Estate & Tax Planning
Did You Know ?
- When a Life Insurance pays out the Death Benefit to your Beneficiary, the proceeds are typically Tax Free to your Beneficiary.
- If you are a shareholder of a corporation (e.g. Business Owner – 100% shareholder or partly owned) your corporation can pay for the Life Insurance on your Life.
- It is much more efficient as the corporation owns the policy, it’s paid with after tax corporate dollars instead of after tax personal dollars as we all know the corporate tax rate is much * lower than the personal tax rate if you had to pay for that policy yourself. This is also great as the corporate is paying as a monthly or annual insurance expense.
- Estate’s default distribution is the probate – the process of administering a deceased’s estate, including having a personal representative appointed, determining if there is a valid will, paying claims, filing any necessary tax returns & distributing assets. Estate planning which includes having a Life Insurance paid out to your beneficiary on death, your liabilities such as loans, mortgages, and taxes can be paid by these proceeds, so that your probate process (if required) becomes easier, faster and cheaper to complete.
Tax laws and estate laws are complex and constantly evolving, which can often lead to costly mistakes.
Let’s work together to examine potential tax gaps between your intentions (your will) and your existing estate plan, while incorporating innovative insurance strategies to protect your health.
When there is no estate plan, we can create and document a tax-savvy and purposeful distribution of your wealth with the assistance of your trust & estate lawyer.
*Disclaimer : All information on this website is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation.
Estate Planning
- What does this mean?
Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an Lawyer experienced in estate law.
This is best explained by a case study below..
Let’s say Peter is a successful business man in 67 years old and still operating a Business (corporation) being the only shareholder.
His assets are as follows :
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As you can see above, a good Estate Plan will ensure passage of Assets to his family with ease and often minimizing the Taxes payable by his Estate. Can you imagine if you were to leave all the headaches to your loved ones if you haven’t implemented an Estate Planning strategy.
We have lawyers and tax advisors / specialists to assist you in this process (or we will work with your advisors).
9 Steps To Your Estate Plan
Step 1: Asset List
Go through your home (inside and out) and make a list of all items worth $100 or more. Then add the non-physical assets you own, such as bank accounts, investment accounts and insurance policies. This is your asset list.
Step 2: Debt List
Next, list all your outstanding debts, such as mortgages or auto loans, as well as all active credit cards or lines of credit without balances.
Step 3: Membership List
The next list is for all the organizations you are a member of : such as the CAA auto club, Costco, your health club and your college alumni association. Lawyers will charge $150 or more to notify
each association or organization of your death: provide a list, however, and your family can do it for nothing. Moreover, some associations offer life insurance benefits to their members.
Step 4: Name Charities
List the specific charities close to your heart if you want donations made.
Step 5: Name Your Beneficiaries
Naming beneficiaries on your registered accounts (such as RRSPs*) and insurance policies ensures the money will be distributed to your heirs directly, which avoids the delay and costs associated with probate. Also, when life events change, such as getting a divorce, remember to update your named beneficiaries.
Step 6: Big Questions
While you should have a professional draft your will, you can start the discussions before you visit your lawyer. Talk to your spouse about how you would like to distribute your estate. If you don’t know where to start, use free online will kits to frame the discussion. This is not about being precise as much as it’s about determining what you know and what you need to find out.
Step 7: Choose Responsible Family and Friends
One of the biggest—and most important—decisions in an estate plan is who will be named as your estate administrator (executor), your power of attorney and the guardian of your children. Pascoe advises his clients to consider appointing different people to different roles. “Appoint a sibling from both the husband’s family and from the wife’s family to be estate trustees—the people who look after the money. Then consider a different person—a natural caregiver—to be the custodian for your children.” The key is to pick competent, trustworthy people, and then to spread out the responsibility.
Step 8: Talk to the Pros
Now it’s time to call in the professionals. If you’re concerned you don’t have enough insurance, contact an insurance provider. To minimize estate taxes, make an appointment with your accountant. If you have no special concerns, an estate lawyer may be able to look after everything. A basic will can cost as little as $500, while a basic complicated—for example, you have a family business, or a child with special needs, or you’re remarried—the cost can climb to several thousand dollars.)
Step 9: Review and Update
The most vital components of your estate plan—your will, your powers of attorney, your health directive and your life insurance coverage—need to be reviewed every few years, or whenever you have a major life change.
F.A.Q.
Some of the Typical Questions Our Clients Ask Us
Can Estate Planning By Pass Probate?
This is a great question one of the Key Considerations in an Estate Plan is incorporating Life Insurance Benefits which are typically paid to your beneficiaries by passing the Estate and Probate on death.
Why is the WILL & Living Trust important ?
Living trusts and wills are both legal documents written to deal with property and both are important estate planning tools that can sometimes even be used together. Living trusts appoint trustees to manage property. Trustees control property while you are alive. Wills appoint executors who manage and distribute property when someone dies. But until someone dies, executors have no power to control property. So what if anyone becomes incapable of managing things themselves? They would need an attorney set up as a power of attorney to manage their property. This power of attorney is done in addition to a will.
When a person dies they may leave behind belongings, real estate and other assets which is called their estate. In Ontario, an estate trustee is the only person with the legal authority to manage or distribute an estate. Probate is a procedure to ask the court to:
- give a person the authority to act as the estate trustee of an estate; or
- confirm the authority of a person named as the estate trustee in the deceased’s will
- formally approve that the deceased’s will is their valid last will.
If your probate application is successful, the court will issue a Certificate of Appointment of Estate Trustee, which is proof that a person has the legal authority to deal with the estate and – if there is a will – is proof that the will is valid.
What happens if no estate planning is done?
Part of the Estate Planning is the WILL & Living Trust. If this is not done, the estate goes into probate. Probate is a legal process in which the probate court uses the laws of the province to decide who inherits what. Probate can take anywhere from a few months to a few years, depending on how complicated the estate is.
Tax Implications On The Estate
Taxation and Estate Planning – The deemed disposition tax is so named because your investments are deemed to be sold at death. Any capital gains triggered by their sale are included in a final income tax return filed in the year of your demise. A final tax return also includes the value of any retirement accounts and income received from stocks, bonds, real estate investments, and even life insurance proceeds in the year of death, from January 1 up to the date of death. With Canadian federal income tax rates of up to 33% in 2019, this final taxation can be substantial. Provincial taxes and probate fees also apply. The good news is that with Estate Planning you may be bale to minimize these * Taxes…
* Disclaimer : The information on this website is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own Lawyer, Accountant, and/or other advisor regarding your specific situation.
Die without a will—known as “dying intestate”—and the government gets to decide who your beneficiaries are and how your assets will be divided up. This is especially important if you and your partner are not formally married: common-law spouses do not necessarily have the same property rights as legally married spouses.
Imagine all the problems that can be avoided such as Taxation, Loans, Mortgages (Liability) issues to disposition of your assets and division among your family without the enormous cost that can be associated if there was no Estate Plan. We work with professionals such as Accountant and Lawyers to devise a plan that is in the best interest for you. Finally we can work with your Accountants and Lawyers adding value where we can.