With the increasing acknowledgment of mental illness, there's a greater need for planning that accommodates special cases
Estate planning is an inherently thorny business: it requires making decisions not only with respect to taxes and law, but also in consideration of less clear-cut issues like family dynamics and adherence to family values.
It becomes that much harder when mental health issues come into the picture. As discussed by Margaret O’Sullivan of O’Sullivan Estate Lawyers, having a client with a mental illness or a family member who suffers from one introduces plenty of complications into the process.
“One critical issue is first recognizing, then acknowledging, and finally constructively dealing with the reality that many of our family members suffer from an illness, not a physical one, but a mental illness,” O’Sullivan wrote in a recent note.
While an estimated one in five Canadians have or will have a mental disorder in their lifetime, the lack of awareness and understanding caused by past ideas and taboos continue to get in the way of open discussion. Those old ideas must be set aside, O’Sullivan argued, in order to deal with mental illness in a helpful and common-sense fashion for everyone’s benefit — the family member living with the mental illness as well as their relatives.
“Many of our clients' spouses, children and grandchildren have special needs because of their mental illness and these must be carefully considered in the estate plan,” she continued. For children or teenagers living with bipolar disorder or autism, there is a very real question of whether they’ll be financially capable and independent as adults.
In such cases, she said, the parents need to have a flexible structure in their wills, often with a trust that has appropriate provisions to give trustees discretion to pay income and capital for their child’s benefit. But it should also provide the ability to terminate the trust, in case the child ends up not needing that sort of financial protection when they reach a more mature age. “A companion letter of wishes to the trustees can provide helpful guidelines for their consideration in exercising their discretion,” O’Sullivan suggested.
Another example can be seen among spouses who need protection due to dementia, manic depression, schizophrenia, or another mental illness. In the short term, it might be less awkward and more comfortable to simply not acknowledge the issue. But tell-tale signs, such as large unexplained withdrawals or repeating details during client meetings, should be a cause of concern for advisors.
Persuading clients of the need to walk down that path could be a challenge. For many living with or at risk of mental incapacity, admitting their burdens to an advisor would lead to them losing control over their affairs. Even when discussions are under way, it could be challenging for them to think about a future when they can’t make their own decisions on their estate, much less plan for that eventuality.
To help their clients through, advisors may propose a transition period in which the client would gradually give up control of their affairs to a trusted family member. Getting others in the family involved in conversations, especially with regards to trusts and powers of attorney, is also important.
