Estate Planning

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Your Estate

Death & Taxes. Unfortunately, both of these things are unavoidable but there are solutions for alleviating, reducing, or even eliminating the tax liability.  Is my estate planning checklist in order?  What needs to be covered?  What will happen to my assets when I die? Questions like these can be answered by covering the checklist. That way, clichés like “planning to fail” or “failing to plan” need not be addressed! Estate planning keeps more of your assets in the hands of your heirs, minimizes income tax & probate fees, designates charitable gifts, declares personal care preferences, provides for income splitting that has tax advantages, distributes your assets as you had intended, ensures business continuity for business owners, and can identify people chosen to carry out last wishes and care for your minor children. Without careful planning, your estate may be tied up in the courts for months or even years. The government could end up collecting more taxes than is necessary. And, most importantly, how your legacy is disbursed may be decided for you. Every Canadian adult, regardless of their financial situation, should have an up-to-date estate plan that outlines the following:

• who is responsible for distributing your assets,
• who gets what and when they get it,
• who will take care of your children,
• who will manage any trust accounts, and
• who will make financial and medical decisions if you’re incapacitated.

Checklist

• Establish a network of professionals to ensure a proper plan. This may include a financial professional, lawyer, and accountant or tax specialist.
• Establish a household balance sheet. Your total net worth (assets – liabilities)
• Understand your insurance needs. Proceeds from insurance policies can be used as tax-free lump sums to replace lost income (if the wage earner dies or is unable to work), pay estate expenses (funeral, probate, debt costs), or leave an inheritance.
• Have an up-to-date will. The purpose of a will is to a) name the person who is executor/executrix, estate trustee, or institution that will administer your affairs on death b) administer and/or pass on assets that have not already been distributed prior to death c) name a guardian for any minor children and d) express limits on the use of your assets.
• Establishing a Power of Attorney for Property and for Personal Care. As of Feb 28, 2000, British Columbia enacted the representation agreement which replaces enduring powers of attorney. A representation agreement will include both property and personal care.
• Minimize taxes and administration fees. This is critical to ensure the majority of your worldly assets are passed on to your heirs, not the government. Most estates encounter certain obligations for income tax and probate upon death. This reduces the amount passed on to your heirs. If any part of your estate must go through probate to validate the will before transferring ownership of assets, the entire estate value may be subject to probate taxes. Probate is the “proving” of a deceased’s will by the court. Probate taxes vary considerably but generally are a percentage of the value of the estate being probated. Simple strategies such as naming beneficiaries in RRSPs, establishing joint ownership with right of survivorship, being properly insured, using segregated funds, pre-arranging funerals, and establishing living trusts (like alter-ego trusts for those 65 and over) are all effective ways of minimizing taxes and administration fees extracted from your estate.
• Keep track of accounts and important information. Keeping track of vital information in a centralized place is a sound practice, not only for you but for those who may need to access them.
• Review and update when necessary. A good rule of thumb is at least once a year or when any substantial life changes occur.
• Share your plans. It’s crucial that those closest to you and those affected by your plans know your intentions, what is expected from them, and where the critical information is kept.

For more information on estate planning ideas, please Contact Us.

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