What behavioural science can teach us about estate planning

As the year comes to a close, we’re thinking about tax planning, charitable giving both during life and through your estate, and of course the recent Federal Budget. It’s a lot to cover in one newsletter, but we’ve done our best! This month’s feature dives into end-of-life giving, and you’ll find highlights from the Federal Budget and a chance to grab free books from our friend Dr. Daniel Crosby in the News Digest below.

Estate planning is often seen as something for the “older generation,” (however we might qualify that), and something that happens behind the scenes, secretively, with just the person planning their estate and their lawyer.

We’ve seen time and time again that keeping estate planning behind closed doors is not only a missed opportunity, but also one that can have grave consequences. Getting your family actively involved in estate planning isn’t just “nice to have”; it’s smart.

From a behavioural science perspective, ownership, familiarity, and engagement play key roles. Two cognitive biases in particular help us understand why involving family can make a big difference in estate planning.

The “Ikea Effect”

The so-called Ikea Effect describes how people tend to place higher value on things they’ve put effort into building themselves (or been involved in creating) than on equivalent things they haven’t. In an estate‐planning context, if a family member has had input, has been part of the conversation, or helped “construct” the plan or understand it, they are more likely to feel “ownership” and alignment with it. That means fewer surprises or resistance when the estate actually has to be administered – and way, way less fighting.

The “Mere Exposure Effect”

The Mere Exposure Effect shows that people develop preferences or comfort with things simply from repeated exposure. The more they experience something (even passively), the more they tend to like or accept it. In practical terms: if your children/heirs/family see you talking about estate planning, see the documents, and are part of the conversations (even at a high level), they become familiar with it. As familiarity grows, so too does comfort. It becomes easier to speak about changes as they happen, and it makes your family’s ability to manage through the stress of estate administration much, much easier.

When you combine the two effects: the more familiar your family is and the more they feel they helped build the plan, the smoother the transition when the plan is activated. Involving family builds familiarity and ownership. It reduces the “unknowns” that create anxiety, and helps get buy-in ahead of time.

What does involving family look like in practice?

Here are several key areas of an estate plan where family involvement matters, and how “ownership” and “familiarity” help.

1. Incapacity Planning

If you lose capacity (due to illness, accident, cognitive decline), but you haven’t passed away, your will and beneficiary designations aren’t going to be helpful. Instead, you need clear arrangements, and legal documents, for decision making while you are alive. Incapacity documents have different names depending on your province, including power of attorney for legal & property, power of attorney for health, representation agreements, advanced directives, and more. The short story is that the right documents appoint individuals to help make decisions when you cannot, and advocate for your preferences.

Why involve family here:

• If your spouse/children/other family know your values, preferences, hopes, fears, and you’ve discussed what “being incapacitated” would mean for you, they’re better able to act. If you don’t want to spend the holidays with a certain family member, or would prefer not to be kept alive through artificial means, your family members will know this and make sure that you get what you want.
• When your family has been part of the conversation, there’s less chance of disagreement or confusion over who does what, when, and how. It’s really stressful when someone you love loses capacity, and it’s incredibly hard work. Not only will your appointees feel confident in what they’re doing next, they’re also less likely to face resistance from the rest of the family.
• Repeated discussion of scenarios means that when something happens, it’s not a shock; it’s part of a plan. Even if emotions are high – which they’re likely to be – your family members won’t get stuck on difficult decisions. They’ll have clarity about the next best step, even if they are struggling with grief and sadness.

2. Estate & Will Planning

This is the more familiar territory: wills, trusts, how your assets are distributed, who is executor/trustee, etc.

Why involve family here:

• If family members understand the “why” behind your will and plan; the rationale, values, objectives, they are less likely to challenge or be blindsided.
• Hands‐on involvement (perhaps through family meetings, having parts of the plan explained or shown) fosters the sense of ownership.
• With familiarity, the heirs know what the plan looks like, what their roles may be, rather than learning everything in crisis. When people are in crisis, it can be hard to access the parts of your brain that can make great decisions and the other parts start to take over. Removing the additional stress of trying to determine the “right” decision is such a gift at a hard time.

3. Shareholders’ Agreements (for family businesses or corporations)

If you’re part of a family business or corporate structure, then shareholders’ agreements become key estate planning tools: how shares pass, how decisions are made, who can buy or sell which shares, and how pricing is determined.

Why involve family here:

• Family owners feel more committed if they understand/share in the agreement design.
• When successors, next-gen family members, even minority shareholder relatives are aware and familiar, the risk of conflict is reduced.
• If family members see themselves as part of the “plan” (the next generation, governance, roles), they feel built-in rather than kept out of the loop (avoiding “us vs. them” dynamics).
• In behavioural terms, the more exposure to the business governance and planning, the less resistance when transitions occur.

4. Family Law & International Law Considerations

Estate planning isn’t purely domestic; increasingly families have members and assets in different provinces or different countries, or are “blended”, with multiple marriages, children, stepchildren and more. On top of that, increasing longevity means that many families are in the previously unusual situation of having four or five generations alive at the same time. Different regimes, including family law, provincial law, and international law come into play.

Why involve family here:

• When family members are aware of the jurisdictional and complex family structure implications, they’re less likely to be uninformed or surprised later.
• Involving heirs and other family members in understanding rights, estate structure, and choice of governing law builds trust that there are good reasons behind the decisions being made.
• The “investment” of being part of the planning means they’re more likely to respect decisions (Ikea effect).
• Even basic exposure to the international/complex aspects reduces the “shock” of complexity when the plan is triggered.

Practical Steps to Engage Your Family

1. Start early & often: Don’t wait until a major event happens. A “family planning meeting” can be held with an agenda: your values, your goals, big assets, business interests, estate and incapacity plans.

2. Educate & explain: Use plain-language to explain the key features of your plan: how much is going where, who is the decision-maker, and why you chose certain structures (e.g., trusts, shareholder agreements, cross-border provisions).

3. Solicit input & feedback: Ask family members what they value, what their concerns are, what they know/want to know. By inviting them in, you trigger the Ikea effect: they are part of the build.

4. Document roles and expectations: Who is executor/trustee/decision-maker? What happens if someone is abroad, incapacitated, or passes first? Transparent roles reduce ambiguity and conflict.

5. Review & revisit: Plans change. Business interests evolve. Family demographics shift. Revisit the plan with your family so the familiarity (Mere exposure) remains, and no one is “out of the loop.”

6. Scenario-plan for incapacity and international complexity: For instance, show the family what happens if you become incapacitated, how cross-border elements work, the role each person can play.

7. Get the support of your advisory team: A financial planning professional, supported by experts in law and tax, who understands both the legal side and the behavioural sides can help your family make great decisions. If they’ve been trained in facilitation, or work with facilitation professionals, you can also gather their support during family meetings, in the mediation of roles, and help explain the “why” behind the plan (not just the “how”).

High quality planning includes decisions regarding capacity, business succession, family governance, legal and tax complexity, and the even more complex dynamics of family communications and behaviour. By involving your family early, and getting support from professionals in finance, law, and people, you can increase the chances your plan will be accepted, understood, and executed well.

Your Spring Planning Team

Practice Notes:

Your Spring team is working relentlessly towards the end of the year. We will power down on December 19, and return on January 5th.

Spring in the News:

A Globe & Mail reader experienced the devastating loss of a child. Her questions, and Julia’s answers, can be found here.

Please check out our media page here for videos, podcasts, interviews and more.

Planning News Digest:

• Free books on Kindle! Our friend, Dr Daniel Crosby has made several of his books on wealth and investing free on Kindle to the end of the year. His hope is that the money you would otherwise have spent on the books would be donated to the Red Cross. Amazing knowledge and a charitable donation receipt? Please make your donation here and grab every book you can right here.
• Want to make a difference at home? We spent some time speaking with the Toronto Foundation recently and they shared this article that explains how great it is to donate securities. If you’ve had a fantastic year in the markets, want to share your good fortune, and just happen to save taxes, donating securities might be a perfect solution. Community foundations are a wonderful way to have your donation dollars make a difference in your community. You can find the one nearest you right here.
• Yes the Federal Budget came out November 4 and the short story is that there wasn’t a lot of change in the Personal Finance space. There wasn’t anything that warranted a whole article, which is not unusual for a minority government budget. Big changes just tend not to be all that possible when you have to convince everyone in parliament. There are significant investments in housing, technology, clean drinking water for First Nations, infrastructure, and more. If you want to dig into the budget, you can find it right here.
  • Lower income individuals can apply for automatic tax return filing, which should make it easier for those folks to take advantage of income-tested benefits
  • Bare trust reporting has been deferred again to after 2026
  • Some fancy planning around the 21 year trust deemed disposition rules have been taken away
  • Qualified investments for registered plans have been simplified
  • The UHT is gone, as is luxury tax on personal aircrafts and boats

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