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Welcome, introductions Objective of seminar is to discuss estate planning issues, strategies and considerations for those who are retired or gearing up for retirement. Estate Planning needs to be approached as part of a complete financial plan (description of what is a complete financial plan). Highlight agenda
Possible personal goals and concerns: protect retirement income needs; complement tax plan during lifetime; and result in tax efficient transfer of assets to heirs/beneficiaries Not a one-time task - needs to be reviewed/revised as your situation and laws change. Good financial advisor will meet with you regularly so you can discuss when you may need to update your estate plan.
Do you want to preserve as much as possible for your spouse, children or grandchildren? Do you need to provide for a child or adult with a disability? Do you want to transfer a business to a family member? Do you want to minimize tax? Now? Or for your beneficiaries? Do you have a favourite charity?
Personal situation (married, divorced, 2 nd marriage) Your current assets and liabilities Business situation (employee, owner, shareholder) Family dynamics: It’s usually better to talk to the people who may or will be impacted by your wishes so as to ensure that those affected understand your wishes; People to talk to include your executor; persons to whom you’ve granted a power of attorney; guardians and beneficiaries/heirs.
Your will - probably the most fundamental component of your estate plan Having a lawyer or notary draft your will can prevent difficulties and reduce the potential of your wishes being misinterpreted or contested Ensure you have a will, that it is current (e.g. doesn’t mention deceased beneficiaries, reflects changes in your marital status, etc.). Keep complete personal records for your executor, including information on insurance policies, investments, personal property, real estate, business assets, SIN, birth/marriage certificates. (Highlight the IG brochure: Personal Records Organizer C2746).
Your estate may be divided in a way you may not have wanted Someone will be appointed to administer your estate, rather than choosing the person you want Taxes payable by your estate and/or by your heirs may be higher than if you had implemented an estate plan. Assets may go to minors, in which case they may be managed by a government-appointed official, called a Public Trustee, and then given to them when they reach age of majority. Your preference to a guardian may go unknown
Qualities to look for: Trustworthy, good judgment, clear understanding of your wishes, ability to take on additional responsibilities, has adequate level of maturity and ability to manage any ongoing trusts for a long time. If possible, choose someone who is younger than you, although that may not be advisable if you yourself are quite young. May choose a family member or friend. Benefits and disadvantages: may not be familiar with affairs and wishes; may not necessarily charge a fee; may find the time-consuming role during a time of grieving a difficult burden, especially if your estate includes any ongoing trusts for minor children, disabled heirs, etc.; awkward situations can arise if all beneficiaries are not treated equally. Choosing a professional executor: will charge fees; will have expertise; no personal interest. Important to avoid anyone who would be in a conflict of interest position.
Executor needs to know: location of your Will and personal documents; funeral arrangement/wishes; names of lawyer/notary, accountant and financial advisor. Highlight the IG Special Report: Will you do it? C2744
Power of attorney allows someone to manage your affairs should you be unable to do so due to an accident, illness, mental incapacity or terminal illness, or even if you plan a trip outside the country, as specified by the POA. (Tip: Mental incompetence will make a power of attorney invalid unless it’s enduring). Provincial laws govern Powers of Attorney. Need to consult a lawyer/notary about giving someone this power. Consequences of not having a Power of Attorney: Someone must apply to the courts for authority to look after your affairs; can be a time-consuming and costly process; may not be the person you would have wanted to look after your finances. May be limited in what they can do Another form of Power of Attorney is one for Personal care: Also known as a ‘living’ will or health care directive; Available in some provinces Gives the person of your choice the power to make certain decisions about your personal care; see a lawyer/notary to find out the rules for your province and for drafting a Power of Attorney for Personal Care.
Your estate must be prepared to deal with debts and liabilities upon your death and can include: outstanding balance on mortgages, loans and credit cards; income taxes; probate and other estate fees. Income in the year of death: final return for deceased - taxable income earned up to the date of death including employment income, investment income, realized capital gains, CPP/OAS, income from RRIFs and pensions. Estate return - taxable income and capital gains from the date of death onwards. Capital gains on deemed dispositions: all assets deemed disposed of at death at FMV - could result in a capital gain or loss; recapture of CCA on rental or business property. Exceptions: assets transferred to a spouse, certain farm assets. Registered Plans: full value of RRSPs and RRIFs are taxable at date of death; Exceptions: transfers to spouse are tax-deferred; transfer to a minor child or dependent in some circumstances is also tax deferred.
Doesn’t apply to jointly held assets and generally not to insurance proceeds and other assets with a beneficiary designation (other than designations naming your estate as beneficiary) directly under the plan/policy and outside your will Don’t let probate fees or taxes drive your estate plan Probate fees or taxes are often minor in relation to problems caused by inappropriate joint ownership or beneficiary designations.
There are several strategies and considerations which may assist in preserving your estate. Each strategy has its advantages and disadvantages. Awareness may help you see opportunities/pitfalls when reviewing or building your estate plan.
Beneficiary designations: Benefits include the likelihood of no probate fees on these assets, reduced executor fees and easier transfer of ownership for beneficiaries. Need to consider how all assets of your estate will be distributed, both inside and outside your will - taking into account the tax liability associated with each asset and potential claims against your estate. Joint Ownership: Benefits include reduced probate and executor fees and surviving owner now has sole title which results in quicker settlement. Things to consider include loss of control by sharing ownership; you may incur a tax liability when adding a new joint owner; jointly held assets will be exposed to creditors of the new joint owner (includes ex-spouses) Joint ownership with children can become complicated, and doesn’t mean they will automatically receive the asset. You should speak to your lawyer and if you don’t already have one, I can provide a recommendation. Be sure to consider your estate as a whole - this may not be a good strategy if the sole purpose is to avoid probate fees.
Gifting during lifetime: Benefits can include: assets don’t fall into your estate, thereby reducing probate, legal and executor fees; beneficiaries may benefit more from a gift today - and you can see them enjoy that gift; you can pass the asset on before the capital gain gets even larger and future growth in the value of gifted assets will, in most cases, be taxed in the hands of the recipient. Things to consider include: comfort level in losing the assets; taking into consideration your own future needs; potential capital gains tax on the asset at the time of the gift; you may still have to pay tax on the income or capital gains from the asset if you gift it to your spouse, or on the income if you gift it to a minor child Planned Charitable Giving: Benefits include: tax benefits of doing so either during your lifetime or upon death; bequests can be made in your will; sometimes lifetime gifts make for a better tax deduction; life insurance can be used to fund a donation; can provide either an immediate tax saving or a tax saving at death. Highlight the Planned Giving brochure C3108 for those who are interested.
Benefits of using insurance for estate creation purposes: Protecting your family - can provide for ongoing income needs; provide for a dependent family member with disabilities; can provide funds to equalize bequests if one child is inheriting an asset that makes up the bulk of the estate (eg. A business or family cottage); can provide funds to assist in the transfer of ownership of a business at death and can leave a final gift to a charity. Benefits of using insurance for estate preservation purposes: Can be used to pay tax on capital gains and other income at death; can offset the tax on liquidation of RRSPs or RRIFs; can provide funds for outstanding debts and immediate expenses. Things to consider when using insurance include family financial needs and the type and amount of insurance required.
Benefits of using trusts include: in most circumstances, it can safeguards assets from creditors - your own and those of your beneficiaries; provides control to your trustee and not your beneficiaries over assets, while at the same time ensuring growth on the asset will accrue to beneficiaries; ability to choose the age or circumstance under which minor children can gain access to their inheritance; provides capital for children from previous marriage while providing income for your present spouse for his/her lifetime; provides tax advantages in some circumstances. Things to consider include: trust law is complex; establishment and ongoing administration of trust could be expensive, so you should consult with your team of professionals for help in determining whether or not your situation could benefit from establishing a trust; ensure you have an expert assist in planning, establishing and administering the trust.
My legacy will be... Planning the ultimate giftfor those you value mostRichard McBrideConsultantInvestors Group Financial ServicesIG Insurance Services
2This Presentation Is intended for residents of Canada outside Québec Written and published by Investors Group as a general source of informationonly. It is not intended as a solicitation to buy or sell specific investments,nor is it intended to provide tax, legal or investment advice. Readers shouldseek advice on their specific circumstances from an Investors GroupConsultant. Although we have tried to ensure the accuracy of this information, tax lawschange frequently so the provisions and exemptions mentioned in thispresentation may change. Investment products and services are offered through Investors GroupFinancial Services Inc. and Investors Group Securities Inc. Investors GroupSecurities Inc. is a member of the Canadian Investor Protection Fund. Insurance products and services distributed through I.G. Insurance ServicesInc. Insurance license sponsored by The Great-West Life Assurance Company. ™ Trademark owned by IGM Financial Inc. and licensed to its subsidiarycorporations.
3Introduction Today’s Objective: Discuss estate planning issues, strategies and considerations Today’s Agenda: What is estate planning? Setting goals; getting started The fundamentals Possible estate planning strategies
4What is Estate Planning? It is a process: To protect and distribute your estate To ensure your wishes are fulfilled That considers your personal goals Estate planning is not a ONE-time task
5Possible GoalsThings to consider: Large inheritance? Provide for an heir who is disabled? Transfer a business? Minimize tax? Charitable gifts?
6Getting StartedAssess the following: Personal situation Current net worth Business/employment situation Family dynamics
7The Fundamentals Will Executor Power of Attorney Taxes Probate
8Your Will Most important document you will ever sign Legally enforceable declaration of how you want yourpossessions distributed after death Safeguards your interests Helps avoids disputes and disagreements
9Your Will - You don’t have one? Your wishes may not be met Someone, not of your choosing, may be appointed toadminister your estate Taxes payable by your estate or heirs may be higher Assets may go to minors, in which case they may bemanaged by a government-appointed official, called aPublic Trustee, and then given to them when they reachage of majority Your preference to a guardian may go unknown
10Your Will - Issues to Consider Naming of an executor Guardian for minor children Care for dependent family members Wishes for division and distribution of assets Wishes in the event a beneficiary predeceases you
11Your Will - Review Review your will at least every 3 years, or when yourcircumstances change Change in marital status Birth of a child Death or disability of an heir Change in tax laws Move to a new province or country Change in business succession plans Change in charities/names
12Your Executor Someone named to administer your estate May choose a family member or trusted friend Could choose a professional executor Consider someone who: has adequate level of maturity, hopefully will outlive you is trustworthy and willing to accept the responsibility has a clear understanding of your wishes has knowledge/expertise to administer your affairs if theyare complex
13Your Executor - Responsibilities Locate and notify beneficiaries Arrange for funeral services Apply for life insurance benefits Advertise for creditors Prepare inventory of assets and pay-off debts File tax returns Distribute estate assets Administer testamentary trusts
14Power of Attorney Enduring power of attorney (POA) typically givessomeone authority to deal with some or all of yourproperty should you be unable to do so Can be revoked at any time May prefer a “springing” form of POA* which only comesinto force upon mental incapacity Look for someone with the qualities of your executor After death, your executor assumes full responsibilityfor your affairs*available in most jurisdictions
15Taxes Life’s two certainties: death and taxes Three basic categories regarding income tax and yourestate: Income in the year of death Capital gains on deemed dispositions Registered plans
16Probate Probate is a process to declare a will valid Confirms the authority of the executor Provides evidence of death Fees for probate vary from province to province
18Beneficiary Designations & Joint Ownership Appointing a beneficiary is one method that can resultin assets not going through your estate Joint Ownership generally means assets willautomatically belong to the surviving owner withoutgoing through the estate This may not always be the case where adult childrenare added as joint owners Beware of deemed dispositions, inequitable division ofestate and creditor exposure with joint ownership
19Gifting Gifting during your lifetime Act of passing assets on to beneficiaries while you are living Planned charitable giving Allows you to make tax-efficient gifts to your favourite charityeither during your lifetime or upon death
20Insurance Life insurance can be an effective way to fulfill avarietyof objectives: Can assist in creating an estate Can assist in preserving an estate General benefit: it provides tax-free proceeds andimmediate liquidity when needed
21Trusts A legal arrangement where you transfer assets to atrustee for the benefit of one or more beneficiaries Trustee manages the trust according to terms of thetrust Two primary ways of establishing a trust: Testamentary trust - through a will Inter vivos trust - through a written trust document during yourlifetime
22Estate Planning Strategies There are many choices and considerations forpreserving and protecting your estate Important that each strategy is implemented within thecontext of your estate plan as a whole, as well as yourfinancial plan Take time to assess the big picture before implementingstrategies
23Conclusion Estate planning is complex Many issues to take into consideration Decide what you want to achieve - what’s mostimportant to you and your family Talk to those you are affected by your wishes Have a will and review it on a regular basis
24Conclusion Make administering your estate as simple as possible foryour executor Implement solutions that are right for you, your goalsand your personal situation Consider your family’s entire range of financial planningneeds and issues
25Conclusion Work with an estate planning team including yourfinancial advisor, lawyer/notary, and accountant Financial advisor: assists in helping you assess yourneeds and circumstances, and providesrecommendations for possible strategies and offersinvestment and insurance solutions to assist inimplementing the estate plan Accountant and lawyer/notary: gives professionalexpertise to help you carry out your wishes effectively