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ESTATE
PLANNING - Making plans for
life.
What
is Estate Planning?
To make enduring plans in an ever changing world is a
challenge we all face. But tomorrow's uncertainty can be
secured, or at least prepared for, with estate planning
that spans today's needs as well as those of future
generations.
"If I'd only known then what I know now." Too often,
we arrive at a place in our lives only to wish that we'd
done things differently. Estate planning enables us to
look into the future - preparing today so all our
dreams for tomorrow can be realized.
Estate planning is more than just writing a Will. It is
the complete package of how you will provide for your
family and loved ones while you are living and how you
will transfer and preserve the value of the assets that
you pass on. Estate planning also takes into account
your need for powers of attorney, trust funds, guardians
for children, and special concerns like business
succession if you are a business owner.
A good estate plan is precisely tailored to your
particular financial and lifestyle objectives. It should
anticipate your future needs, as well as encompass the
present. It should ensure that your estate is on solid
ground financially, with an eye to transferring it to
your beneficiaries in a tax-wise manner. Most of all,
your estate plan is a tool you can use to live life to
the fullest.
Because estate planning is about making plans for life,
you need to explore many questions, such as:
- What kind of lifestyle do I want for my family?
- What about looking after my children's future? Who
will look after my children if they are left alone at a
young age?
- How can I ensure that my finances are in order?
- Will my savings provide for my retirement?
- Is my insurance sufficient to protect my
beneficiaries?
- What happens to my family if I am incapable of
managing my affairs?
- How will my business be passed on?
- Will there be hidden expenses that could affect my
family or business?
- How can I best contribute to an organization that
does important work in my community?
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Getting Started -
It's never too early
Traditionally, estate planning has gone
hand-in-hand with retirement planning - something that
many people put off until they approach the end of their
careers. But you're never too young to start planning for
those you care about or for your business interests. And
you don't need to have unlimited assets to put a sound
financial plan in place.
Most estate planning discussions begin with spouses,
other family members or close friends. After all, these
are the people for whom the planning is done. Their
counsel is invaluable, but it is no substitute for
professional advice. While those you care about most will
help you decide what you want to do, your financial and
legal advisors can help you formulate a plan to get you
there.
You can start by learning more about the issues
surrounding estate planning. Set goals with a thorough
understanding of your advisor's counsel on how to achieve
them. Make contingency plans that can keep you on course
when things go wrong. And ensure the legal documents
exist to protect your plans, your business interests and
your loved ones.
Determining your
net worth
Before any estate plan is formulated, you must
begin by preparing a list of your assets and liabilities.
A listing of your assets should include the properties
and possessions you own, the money you have set aside,
and any business interests you may have.
Once you have your assets listed, take a look at what
you owe on these proper-ties, any financial obligations
you have, and any outstanding costs that are associated
with your business interests. This forms your statement
of liabilities.
Keep your estate plan fresh by reviewing your lists
whenever there is a change in your financial or personal
situation.
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Your
Beneficiaries
While making an estate plan is a smart move for
you, it will also take care of those around you after
your death. Make a list of all those who can benefit from
your planning and include yourself on the list. Consider
how you wish to manage your estate during your lifetime
to best meet your personal and financial needs, and then
consider how you want this estate to be passed on once
you're gone.
By having a clear picture of the people you want to
benefit from your estate, you will be able to identify
how you can best make your plans work - for them and for
you.
Gifts During Your Lifetime and Charitable
Donations
If one of your goals is to leave a sizeable gift or
bequest to an organization whose work you admire, be sure
to consult us to determine how to do this most
effectively. You will want to consider both the timing of
the gift and the tax consequences of your preferred
strategy. There are a number of tools that you can use to
serve both your personal financial interests and your
desire to contribute to a worthwhile cause.
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Gifts and
Bequests
- An estate plan should account for any gifts you wish
to make, either during your lifetime or after. Some of
the questions you may face:
- Do I want to make specific gifts (whether of money or
belongings) to a particular person, organization or
charity?
- Do I want to make these gifts while living -
or in my will?
- Will my entire estate be handed directly to my
spouse?
- Should I set up trust funds for my children, or
anyone else?
- When should my children receive income earned on
their trust funds? When should they have access to the
capital?
Having identified your beneficiaries, you can
then determine how and when you will provide for them.
Making plans now helps to ensure that your wishes will be
carried out as you intended.
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Professional
Advice
Estate planning - whether it's aimed at
your immediate needs or your beneficiaries' future needs
- covers a broad range of legal, tax, and financial
topics. Look at some of the things we can help you
achieve:
We can:
- help you accurately determine present and future
income needs for you and your family
- devise a financial plan that best meets these
needs
- help identify your insurance needs
- offer solutions that meet your cash requirements
on death
- make suggestions for tax - favourable
investments
Your Tax Advisor can:
- assess the tax implications of your estate
plan
- develop strategies for minimizing the impact of
taxes
Your Lawyer can:
- help resolve any conflict that may exist between
your wishes and the law
- draft legal documents - wills, powers of
attorney, purchase and sale agree-ments, trust
documents, etc. - that express your wishes in
accordance with applicable laws
Keep in mind that each of these fields touches on the
other, so it is important to involve all your advisors in
the early stages of your estate planning. In this way,
they will be able to provide important and possibly
unexpected contributions that can guide the steps of your
other advisors. You may also wish to delegate the
coordina-tion of this team effort to your most trusted
advisor. That person can assign indi-vidual
responsibilities and make sure tasks are completed on
time.
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Estate
Planning Tools
Your
Will
Your will is the cornerstone of your estate
plan. We strongly recommend professional preparation. A
good lawyer will draft the provisions of your will so
that they are accurate, complete and clear statements of
your intentions.
It is important to involve all of your advisors in the
preparation of your will. Give them clear and unambiguous
guidance as to what you wish to achieve.
Have each advisor read a draft of your will to make sure
that it achieves your goals from all perspectives. Once
you are convinced it is the best will for your needs, you
can be comfortable signing it. Remember that the
completed will must be signed and witnessed in accordance
with provincial laws.
No will is etched in stone - your objectives,
personal circumstances or legislation can change. You
should review your will periodically to ensure it
continues to reflect your intentions. While a formal
amendment (codicil) can make straightforward changes to
your will, more significant changes may require that a
new will be drafted.
You must name an executor in your will. In selecting an
executor, be sure to select someone you can trust
- someone who will be sensitive to the needs of
your family and, if applicable, your business interests.
You may want to consider asking more than one person to
serve as co-executors. And if your estate is fairly
compli-cated, you may need to enlist the help of a trust
company to serve as a corporate executor.
If you do not have a will, your estate will be
distributed in accordance with provincial intestate
legislation - those who inherit may not be those
whom you intended to benefit. And you will nor be able to
select your executors.
To
Will or Not to Will
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will
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- you choose your heirs
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no will
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- your heirs are determined by law
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will
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- you make specific provisions for your
spouse
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no will
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- your spouse may receive less than you
intend
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will
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- you decide when and how your children
receive their inheritances
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no will
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- ready or not, minor children receive their
shares at the age of majority
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will
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- you choose an executor to look after your
estate
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no will
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- the court appoints an administrator
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will
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- you provide for a timely, cost-effective
distribution of your estate
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no will
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- your heirs are faced with delays and
unnecessary costs
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will
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- you make plans to minimize the impact of
income and capital gains taxes
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no will
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- Revenue Canada becomes one of your major
beneficiaries
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Power of
Attorney
A power of attorney is a formal document that
allows you (the donor) to appoint another (the attorney)
to act on your behalf in carrying out your business and
legal affairs when you are unable to do so. Under most
provincial laws, a power of attorney can be drafted so
that it remains effective in the event you become
mentally incompetent. This is called an "enduring" power
of attorney. Upon death, a power of attorney
automatically terminates. From that point on, your
affairs will be man-aged in accordance with the
provisions of your will.
Insurance
Insurance is a key element of most estate plans.
It provides funds to your estate and to your family when
needed most. The insurance proceeds from an exempt life
insurance policy are paid tax-free to your beneficiaries.
As a tax-favourable investment tool, insurance can also
provide income during your lifetime for things like
retirement or a child's education. Ask us how you and
your family can benefit from the use of life insurance,
both while you are living and after your death.
Trusts
Trusts are an extremely flexible estate-planning
tool. A trust can be created during your lifetime (an
inter vivos trust) or after death under the terms of your
will (a testamentary trust). A trustee is appointed to
hold specific property for those whom you wish to benefit
(the beneficiaries). The trust document sets out the
manner in which the trustee must deal with this property
and how and when it is to be transferred to your
beneficiaries. The trustee can be given as much or as
little discretionary power as you wish. Flexibility is an
attractive advantage with trusts - you can name multiple
beneficiaries with each benefiting in different ways and
at different times. Your advisors will be able to give
you suggestions on whether and how to use a trust in your
estate plan.
Private
Corporations
Holding assets in a private corporation can
result in significant tax advantages. The private
corporation also provides an effective means for
splitting income among family members as well as a
tax-effective way to pass along wealth to your children.
Estate Planning -
A Work in Progress
Estate planning is an ongoing exercise. Your
plan is likely to require periodic tune-ups - maybe even
a complete overhaul from time to time - so it is
important to stay in touch with your advisors. Let them
know of any changes to your personal circumstances or
estate planning objectives. Have them let you know about
changes to the law that might affect your plan. In this
way, you'll be assured of having a plan that remains a
source of stability and strength for you and those you
care about most.
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The
Executor's Role
You've been asked to play the important part of
executor and you are not sure what to do.
As the executor, you are responsible for ensuring that
the instructions set out in a will are carried out in
accordance with the deceased's wishes. You will need to
gather the assets, pay debts, prepare the final tax
return, and manage investments for the beneficiaries
while the estate is being administered.
The executor can be more than just one person. Two or
more people can act jointly as co-executors of a will.
And for more complicated estates, you may need to work
with a corporate executor (a trust company).
While the list of duties can vary from estate to
estate, the executor's role often includes some or all of
these responsibilities:
- locate and review the will
- assist with funeral arrangements
- apply for probate, if necessary
- determine family's immediate cash
requirements
- notify beneficiaries of status of estate
administration
- close bank accounts of deceased and open estate
accounts
- prepare inventory of assets and liabilities
- manage the assets of the estate
- set up trusts created by will, if any
- pay any outstanding bills
- prepare and file final tax returns
- prepare and distribute accounting to beneficiaries
on a regular basis
- consult with beneficiaries, distribute assets
- arrange for final settlement of estate at
appropriate time
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