney for personal care if you have an accident and somebody has to give consent to a surgical procedure? Who will manage property issues? Family members need to know that so they can step into those roles.
Responses have been lightly edited for clarity and length.
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