Protecting your estate

1. Protecting your estate Allow your legacy to live on

2. What is estate planning? • Ensuring an individual’s • Personal property is managed effectively during their lifetime • Wishes are carried out after their death • Taxes are minimized on death • You can do this with • Wills • Estate freezes • Trusts • Gifts while you are alive • Life insurance

3. Who needs estate planning? • Every person who needs or wants to • Preserve or increase an estate • Conserve assets • Distribute their assets in an orderly way • As income for themselves or others during their lifetime • To spouse, children and descendants after their death

4. Important questions to ask • Do you have wealth built-up in capital assets? • Do you want to leave your full estate to heirs or a favourite charity? • Are you worried about leaving your family with a large tax burden? • Do you want to provide funding for final expenses, outstanding debts, legal fees and taxes?

5. On your death • Generally, you are deemed to have disposed of all your assets and you will pay income tax on the disposition, including • Registered assets such as RRSPs and RRIFs • Non-registered assets such as • Mutual funds • Stocks • Segregated funds • Growth in real estate values, including vacation property

6. Your estate and taxes • You can defer some income tax on your death by transferring assets to your spouse • However, when your spouse dies, income tax on the deemed disposition of their assets must be paid • Income tax can be as high as 48.2%,* depending on province • * 48.2% is the highest marginal tax rate in Canada, at May 2010

7. Problem • The largest burden on your estate can be tax on accumulated assets • Your beneficiaries could be forced to sell assets, reducing your net estate RRSP, RRIF deemed taxable capital gains, etc.

8. Solution • Use life insurance to cover tax owing at death • This leaves more of your estate intact for your beneficiaries RRSP, RRIF deemed taxable capital gains, etc.

9. Life insurance • Myth • As you get older or become more financially independent, your need for life insurance decreases • Fact • As your net worth increases, the need to protect your estate also increases • Your life insurance coverage may also need to increase

10. Benefits to you while alive • Gain permanent life insurance protection • Accumulate wealth in a tax-advantaged life insurance policy • Generally, have ability to change a beneficiary • Ability to increase coverage amount, subject to underwriting requirements

11. Benefits to your family or charity • Access to money when your family needs it most, while living • Offset tax liability on death • Your heirs receive the death benefit tax-free • No probate fees on the death benefit, when you name a beneficiary other than your estate (not in Quebec) • Preserve your estate’s value

12. This material is current at May 2010 and is for information purposes only. It is not legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation for Canadian residents, which is subject to change. For individual circumstances, consult with a legal or tax professional.