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Estate planning involves the accumulation, preservation and eventual distribution of an individual’s wealth. The main purposes of Estate planning are preserving the integrity of your portfolio in the event that you become disabled or mentally incapacitated, developing a plan for passing on your wealth to your intended beneficiaries, and planning ahead for potential tax liability so your Estate is not unnecessarily impoverished by the tax bill payable as a result of your death.

The Cost of Settling Your Estate

We all know of the two certainties in life - death and taxes. What many Canadians fail to realize, however, is that the biggest tax burden comes after death. That’s when you are deemed by Revenue Canada to have sold all of your assets at fair market value, thereby realizing a capital gain if the deemed "sale price" is greater than the purchase price of the asset. In this case, 50% of the capital gain is taxable at regular marginal rates, with some exceptions for principal residence.

These taxes can seriously impact Estate size and, if not properly planned for, may impoverish one’s Estate, leaving financial hardship for one’s beneficiaries. With the help of your CANFIN Management Inc. Advisor, you can succeed in sheltering assets from taxation, as well as deferring capital gains taxes until the death of your spouse to avoid the immediate tax consequences.

In addition to taxes, consideration must be given to the impact of probate fees on the security left for your heirs. The probate of your Will certifies that it is acceptable to the courts and confirms the authority of the executor named in the Will. Probate fees, which can be significant, are payable at your death and possibly again at the time of your spouse’s death, and can create a significant burden on your Estate.

The Estate Planning Process

Estate planning today requires a team approach. Depending on the situation, the team may include an accountant, a life insurance broker, a real estate professional and/or a social worker. Always on the team is a lawyer and your CANFIN Management Inc. Advisor who coordinates the entire process.

The process involves taking a detailed inventory of your assets and liabilities; preparation of a fact-finding personal profile; defining your goals and objectives; and the planning for distribution of property, preservation of accumulated capital, retirement and disability needs, and the provision of income for beneficiaries in the event of your death.

Effective Estate Planning Strategies

From a legal perspective, the cornerstones of any solid Estate plan are a Power of Attorney and a properly drawn Will or, in some cases, multiple wills. In addition, a number of other simple and cost-effective tools may be used to realize your Estate planning objectives, in particular the need to defer taxes and fees payable by your Estate upon your death.

These tools may include joint ownership, designation of beneficiaries, spousal rollovers, living trusts, life insurance and other Estate-friendly life company products.

Other strategies may further help you in achieving your Estate planning objectives. To reduce probate fees and defer taxes, you may wish to include the gifting of assets prior to death (which is more likely to be an option for the elderly), the conversion of personal debt into corporate debt, and for larger Estates, the transfer of assets to a private holding company in a low probate province such as Alberta.

How We Can Help You

All of the above mentioned strategies vary in complexity so you should always seek professional advice to ensure that any action does not give rise to adverse income tax consequences and that the cost of the implementation and administration of these strategies does not exceed the probate fees you are seeking to avoid.

Your CANFIN Management Inc. Financial Advisor can assist you with this and may be able to recommend other products and strategies that may meet your individual investment and Estate planning objectives. In addition, he or she can help you organize your affairs, identify your objectives, assist you in developing an Estate plan, and arrange for its implementation. Call for a complimentary Estate plan review today.