Welcome!

1. Welcome! The Canada Life Assurance Company Ontario Regional Marketing Centre

2. Global Insurance Solutions & Canada Life • Katherine Hill, Regional Marketing Consultant • Telephone: (905) 803-8888, ext. 17 • Kelly Picard, Living Benefits Consultant • Telephone: (416) 594-1100 • Ian Kerr, Investment Products Consultant • Telephone: (416) 594-1100, ext. 147 • Tom Pilkington & Frank Abate, Estate & Tax Planning Consultants • Access via Katherine Hill • Edda Whitten, Marketing & Sales Assistant • Telephone: (905) 803-8888, ext. 27 • Eddie Maiato, Marketing & Sales Assistant – Investments • Telephone: (905) 803-8888, ext. 39

3. March 2005 Significant pricing philosophy change to Millennium May 2005 Life Advance re-price ASTRA enhancements T20 re-price and enhancements Millennium Enhancements August 2005 Millennium Enhancements to compensation T10 re-price and enhancements and T20 re-price September 2005 Achiever compensation increase October 2005 Introduced Leveraged Loan Program November 2005 DI portfolio improvements 2005 – Year in Review

4. 2006 – Looking Forward • January 2006 • No changes to the dividend scale (7.46%) • New Sales Strategies • Scheduled Launches for 2006 • Lower MER Segregated Funds – Generations 1 • Guaranteed Pay Universal Life • Ongoing Sales Strategy Releases • Competitive pricing updates as required • New Critical Illness addition

5. House-Keeping Issues • Canada Life Software Version Zoom 9.0 • RRSP Season • RRSP Loan Program • Catch-up loan: a long-term loan to help you catch-up on your retirement savings by taking advantage of accumulated contribution room • Top-up loan: a short-term loan you can use to top-up your annual contribution to your maximum annual allowable contribution limit

6. House-Keeping Issues - Disclosure • Intended to increase clients' confidence by allowing them to decide if they are satisfied you are offering objective advice • Before you complete a sales transaction, you need to disclose five items to a client in writing: • the financial services companies you represent • the nature of the relationship between you and an insurance company • how you're compensated and by whom • if you may be eligible for additional compensation, including cash or non-monetary compensation • potential conflicts between your interests and those of the client

7. House-Keeping Issues - Disclosure • Producer Resources • cailba.com • ifbc.ca • advocis.ca • Canada Life’s Repnet - canadalife.ca/repnet • Services  Compliance • Sample Disclosure Document • FAQ • Other information covered in this section includes Privacy Guidelines

8. Understanding the important role insurance plays in estate planning for clients and their families The Need For Estate Liquidity Tom Pilkington, CA, CFP, TEP National Estate and Tax Planning Consultant Ontario Regional Marketing Centre

9. This material is for information purposes only and should not be construed as 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. Persons who are not residents in Canada or who are resident in Canada but are citizens of another country, may be subject to different tax rules in Canada and may also be subject to taxes levied by jurisdictions other than Canada. • For individual circumstances, consult with legal or tax professionals. • This information is current as of February 15, 2006.

10. Agenda • Introduction • Wills and will planning • The need for liquidity • Probate fees • Death of a taxpayer • Charitable gifts • Planning for business entities • Summary

11. Introduction • Estate planning defined “Estate planning is the process of arranging for the transfer of your property to your heirs and other beneficiaries in a way that will, as much as possible, achieve your objectives and minimize the associated costs and taxes.”

12. Introduction • Why is estate planning is so important • Better decision making • Achieve your objectives • Costs and taxes minimized • Focus on fun and lifestyle • Family harmony • Peace of mind

13. Introduction • Estate planning process • Fact-finding • Client objectives • Analysis • Action plans • Implementation • Follow-up

14. Introduction • Estate planning tools • Wills and Powers of Attorney • Trusts • Private corporations • Agreements • Gifts • Beneficiary designations • Ownership of property • Insurance

15. FINANCIAL ADVISOR BUSINESS ADVISOR LEGAL ADVISOR TAX ADVISOR Introduction • Who wants to be the “quarterback”? CLIENT

16. Will planning My last will and testament .. • What is a will? • Why have a will? • Do you need a will? • Why some clients may not have a will? • What if you don’t have a will?

17. Will planning • If you die without a Will in Ontario (intestacy): • Spouse, no kids - all to spouse • Spouse and kids, estate < than $200,000 - all to spouse • Spouse and kids, estate > than $200,000 • 1 child - first $200,000 to spouse, spouse and child split difference • more than 1 child - first $200,000 plus 1/3 of excess to spouse, kids share 2/3 of excess • Kids, no spouse - kids share equally • Otherwise – parents, then brothers and sister, then nieces and nephews, then all other next-of kin, then Government of Canada

18. Will planning • Tax considerations • Taxpayers • Deceased • Estate • Survivors • Taxes • Income tax • Foreign tax • Probate fees (Estate Administration Tax or “EAT”)

19. Will planning • Spouse trusts • Estate as a separate taxpayer • Testamentary trusts • Tax-free rollovers • Elections • Spousal RRSP contribution in year of death • Testamentary charitable gifts • Post-mortem freeze / reorganizations

20. CASE STUDY # 1

21. The need for liquidity • Immediate cash needs • Pay final expenses and fees • Pay taxes • Repay debts • Fund specific bequests or legacies • Fund charitable bequests • Fund special trusts • Fund business needs • Fund equalizations • Capital needs • Income replacement for spouse / heirs

22. Pay final expenses and fees • Funeral costs • Executor’s fees • Professional fees • Estate administration tax (probate fees)

23. Pay final expenses and fees • Why is probate necessary? • Evidence of Estate Trustee’s (executor’s) right to deal with property • Example: • Bank accounts • GICs/CSBs • Public stock/securities • Real property • etc.

24. Pay final expenses and fees • How much are probate fees? • first $50,000 of estate assets 0.5% • amount in excess of $50,000 1.5% • How are probate fees calculated? • assessed on gross (not net) value of estate • assessed only on assets falling into Ontario estate • Example: • $100,000 estate fees = $1,000 • $1,000,000 estate fees = $14,500 • $10,000,000 estate fees = $149,500 Is this fair?

25. Pay final expenses and fees • How can I minimize / avoid probate fees? • Joint ownership with right of survivorship • Inter vivos (lifetime) gifts / transfers • Use of trusts • Beneficiary designations • Multiple Wills (for private company shares/debt)

26. Pay final expenses and fees • Multiple wills • Example • Bank accounts / investments / etc. $1,000,000 • Shares in private corporation $5,000,000 • If one will .… probate fees = $89,500 • If two wills ... probate fees = $14,500 • Difference = $75,000

27. Pay taxes • The two certainties of life: • Death • Taxes • Estate planning considerations • Taxpayers (deceased, estate, beneficiaries) • Canadian taxes • Foreign taxes (e.g., US estate tax)

28. Pay taxes • Filing requirements • Legal representative is responsible for the filing of T1 tax return for the year of death (“final return” or “terminal return”) • Taxation year is Jan 1 to date of death • Due date is later of 6 months following date of death and April 30th of the following year • Legal representative is responsible for the payment of all taxes that are owing • Legal representative is responsible for obtaining clearance certificates from CRA for deceased and estate

29. Pay taxes • Computation of income in year of death • The taxpayer’s tax position is essentially “crystallized” at the time of death • Taxation year is Jan 1st to date of death • Accrual tax rule applies • Deemed disposition rule applies

30. Pay taxes • Accrual tax rule • Include accrued income from Jan 1 to date of death on final tax return • Accrual tax rule applies to • Employment income • Rental income • Investment income • Realized capital gains / losses • Income from a business or partnership

31. Pay taxes • Deemed disposition of property rule • Deceased is deemed to dispose of each property immediately before death for proceeds equal to the fair market value of the property at that time • Deemed disposition of property rule applies to • Capital property (investments, land, private company shares, etc.) • Depreciable property (rental buildings, etc.) • Registered funds (RRSPs, RRIFs)

32. Pay taxes • Deemed disposition of property • Capital gain or loss = Proceeds - tax cost (ACB) • Taxable capital gain = 50% x capital gain • Special rules • Principal residence • Tax-free rollover to spouse or spouse trust (unless elect FMV transfer) • $500,000 capital gains exemption on QSBC shares • Depreciable property

33. Pay taxes • RRSPs / RRIFs: • General rule: • Deceased annuitant deemed to receive a benefit from the plan equal to the fair market value of the plan • Exceptions: • Transfer to spouse, financially dependant child

34. Pay taxes • RPPs: • Benefits taxable to recipient (not to deceased) • May transfer lump-sum payments to RRSP

35. CASE STUDY # 2

36. Fund charitable bequests You have 3 choices for distributing your estate: HEIRS CHARITY CANADA REVENUE AGENCY

37. Fund charitable bequests • Individuals • Entitled to a non-refundable federal tax credit based on total donation receipts • Tax credit = 46.4% x donations > $200 • Testamentary gifts • Donation based on total testamentary gifts • Maximum of 100% of net income in the year of death • Plus 100% of net income in the immediately preceding year

38. Fund charitable bequests • Insurance strategies • Bequest by will • Bequest by beneficiary designation • Gift of policy • Estate replacement • Insured annuity donation

39. Fund charitable bequests • Insured gift by Will • The donor owns an insurance policy, pays the premiums, names his/her estate as beneficiary and makes a bequest in his/her Will in favour of one or more charities. • Planning • Use of insured gift by Will to create tax credit to offset income tax liabilities at death

40. Fund charitable bequests • Insured gift by beneficiary designation • The donor owns an insurance policy, pays the premiums, names one or more charities as a beneficiary under the insurance policy • Planning • Use of insured gift by beneficiary designation to create tax credit to offset income tax liabilities at death

41. Fund charitable bequests • Charity-owned policy • The charity owns an insurance policy and is the named beneficiary under the insurance policy, donor pays the premiums • Planning • Use of charity-owned policy to create current tax credits to offset current income tax liabilities

42. Fund business needs • Planning to transfer business interests • Business succession planning • Dealing with investment holding companies • Tools • Estate freeze • Post-mortem planning • Will planning • Shareholder agreements • Corporate-owned life insurance

43. Fund business needs • Estate freeze – Internal freeze (section 85 or 86) BEFORE AFTER Parents Kids Parents 100% CS 100% CS 100% PS FAMILY OPCO FAMILY OPCO

44. Fund business needs • Estate freeze – Holdco freeze (section 85) BEFORE AFTER Kids Parents 100% CS 100% PS FAMILY HOLDCO Parents 100% CS 100% CS FAMILY OPCO FAMILY OPCO

45. Fund business needs • A multitude of possibilities: • Fund capital gains tax on deemed disposition • Fund share redemption of preferred shares • Fund estate equalization amongst children • Fund repayment of business debts • Fund replacement CEO of family business • Fund emergency working capital needs • Fund supplemental retirement income • Fund redemption of shares gifted to charity

46. CASE STUDY # 3

47. Summary • Life insurance is an essential tool in estate planning because it provides liquidity to … • Pay debts • Pay expenses • Pay taxes • Create special purpose funds • Make charitable bequests • Facilitate business succession plans • Equalize the estate amongst the heirs