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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 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 • Maximize gifts to beneficiaries
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
Financial Advisor or Advisors • Insurance • Pension • RRSP • Tax plans
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
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
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
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
Lawyers • Structured assets • Will or multiple wills • Powers of Attorney
Structured Assets Tool • Bank accounts • Real estate • GICs and Investments • Beneficiary designations (insurance, RRSP, RIF, pension) • Gifts during life
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
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
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
Designations • Life insurance • RRSP • RIF • Pensions
Special Wishes • Funeral • Burial • Organ donation
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
Special Care • Marriage • Divorce • Family Law Act • Community of property • Dependants • Spousal election • Foreign property • Tax considerations for foreign beneficiaries
Regular Review • Changed financial situation • Trustee or beneficiary dies • Divorce, separation or new child • Changes in the law
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
Personal Care • Different purpose • Empower a trusted person • Effective on disability • Living will effect • Consequences of no power • Considerations
Why bother? • Survey says: about 50% do not have a will • Certainty • Peace of mind • Big costs $aving
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
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