Estate Planning for Smarties

W. Bruce DrakeHooey Remus

November 2004

Estate Planning Objectives

Provide financial security for retirementProvide for potential disabilityImplement distribution plan after deathMinimize taxes on deathMinimize costs and inconvenience after deathMaximize gifts to beneficiaries

Planning Toolbox

Financial Planner– Insurance– Pension– RRSP– Tax plans

Lawyer– Structured assets using gifts and joint ownership– Will or multiple wills– Powers of attorney

Smarties

Financial Advisor or Advisors

InsurancePensionRRSPTax plans

Insurance Tool

Death benefit paid to beneficiariesDeath benefit used to pay taxesDeath benefit used to fund corporate obligationsNear death purchase to accelerate payments to beneficiaries

Pension Tool

Main tool for retirement income security for employeesDeath benefit paid to beneficiaries if plan member dies prior to retirementSpousal benefit offers income security after death of pensioner

RRSP Tool

Main tool for retirement income security for self-employed personsA supplement to employee pension plansTax deferral for spousesTax relief on contributions to maximumsWatch in will situations

Tax Plan Tool

A necessity to look ahead for tax impactOn death, a deemed disposition of capital propertyEnsure sufficient liquidity to pay taxes and debtsEstate freezes for corporate assets

Lawyers

Structured assetsWill or multiple willsPowers of Attorney

Structured Assets Tool

Bank accountsReal estateGICs and InvestmentsBeneficiary designations (insurance, RRSP, RIF, pension)Gifts during life

Structured Assets Tool Limits

The joint owner really owns half and you don’t after the transferFor gifts, the asset is no longer yoursIncome earned has to be shared appropriatelyTaxes have to be paid based on joint ownershipPrincipal residence exemption may be lost on the part of your home you don’t own anymoreFamily Law Act deemed severance for a matrimonial home

Wills Tool

Flexibility in distribution – your way, not under the statutory intestate succession distributionEssential for parents with minor children, common law or same-sex relationships, multiple families and special needs situationsTax effectiveCertaintySpecial NeedsMinimizes estate administration costs

Distribution Plan

You can choose any distribution you want unless it does not provide for a legal spouse or financially dependant personSpousal and Family TrustsPostponement for minorsProtection for special needs personsTax considerationsYou can make a difference with a charitable gifts and save taxes too

Designations

Life insuranceRRSPRIFPensions

Special Wishes

FuneralBurialOrgan donation

Minor children

Effective guardianship to named person for 90 daysNot binding thereafter but relevant for courtCourt will consider best interests of the child

Special Care

MarriageDivorceFamily Law Act– Community of property– Dependants– Spousal election

Foreign propertyTax considerations for foreign beneficiaries

Regular Review

Changed financial situationTrustee or beneficiary diesDivorce, separation or new childChanges in the law

Power of Attorney for Property

Empowers a trusted person or personsContinuing effectivenessDifficulties when no power$ignificant saving on lawyer’s feesConsiderationsA-G POA Internet Kit

http://www.attorneygeneral.jus.gov.on.ca/ and follow the link for the kit

Personal Care

Different purposeEmpower a trusted personEffective on disabilityLiving will effectConsequences of no powerConsiderations

Why bother?

Survey says: about 50% do not have a willCertaintyPeace of mind

Big costs $aving

How do I get one?

Financial PlannerLawyer– Family lawyer– Friend’s suggestion– Lawyer Referral Service 1-900-565-4LRS (4577)

($6.00 per call)– Hooey Remus Make a Will Month consultation

Trust companyCommercial will kitsWarning: if you write your own will

Objectives Reminder for Smarties

Smarties can plan their affairs to:– Provide financial security for retirement– Provide for potential disability– Implement distribution plan after death– Minimize taxes on death– Minimize costs and inconvenience after death– Maximize gifts to beneficiaries