1. One of the harsh realities in life is that our passing
is inevitable. Over the years we accumulate assets,
which becomes our estate. In order to avoid having
the government decide who will benefit from our
estate, we should have a notarized will.
Unfortunately, the majority of clients that I meet
do not have a will, and if they do it has not been
updated since their marriage, divorce or birth of their
first child.
In addition most of us do not consider what would
happen if we become incapable, who would manage
our finances or make decisions concerning our
health. A protective mandate, previously named a
mandate in case of incapacity, is a document that
allows you to nominate a person who will handle your
financial and legal affairs if you become incapable of
managing on your own.
When a person dies his assets are deemed to have
been disposed of at fair market value at the date
of death. In other words, if we are dealing with real
estate, the person will be taxed on the difference
between the value at death and the original price
with certain adjustments which will create a capital
gain and possible recapture of depreciation claimed
in the past. There are certain strategies that can be
implemented in order to avoid or defer the taxes:
• leaving the appreciated property, by will, to your
spouse
• leaving your RRSP and TFSA, by will, to your
spouse
• leaving your RRSP, by will, to children financially
dependent upon you
• purchasing life insurance to cover your tax liability
• create a testamentary trust
• donate some of your property that do not have
appreciated value to your family during your lifetime
• donate to a registered charity
• effect an estate freeze concerning your company
shares in order to stop your tax liability
Over the past year a major part of my clientele has
consisted of business succession planning or selling
of businesses or real estate due to the lack of the new
generation’s interest in continuing the business or
managing the real estate.
I recently met with the founder of a prominent real
estate development and management company
whose spouse has recently passed away, and who
is now faced with the challenge of providing for his
disabled child, which he wants to protect upon his
passing. Given his advanced age it has become a
priority for him to effect a tax efficient estate plan.
His other children are actively involved in the family
business and do not have the time to assume an
active role in providing for their disabled sibling. In
order to realize his objectives we are transferring
some of his real estate holdings into a tax efficient
structure and integrating a family trust to provide for
the disabled child. We are also updating his will and
drafting a mandate of incapacity and a representation
agreement.
Depending on the client’s needs and objectives, an
estate plan is tailor made to suit his needs. It is a
big challenge in my profession to convince clients
that the longer they differ their estate planning the
larger their tax liability will be upon their demise.
Unfortunately human nature is such that we only react
when we are in desperate need. Most clients will
differ or avoid estate planning due to lack of time or
because they consider it costly. However the cost to
savings benefit could be enormous.
Wealth transfer is a complex affair for Canadian
families. It involves the planning and execution of a
strategy to shift wealth created by the current and /or
prior generation, into the possession and control of
the next or even subsequent generations. It is usually
a difficult subject for individuals to address, however,
with the assistance of a trusted professional, our
clients can avoid the potential pitfalls of not having a
well laid our plan based on their wishes.
If you are considering setting up an efficient estate
plan, kindly contact the CONCILIUM Professionals
whom will gladly assist you in realizing your
objectives.
Nancy Nerone LL.M.fisc.
WHY DO I NEED
AN ESTATE PLAN? Nancy Nerone LL.M.fisc.
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