Estate Planning
Protecting your estate requires careful planning and knowledge of family, estate and income tax laws. It is vitally important to enlist the help of a lawyer as well as an independent advisor. Unless you leave everything to your spouse when you die, Canada's tax laws function as if you’ve just sold your assets. You may even end up paying out capital gains taxes, reducing the amount of money that goes to your loved ones.
What will be your legacy? Do you hope to leave a little nest egg for your grandchildren to make a downpayment on a house, go to college, or start their family. Are you looking to minimize your tax burden?
Start by answering these questions, setting priorities for your will and taking charge of putting your financial house in order.
Plan carefully - identify your goals, find strategies to reduce estate taxes, contribute to charities, and update your Will and Power of Attorney.
Planning Fundamentals
While certain executives, entrepreneurs and high-wealth investors may appear to approach estate planning as a business exercise, for the average client estate planning is perhaps best viewed as a highly personal activity which necessarily has legal and financial implications.
Ultimately, each person will have unique qualities and goals that must be dealt with on a case-by-case basis in consultation with
relevant informed professional advisors, including consideration of personal characteristics, interpersonal dynamics and family issues.
Keep Some Assets Apart
Life insurance policies and RRSPs/RRIFs won’t be considered part of your estate for probate fees if you have named a beneficiary.
- Buy life insurance to cover estate taxes. It can also be used to provide income for dependents, to pay for your grandchildren’s education, final expenses or to offset capital gains taxes.
- Consider setting up a family trust or spousal trust to avoid capital gains taxes.
- Include tax-oriented clauses in your will. Set up your estate to make an RRSP contribution to your spouse’s RRSP for that year if permitted. This will reduce your final income and your tax bill.
Plan Charitable Bequests
Charitable bequests can be used to gain significant tax savings for your estate. Instead of selling your assets and making a cash donation, take out a life insurance policy or donate securities directly to your favourite charity to avoid capital gains tax.
- Be sure to seek professional advice - there are many important details that must be considered.
Wills and Probate
Prepare & Update Your Will
A legal Will defines how you would like your assets to be distributed when you die. It designates who you want to be responsible to serve as the executor of your estate.
It can set out specific burial requests and name those who you would like to serve as guardians for your children.
In the absence of a valid Will, provincial or family law will govern how your assets will be distributed.
- Review and update your Will every two to three years to make sure it reflects your current wishes.
Establish Power of Attorney
A Power of Attorney is a legal document that outlines how you would like your financial assets to be handled if you become incapacitated, mentally or physically.
- Keep your Power of Attorney with your will and review it periodically.
Health and Welfare Trusts
Income and Alter Ego Trusts
Everest
Life insurance policies and RRSPs/RRIFs won’t be considered part of your estate for probate fees if you have named a beneficiary.
- Buy life insurance to cover estate taxes. It can also be used to provide income for dependents, to pay for your grandchildren’s education, final expenses or to offset capital gains taxes.
- Consider setting up a family trust or spousal trust to avoid capital gains taxes.
- Include tax-oriented clauses in your will. Set up your estate to make an RRSP contribution to your spouse’s RRSP for that year if permitted. This will reduce your final income and your tax bill.
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