The 5 Most Important Benefits of Having an Estate Plan

The 5 Most Important Benefits of Having an Estate Plan

by AgingEstate Planning

Many people make an assumption that they don’t need estate planning, or they can’t benefit from it in a tangible way. Estate planning is something that can greatly benefit everyone, not just the rich and famous. Estate planning gives you the opportunity to essentially map out how you want your assets, among other important items, handled following your death. This ensures that your finances, your home, and your business are all managed according to your wishes and that your family is provided for after you pass away.

Here are five important benefits of having an estate plan.

State Your Wishes if Incapacitated

One of the most important benefits of creating an estate plan is that it allows you to plan for unpredictable events that life may throw your way. Accidents and physical or mental illnesses can blindside you at a moment’s notice. We never like to think of these events occurring, but the reality is that planning for them is much better than being left at the will of others making decisions on your behalf. An estate plan will clearly outline all of your wishes when it comes to major life and medical-based decisions if something does ever occur.

Select Guardians for Children

If you have young children, having a plan set in place will nominate a guardian of your choice for looking after your children following your death. This can provide peace of mind knowing that the decision won’t be left in the hands of the courts, and will instead, be determined according to your wishes.

Establish Trustees of Your Estate

Choosing someone you know and trust to oversee the details of your estate ensures everything is kept in order and in line with your wishes. Giving authority to someone you choose can also help alleviate the burden on your family, along with any potential conflict, and simplify the administration process of your assets.

Provide for Your Family

Providing for your family in the case of your death is another crucial factor for establishing an estate plan. This will help allocate money to the appropriate family members, helping to provide for them, or even your children if anything were to happen to both parents.

Protect Your Business and Legacy

If you own a business, an estate plan can help ensure that it continues to operate according to your wishes by establishing an orderly succession. You get to decide what happens to your business and your legacy after you pass on.

Wouldn’t you want to have the final word on how your finances, home, and family are treated after you pass away? Estate planning is crucial to ensure that your wishes, your assets, and your loved ones are looked after and protected in the case of your death. When you’re ready to create your estate plan, contact us at The Beacon Group of Assante Financial Management Ltd. We can guide you through the process and help you safeguard your assets.

Beyond the Will: What’s Involved in Estate Planning?

Beyond the Will: What’s Involved in Estate Planning?

by AgingEstate PlanningFinancial Planning

Every Canadian should have a will. We understand how uncomfortable this discussion and process can be, but it’s crucial to take care of to gain peace of mind and to know that your family and your assets are well taken care of. A Will allows you to determine how you want your possessions and estate handled, who the executor will be, and who the guardians of your children will be if something should ever happen to you.

If you’re wondering what’s involved in estate planning, here’s what you need to know when it comes to gaining that important peace of mind during the creation of your Will.

 

Create your Will

An essential part of estate planning is creating your Will. This key legal document outlines how your assets will be distributed and to which beneficiaries. It also stipulates who will be responsible for ensuring your wishes are carried out exactly as you planned.

 

Name the Executor

Naming your executor is the next important step of your Will planning process.  This person or corporation will have the responsibility for carrying out your wishes after you pass away.  This named individual will also have the responsibility to issue payment from your bank account to cover any taxes or debts that you owe.

 

Choose the Power of Attorney

Important to your estate planning is also determining a Power of Attorney. This refers to someone you designate to have the power and legal precedence to make any financial or health-related decisions on your behalf.

 

Set up your Insurance

Many people underestimate the amount of money that’s necessary to cover the funeral expenses, taxes, debts, and probate fees. Setting up a life insurance policy can help reduce these burdens on your family and can also help your heirs receive inheritance money to help them out in the future.

 

Ensure Business Continuity

Without a plan for business continuity, you may end up leaving your business partners or family members in a bind. Instead, plan out how your business will operate after you pass on.

 

Outline Personal Care and Funeral Arrangements

Without a detailed plan on personal care and funeral arrangements, your family will be left with the burden of making these painful and challenging decisions for you. An estate plan can help you pre-plan your before and aftercare, how it will be paid for, and your desired wishes for the service.

 

Designate Charitable Gifts

If part of your estate plan includes charitable gifting, ensuring this is included in your Will is vital to guaranteeing that your charitable plans will be carried out correctly.

 

Minimize your Income Tax and Probate Fees

Although you’re not charged an estate tax in Canada, there are other fees that do exist in relation to your Will. There are ways that your estate plan can help minimize your fees that will be charged by your province to process and probate your will.

 

Appoint a Guardian

A guardian will be the person you name to take legal custody of your minors in case of your death.

Talk to an advisor at The Beacon Group of Assante Financial Management Ltd. today to help guide you through the process of creating your Will and your estate plan, so you can take care of any unforeseen situations in the future. It will ensure your loved ones are looked after once you are gone, and it will help settle your affairs preventing any further stress or burdens from being placed on your family.

3 Investment Rules for Estate Trustees

3 Investment Rules for Estate Trustees

by Estate PlanningFinancial Planning

An estate trustee is responsible for performing various duties to encourage the wellbeing of the estate in question, as well as its beneficiaries. Among those duties includes careful and thoughtful investment in order to bolster the strength of the estate. There are three main rules pertaining to this duty, and by following them diligently and accurately, an invested estate can prosper for many years to come.

 

Obey the Trust Deed at All Times

A trust deed normally includes an agreement or term that protects the estate by limiting the trustee’s investment authority. Sometimes this is incorporated intentionally, but even if it isn’t, trustees are required to follow the instructions written out in a testator’s investment clause. Even if they are poorly explained or overly broad, the trustee and investment advisor are responsible for remaining faithful to the testator’s wishes. If not, they are essentially breaching their contracted duties and can be held liable in a court of law.

 

Invest Sensibly and Consider Outcomes

To guarantee sound and prudent trust investments, a trustee must consider the economic climate, including potential effects of inflation or deflation. Additionally, they must ruminate on any tax implications or impacts on the trust’s portfolio from any investments, as well as the expected total return, required payments or liquidity, and asset values to beneficiaries (such as family business shares). Case law also enforces the need for a trustee to diversify the trust’s portfolio to an appropriate extent — even in provinces where legislation doesn’t require diversification. You need to follow a designated investment plan that assesses risks and return potentialities associated with the investment portfolio, as well. You are permitted in any Canadian province to consult with a prudent investment advisor, stemming from applicable qualifications and experience investing within the trust setting. More commonly, an advisor is pre-selected in a clause of a trust deed to ensure continuity. In any case, a written agreement between you and the advisor is required in addition to the investment plan.

 

Be Fair to Beneficiaries (Even-Hand Rule)

On many occasions, trusts include a clause directing the estate trustee to favour or bypass an income beneficiary or a capital beneficiary. This request must be adhered to if included, but if not, you as the trustee need to consider the best interests of all beneficiaries prior to and during the investment process. Not doing so or investing in a beneficiary’s own business could be used against you in a court of law as a violation of the even-hand rule.

A trustee is quite literally trusted with the wellbeing of an estate and its applicable beneficiaries from a financial standpoint. To legally and diligently adhere to the testator’s wishes and follow specific guidelines, invest prudently, and follow the even-hand rule will enable for a smooth and efficient process. To learn more about selecting a trustee for your estate or ensuring your legacy is carried out according to your wishes, schedule a consultation with The Beacon Group of Assante Financial Management Ltd.

Will a Codicil Suffice?

Will a Codicil Suffice?

by Estate Planning

When you have a will, it’s crucial to keep it up to date and current. And if you have undergone changes that can affect your beneficiaries, you should review your will and consider making an amendment. Depending on the complexity of the changes, you may be able to draft a codicil instead of an entirely new will. A codicil is a legal document that issues a minor amendment to your will and can be beneficial in certain circumstances. But knowing which one is the better choice may not always be clear-cut.  Here we explore whether you should consider a codicil when looking to make a small revision to your will.

When to use a Codicil vs. a Will

Codicils are best used when there is a small and inconsequential change that you need to make to your will. For instance, you need to adjust the distribution amount of some of your monies to a beneficiary, a name change of a beneficiary, or new instructions for your burial, a codicil will suffice. However, if the changes will directly affect the beneficiaries or include a large change in assets, a new will would be a better option.

Benefits of a Codicil

Drafting a codicil is usually a financial preference. It can be much more cost-effective than drafting an entirely new will.

Risks Involved

If not edited properly, you could accidentally remove important information affecting your overall will or result in contradictory sections. You also risk the chance that the codicil may become separated from the original will, and as no one is aware of its existence, the changes won’t be considered. In some cases, if there was more than one codicil, the changes may not be properly understood.  This is especially true if one of the documents is missing.

Procedures for Drafting

The procedure for creating a codicil involves following the same signing formalities as when you created your original will. This process will involve signing in the presence of witnesses and a notary. This ensures if there is a dispute over anything involved in the will, there will be someone who was present to explain what the deceased person intended when drafting and signing it.

The laws that surround the validity of codicils can be challenging to mitigate. If you’re unsure if a codicil is right for you, contacting a reputable firm to help you navigate the laws and procedures can help you make the best choices for you and your beneficiaries.

 

To learn more about estate planning, book an appointment with The Beacon Group of Assante Financial Management Ltd.

 

A Closer Look at the Probate Process

A Closer Look at the Probate Process

by Estate PlanningFinancial Planning

When it comes to creating a will, you should also become familiar with the probate process. This approval process is crucial for your estate and your executor. Applying for a probate approval confirms that your executor is the right person to be handling your money after death and ensures they’re using the most recent version of your will. Plus, the process can involve probate fees that will need to be arranged. Taking a closer look at the probate process can help you to properly prepare your will and executor to be ready when it comes to distributing your assets.

When is a Probate Required?

After death, your executor is responsible for securing the assets of the estate, paying your debts, and determining if probate is needed. The situations in which your executor will need to apply for a probate is:

  • If you pass away with debts
  • If there are bank accounts or registered investments without a named beneficiary
  • If there is owned property that isn’t being passed directly to a spouse or common-law partner through joint ownership

Why is a Probate Recommended?

Institutions like your bank will want proof that you passed away, confirmation that your executor is the right person and that they possess the final testament of your will. Many institutions will also want a proof of probate to avoid any legal issues if the will becomes contested.

How Does the Executor Apply?

The executor will need to visit the province’s probate court to be granted probate approval. There are different laws for each province, so it’s important for your executor to understand your province’s rules, approval process, and the costs involved. If they have issues obtaining or understanding the information, they should talk directly to a lawyer.

Are There Fees Involved?

Each province sets out their own specific amount of probate fees. Some charge a flat rate, while others charge a percentage of your assets.

How Can You Better Plan to Distribute Assets?

You can arrange to have two wills; one that will be used to distribute assets that need to go through probate, and one that will be used to distribute assets that do not. Legal counsel can help you arrange to have the two wills properly worded. If this option is not available in your province, you could also give cash gifts to family instead which may be exempt from tax. Another option would be set up a trust or private company to own your assets, this way your assets will not go through probate.

The probate process can be difficult to understand, not only for you, but your executor as well. Hiring a professional who can help guide the both of you through the process can ensure your estate planning goes smoothly and as intended. Book a consultation with your financial advisor at The Beacon Group of Assante Financial Management Ltd. today.

Leaving a Vacation Home to Your Heirs

Leaving a Vacation Home to Your Heirs

by Estate Planning

Your vacation home is a special place for you and your family to unwind and recharge. That can all change quickly if you don’t have proper estate planning in place when leaving your vacation home to your heirs. Whether you own a cottage on Eagle Lake or a chalet in Canmore, there are many estate planning approaches that will ensure your legacy is left to future generations.

Leave the Vacation Home in Your Will

Your Will should outline how your estate will transfer the deed to your children. Each person that you cite in the Will would own an equal portion of the property and an equal claim to how the property will be used in the future. Each heir would also bear an equal responsibility for any costs associated with the property, which includes the capital gain taxes associated with the disposition upon your death – something that not each of your heirs may want to endure.

Create a Trust

If you decide to create a trust you would be able to select a trustee to oversee the home while your heirs become the beneficiaries of the trust. Your heirs would have rights to use the home as outlined in the terms, but the trustee would make the decisions regarding the property.

Gift the Property

If you expect the property to appreciate and increase in value in the future, then gifting the property to an heir may be beneficial to defer more tax. This is because when you gift the property, it is disposed of at market value and a taxable gain will occur if the current market value is more than the sum of what the original cost was.

Taking that into account, you should consider whether you will be able to defer more tax now or in the future if the property appreciates. Something else to consider is that if you gift the property at a bargain price, your heirs will need to use that as the base price when they sell the property, possibly acquiring hefty capital gains taxes.

Make sure that you have the appropriate resources in place to pay the capital gains tax if your property has indeed appreciated and you decide to take this route.

Claim as a Principal Residence

You can also tax shelter the property by using the principal residence exemption. When claiming the vacation property as your principal residence, you will be exempt from the capital gains tax that is normally added during disposition. However, if you’ve owned the property from 1982 onwards, you can only claim one property as your principal residence.

You should determine whether your vacation home has appreciated at a higher rate than your current home. If the answer is yes, you may want to designate it as your permanent residence. It’s important to note that upon the second spouse’s death there could be tax to pay if the property has appreciated in value. Consider investing in life insurance to cover any taxes owing at the time of death.

Given these complexities, it’s crucial to calculate and evaluate all the different scenarios before reaching a final decision. Your financial advisor at The Beacon Group of Assante Financial Management Ltd. can assist with estate planning and tax planning to ensure your wishes are met.

What Estate Freeze Strategy is Right for You?

What Estate Freeze Strategy is Right for You?

by Estate Planning

Estate freezes conveniently help lock in your capital assets at its current Fair Market Value (FMV) so that there’s no further capital gains and tax liabilities on its future growth. This strategy provides several benefits to both the owner and the beneficiary when transferring a business. Let’s take a look at the various freeze strategies and what the right one is for you.

Estate Freeze

The classic estate freeze is perfect for a client with a business, typically worth at least $1 million dollars, who wishes to transfer the ownership to their kin or management. The estate freeze locks in the current value into preferred shares for the owner while passing on any future growth to the transferee through new common shares.

This involves the existing owner initially transferring their existing shares into preferred shares in either the operating company or a holding company, which will have a fixed value equal to the FMV of the company. The successor then buys the common shares that are issued from the company for a nominal amount and any further increase in the value is benefited to the successor.

The Partial Freeze

The partial freeze is different from the traditional freeze in the sense that the owner will lock in the present value of the company in preferred shares and further profit through the common shares for any future growth.

How this works is that when the common shares are issued the owner and transferee, both buy the shares for a nominal amount. This is most effective for an owner who wants to continue to participate in the company’s growth, while also broadening the ownership to successors or staff. It’s also beneficial if the owner would like to hold off assigning a beneficiary. The owner can simply issue the shares into a discretionary trust and then later designate the transferee as the trust’s beneficiary.

Wasting Freeze

The wasting freeze allows the owner to redeem the preferred shares over time. This is great for owners who would like to fund their retirement with the company’s proceeds. This method also allows the owner to spread out the tax liability, as the owner will pay tax as the shares are redeemed. However, when the company buys all the redeemed shares, the owner receives a dividend that does not qualify for the LCGE (Lifetime Capital Gains Exemption) because they are not considered capital gains. This redemption is generally taxed at a higher tax rate than capital gains for those in the higher tax brackets.

Estate Re-Freeze

If you are an owner who has already committed to an estate freeze and the value has dropped without a recovery in the near future, this may be the best option for you. This protects the transferees from taking a tax hit if the owner was to pass away before the value recovers. A re-freeze involves bringing the current share value in line with the company’s actual value by creating new preferred shares worth the present value that the owner trades for the original preferred shares.

This option is also beneficial when the company is growing in value and you would like to freeze the company again, or when one introduces new shareholders into the ownership model.

Estate freeze methods have various benefits to owners and shareholders alike. Finding the right one for you can reduce the liabilities incurred when assets are disposed of. To learn more about estate freezes or to discuss other estate planning strategies, speak with your financial advisor at The Beacon Group of Assante Financial Management Ltd.

Preventing conflict between heirs

Preventing Conflict Between Heirs

by AgingEstate PlanningInheritance

Every family has their own complications and sometimes a death can exacerbate existing problems. When a parent dies and they are survived by their adult children who don’t have the most harmonious relationships or dynamics, this could affect their inheritance. Disputes between heirs in an estate distribution is a very common occurrence, and unfortunately can tie up a lot of time and estate funds if the disputes lead to estate litigation. If you think there is the potential for conflict with your future estate, it may be beneficial to set up some preventative measures while you have the capacity to do so. Here are some options to consider.

Jointly Held Assets

A good example of this is joint bank accounts. Often, aging parents will have trustworthy and geographically accessible children be joint on their accounts to assist with paying bills or as part of a tax planning strategy. The problem arises upon death and the bank account technically passes automatically to the surviving owner. This could be problematic because technically the bank account would not form part of the estate and not be divisible to the other beneficiaries. In order to avoid this conflict, it should be stated very clearly in the will what is to happen with jointly held accounts.

Family Cottage

Many families have cottages or vacation homes that form part of the estate when the head of the family dies. Problems arise when the heirs to the cottage differ in their desires of what to do with the cottage. This can be upsetting if one heir wishes to keep the cottage while others don’t want to take responsibility for it and wish to sell it. This is an issue that can be dealt with in the will, or even better with an honest discussion prior to death. If it’s clear that one beneficiary wishes to keep the cottage while others wish to sell it, perhaps leave the cottage solely to the heir who wants it and give an equal bequest to the others. If this is not financially possible, then it will be up to the heirs to figure it out amongst themselves.

In Terrorem Clause

Sometimes heirs will challenge a will if they think that they are not left their fair entitlement. Children can be written out of a will or given less of an inheritance at the discretion of the person writing the will. To minimize the chance of having a beneficiary contest the validity of the will, and possibly tie the estate up in litigation, put in an “in terrorem clause,” or an anti-litigation clause in addition to some sort of bequest. This type of clause threatens to take away any bequest in the will should the identified recipient start any litigation challenging the will. This may cause some waves in the distribution of the estate, but if the heir wishes to receive their guaranteed bequest they will be deterred from challenging the will.

There is no way to guarantee that there won’t be conflict between heirs while distributing an estate, but by planning ahead and addressing certain problems surrounding distribution you can help ease the process for your heirs when the time comes. Your financial advisor can help guide the estate planning process to ensure your wishes are met after you pass.

what is digital estate planning

What is Digital Estate Planning?

by Estate PlanningFinancial

Estate planning is no different from any other industry when it comes to the need to update its practice in order to accommodate the changing digital world. Transferring ownership of digital property owned by an estate is becoming a problem in the online world. It’s quite common for people of any age, but even those well into their 70s, to own online accounts or websites that either generate income or have monetary value that forms part of their estate when they pass. The challenge executors continue to face is gaining access to these accounts and funds in order to liquidate them, transfer ownership, or shut them down out of respect for the deceased. It is not always a matter of liquidating accounts; sometimes it can be simply closing an email account in order to protect it from potential infiltration and hacking.

New questions and hurdles are constantly surfacing from executors as online ownership becomes a more common thing. But how do you plan for it?

Estate Planning in the Modern Age

If you do a lot of business online, you likely know your way around the computer. No one is more familiar with your online holdings than you are, and once you pass it may be difficult to track down all of the sites and accounts you have online. As you start your estate planning preparations, create a chart that outlines what domains you own, what online accounts you have in your name, and anything pertinent on the internet that will need to be addressed when you die. Include passwords and any information required to access each item. This chart, once completed, will become a codicil to your original will because the chart is likely to undergo modifications over the years as your online presence changes.

Online companies pride themselves on their asset protection and are not willing to transfer ownership easily. It’s such a new thing in the estate administration world that the online companies haven’t quite figured out the best process for allowing access while protecting their privacy standards.  Many internet-based companies are coming across this problem and are creating policies in order to deal with digital estates. Be certain to follow individual company policies and complete the required forms. Proper compliance with their fresh new policies is the best way to ensure a smooth transition of ownership. Remember it’s relatively new territory for everyone so it’s important to exercise patience as much as possible.

As a busy business person, it may not seem important to document your online ownership records to leave behind as a guide for your surviving family or friends. However in so doing, you can help to ensure your online assets are protected and available for your family should they require. Talk to a financial advisor at The Beacon Group of Assante Financial Management Ltd. to find out more about how to plan for your digital estate.

Estate planning starts now

Estate Planning Starts Now

by Estate PlanningInheritance

Life is busy and requires non-stop planning to accomplish everything you need to do on a daily basis. We aren’t often prompted to plan as far ahead with our estate, but it’s much better to plan in advance than have your spouse, children, or siblings struggle to distribute and settle your estate with little to no instruction. Take some time and put thought to these five simple estate planning points.

Do You Have a Valid Will?

A will can be easily forgotten about if it was drafted decades ago. But it should be something you are mindful of because the law has the ability to change the validity of your will in ways you may not be aware of. Marriage will make an existing will null and void. This may not be a problem if you remain married to the same person at the time of your original will signing, but life happens and people get re-married. Having a will nullified by marriage is not a position you want to leave your estate in. Always have a valid and up-to-date will properly executed and readily available. It is best to seek legal advice when preparing a will.

Discuss Your Will and Wishes

While you have the opportunity to, have discussions with family members about how you wish your estate to be handled. This leaves no room for question when you are gone and can settle some potentially serious disagreements in the future. Discuss any property you own and what you would like to have happen with it upon your passing.

Prepare Power of Attorney Documents

Although this does not form part of your estate, it is still an integral part of the planning. Having someone you trust and acknowledge to be in charge of your well-being in time of physical need is very important. Power of Attorney needs to be declared when you are fully cognizant of your decision and so should be dealt with while you are still in good health.

Asset Freeze

To do estate planning when you are a business owner who wishes to pass the business to their children often involves an estate freeze. This is when the value of your business is in effect frozen in time and any future capital growth will be to the benefit of your children. This tactic minimizes the amount of taxes due upon death.

Have Life Insurance

Life insurance is best purchased when you are young and healthy. The younger you are when the insurance is purchased, the longer it has to grow in value and interest. It is much more difficult to be approved for life insurance once illness and old age are in play so do this while you are young and healthy to ensure it’s there for your family at your passing.

There are many questions surrounding estate planning and the topic is always best discussed with an estate planning advisor. For further information on estate planning contact The Beacon Group of Assante Financial Management Ltd.