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Estate Planning for Smarties

Estate Planning for Smarties. W. Bruce Drake Hooey Remus November 2004. Estate Planning Objectives. Provide financial security for retirement Provide for potential disability Implement distribution plan after death Minimize taxes on death Minimize costs and inconvenience after death

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Estate Planning for Smarties

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  1. Estate Planning for Smarties W. Bruce Drake Hooey Remus November 2004

  2. Estate Planning Objectives • 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

  3. 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

  4. Financial Advisor or Advisors • Insurance • Pension • RRSP • Tax plans

  5. Insurance Tool • Death benefit paid to beneficiaries • Death benefit used to pay taxes • Death benefit used to fund corporate obligations • Near death purchase to accelerate payments to beneficiaries

  6. Pension Tool • Main tool for retirement income security for employees • Death benefit paid to beneficiaries if plan member dies prior to retirement • Spousal benefit offers income security after death of pensioner

  7. RRSP Tool • Main tool for retirement income security for self-employed persons • A supplement to employee pension plans • Tax deferral for spouses • Tax relief on contributions to maximums • Watch in will situations

  8. Tax Plan Tool • A necessity to look ahead for tax impact • On death, a deemed disposition of capital property • Ensure sufficient liquidity to pay taxes and debts • Estate freezes for corporate assets

  9. Lawyers • Structured assets • Will or multiple wills • Powers of Attorney

  10. Structured Assets Tool • Bank accounts • Real estate • GICs and Investments • Beneficiary designations (insurance, RRSP, RIF, pension) • Gifts during life

  11. Structured Assets Tool Limits • The joint owner really owns half and you don’t after the transfer • For gifts, the asset is no longer yours • Income earned has to be shared appropriately • Taxes have to be paid based on joint ownership • Principal residence exemption may be lost on the part of your home you don’t own anymore • Family Law Act deemed severance for a matrimonial home

  12. Wills Tool • Flexibility in distribution – your way, not under the statutory intestate succession distribution • Essential for parents with minor children, common law or same-sex relationships, multiple families and special needs situations • Tax effective • Certainty • Special Needs • Minimizes estate administration costs

  13. Distribution Plan • You can choose any distribution you want unless it does not provide for a legal spouse or financially dependant person • Spousal and Family Trusts • Postponement for minors • Protection for special needs persons • Tax considerations • You can make a difference with a charitable gifts and save taxes too

  14. Designations • Life insurance • RRSP • RIF • Pensions

  15. Special Wishes • Funeral • Burial • Organ donation

  16. Minor children • Effective guardianship to named person for 90 days • Not binding thereafter but relevant for court • Court will consider best interests of the child

  17. Special Care • Marriage • Divorce • Family Law Act • Community of property • Dependants • Spousal election • Foreign property • Tax considerations for foreign beneficiaries

  18. Regular Review • Changed financial situation • Trustee or beneficiary dies • Divorce, separation or new child • Changes in the law

  19. Power of Attorney for Property • Empowers a trusted person or persons • Continuing effectiveness • Difficulties when no power • $ignificant saving on lawyer’s fees • Considerations • A-G POA Internet Kit http://www.attorneygeneral.jus.gov.on.ca/ and follow the link for the kit

  20. Personal Care • Different purpose • Empower a trusted person • Effective on disability • Living will effect • Consequences of no power • Considerations

  21. Why bother? • Survey says: about 50% do not have a will • Certainty • Peace of mind • Big costs $aving

  22. How do I get one? • Financial Planner • Lawyer • 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 company • Commercial will kits • Warning: if you write your own will

  23. 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

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