How Being Prepared for Life Changes can Safeguard Your Business

How Being Prepared for Life Changes can Safeguard Your Business

by BusinessFinancial PlanningInheritanceLife Changes

Is your business prepared in the case of a major life change to one of the owners or primary shareholders? There are many things that can happen that can lead to disaster if a plan is not already in place, such as an owner becoming disabled or passing away, a divorce that causes shares to be split, a major shareholder deciding to pursue a new opportunity, or disputes among heirs of a deceased shareholder. To avoid significant business disruptions, it’s essential to have a succession plan. Here we’ll explore how being prepared for life changes can safeguard your business.

Protects Your Loved Ones

Significant life changes can happen to you or a business partner at any time and at any age. No matter how much you plan, it’s hard to know what might happen in the future. Having a succession plan in place will help protect you and your loved ones in case you are unable to control or tend to your business. With this in place, you won’t have to worry who will take over your business since it will be fully detailed in your plan.

Avoids Disaster

With a succession plan in place, big setbacks can be avoided or mitigated, and your business can continue to operate smoothly if you or a main shareholder exits suddenly. For instance, the passwords, IT information, data, and client lists, and financial records will fall into the right hands to prevent business disruptions. Your plan will also include the development and training of a new owner or key shareholder, and help to transition them into the role.

Ensures the Right People Inherit Your Business

Your business is your life’s work — you want to ensure that it gets passed on to the right people. Working to develop a thorough succession plan ensures that your business falls into the right hands and addresses any inheritance issues that could arise.

Minimizes Tax Implications

Succession planning can also help you to avoid tax issues down the road. An estate plan can help you to avoid substantial tax implications and any potential probate delays when transferring the ownership of your business in the future.

Establishes an Exit Strategy

Every business owner should have an exit strategy in place. A business success plan helps you to create an exit strategy that is on your terms.
If you own a business, it’s important to be prepared for life changes to safeguard your business. A well planned out estate and succession plan will help you make fundamental decisions about identifying and developing new leaders, maximizing company value, tax strategy, and ensuring that the business, the clients, and your family are protected.

How to Decide Who Should be The Executor of Your Will

How to Decide Who Should be The Executor of Your Will

by AgingEstate PlanningInheritance

When you create your will, one of the most important things you need to do is choose your executor. This is an important role that comes with the responsibility of taking care of the probate process, estate inventory, payments and notifications, final tax returns, and distributing your assets. You need to choose someone who is reliable, organized, and honest enough to carry out your estate exactly as you planned. To help you make a well-informed decision, here are some of the factors to consider when trying to decide who should be the executor of your will.

Family Dynamics

The majority of people prefer to choose a family member as their executor. While this can be a more comforting choice, it’s not always the right one. If your family is already experiencing conflict, then choosing one over the other as an executor will only lead to more problems. If this is the case, you may want to select a reliable friend or a third party to carry out your will.

Health and Resilience

Your ideal executor should be of good health and younger than you. They’ll also have the patience to carry out the lengthy process and deal with government agencies and the banks. Being the executor of a will is a truly stressful responsibility to — they need to be ready for that.

Proximity

It’s essential that the person who you choose lives in the same area as you. It’s not only easier to deal with the process when you’re close by, but it could also speed up the process. There may be regulations in place that will prevent you from choosing someone outside of province or state. It’s important to check with your local jurisdiction to find out what is required if you decide to go this route.

Experience

Although a degree in finance and accounting is not required to be an executor, it’s always wise to choose someone who has experience working with finances in some capacity or is willing to do the research. There will be a number of documents and tax forms that will need to be filled out, followed up on, and managed into the future, so it’s important to choose someone who is comfortable with bookkeeping and dealing with all the relevant agencies.

Deciding who to assign as the executor of your will is an important decision and one that should be given careful thought. At The Beacon Group of Assante Financial Management Ltd., we are dedicated to managing and securing the finances and assets entrusted by our clients. Contact us today to learn how we can protect your legacy.

Family Estate Planning

Avoid Family Estate Conflicts with These 5 Strategies

by Estate PlanningInheritanceLife Changes

It’s every parent’s dream to be able to pass along their legacy and leave something substantial and meaningful behind for their family. However, if you don’t tread carefully when creating your inheritance plan, you could end up inadvertently causing resentment between siblings and altering the family dynamic. To ensure everyone is happy and that you’re remembered exactly how you want to be, avoid family estate conflicts by using these five strategies.

Call Family Meetings

A simple way to avoid catching your family off guard with your inheritance decisions is to hold family meetings. Talking directly to your children about your plans and asking for their preferences can help prevent any surprises that may leave people feeling hurt or angry. Opening up the communication channels will allow your children to at least negotiate amongst each other. This could make it easier for you to distribute your belongings without causing any conflict to begin with.

Create Detailed Instructions

The majority of family arguments center around how the personal property is distributed when a parent passes away. You can avoid causing family drama over your belongings by creating a detailed list of instructions. This should outline in detail who will inherit what and then add it into your estate plan so that your executor can appropriately carry out your wishes once you are gone.

Adjust for Gifts and Loans

If you loaned money to one of your children to help with their tuition or a business, you should adjust for this when you plan your inheritance. If you don’t, one of your other children who didn’t need support may become upset feeling as if they’ve lost out.

Appoint a Mediator

Even when you’ve tried your best to please everyone, emotions run high during times like these. If there was a previous dispute between siblings or if this is your second marriage (or third) it may be wise to hire a third-party trustee who can mediate if a disagreement arises or conflict breaks out.

Have a Professional Create Your Estate Plan

Having a well thought out and strategically-formed estate plan ensures that your wishes are appropriately expressed. This allows you to provide adequate support and financial stability for your family in the manner you desired. When you work with a financial advisor, you’ll receive advice and solutions that help maximize your estate’s value, distribute your assets as planned, and minimize any taxes so that your beneficiaries receive the intended amounts. They’ll even help you leave a lasting legacy that you’ll be remembered for.

The best time to plan your estate is now. If you’re looking to create an estate plan that will create the most value and avoid family estate conflicts, we at The Beacon Group of Assante Financial Management Ltd. can help you. We’re here to help you understand how the decisions you make today will impact your estate in the future.

Discuss Your Inheritance Plans

Discuss Your Inheritance Plans

by FinancialFinancial PlanningInheritance

You may be surprised to hear that many Canadians have not created a solid inheritance plan, even though they are expecting to leave assets to their loved ones. Creating a strategy is an important first step, but so is the discussion with the beneficiaries and a financial advisor. Keeping your inheritance private can cause all kinds of surprises and complications after your death. Here we explore the steps you can take to discuss your inheritance plans in advance.

Planning with your Partner

The first thing you should do is to create a plan with your partner on how your wealth should be distributed. This will involve outlining which of your family and friends will be beneficiaries, your financial situation, and your initial inheritance goals. You should also consider those who may need special financial assistance, if it will be equal share, and the necessary provisions.

Create an Inventory

Once you have a strategy, take some time to review your assets that will be included in your estate planning. Make an inventory of all the items such as your house, car, investment properties, personal belongings, and financial investments. Also, note any debts you may have and any fees that will be associated with probate.

Include a Financial Advisor

You should always discuss your inheritance plans with a financial advisor. They have the expertise to help you understand the tax implications, capital gains, and other financial responsibilities that will fall onto your beneficiaries.

Discuss Assets

You may expect that one of your kin will be thrilled with inheriting your belongings, but they may not feel the same. Not everyone can bear the burden of the costs of a house or cottage. Talking to your family before you finalize your inheritance plan for assets can help you both plan what is the best for everyone.

Communicate about Money

Communicating your plans to your family regarding money is also important. You may be considering charitable gifting to your beneficiaries as part of the inheritance. While it may be attractive to some family members, not everyone may prefer this over heirlooms.

Probate Planning

Joint investment or bank accounts with your children can help them to avoid probate fees after your death. But this can cause some issues and complications if there are other children involved. A discussion with your family members in advance may help smooth over any potential bad feelings.

Discussing your inheritance plans with your family, beneficiaries, and financial advisor is the best decision you can make to ensure that everything is left as you wish, and that everyone is as content as can be with your decisions. Your financial advisor at The Beacon Group of Assante Financial Management Ltd. can advise on estate planning strategies to ensure your wishes are met.

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.

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.

Avoiding Hidden Tax Liability for Your Heirs

Avoiding Hidden Tax Liability for Your Heirs

by InheritanceTax Planning

Let’s say you bought a cabin in the Rockies many moons ago for $80,000. The property has already tripled in value, and by the time you pass you expect it will be worth about $400,000. The capital gain on your cozy cabin is $320,000. With a marginal tax rate of 45%, a capital gains tax of $72,000 would be due. Rather than enjoying family retreats at the cabin, your heirs may have to sell the property in order to be able to pay this tax.

This is just a hypothetical scenario, but it happens all too often, and not just with real estate property. Any successful investments or businesses that have multiplied in value will be subject to hefty capital gains taxes.

You can avoid these substantial tax liabilities by understanding how capital gains tax is applied and calculated, and to which assets the tax will apply. Next, you can prepare for capital gains tax as part of your estate planning by leaving funds to cover the tax after you’re gone.

Calculating Capital Gains Tax

Capital gain is the difference between the fair market of an asset (like a home, business, or stock) at the time of your death and the price you paid for it, with some minor variances depending on the asset. Capital gains tax is 50% of the value of the capital gain, as demonstrated in our earlier cabin example. Capital gains tax applies to property like non-registered investments, real estate other than your principal residence, share or partnership in a family business, and personal assets like vehicles, jewellery, and artwork.

Offsetting the Tax Liability For Your Heirs

A common way to offset the expected tax liability is to purchase a life insurance policy that names your heirs as beneficiaries. This policy should be insured for an amount that sufficiently covers the expected capital gains tax.

This is a wise strategy as insurance proceeds are tax-free and do not go through probate. With a guaranteed payout and affordable premiums, life insurance is generally recommended ahead of alternatives. Considering the downsides of having to pay interest on a loan or selling the assets below market value, life insurance is the best option for offsetting the tax liability.

RRSP/RRIF Tax Liability

Beyond capital gains tax, you must also account for the potential tax liability when your Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) transfer into your income. You can defer taxation by transferring the funds into the RRSP/RRIF of your spouse or financially dependent child. Alternatively, you may wish to donate the proceeds of your registered plans to a designated charity. While charity donations are ordinarily limited to 75% of net income, you may donate 100% of net income in the year or immediately preceding year of your death.

It is extremely important to consider the tax liability during the estate planning process. As part of The Beacon Group of Assante Financial Management Ltd.’s Lifetime Legacy Advantage, we will help you develop estate planning strategies that provide your heirs with a secure future.

Naming Beneficiaries for Your Financial Assets

Naming Beneficiaries for Your Financial Assets

by Estate PlanningFinancialFinancial PlanningInheritance

When naming a beneficiary for each of your financial assets, the obvious choice may not always be the best choice. You should consider tax and estate planning implications, among other things. We have listed important items you should consider when naming beneficiaries for major financial assets:

Tax-Free Savings Accounts

With a Tax-Free Savings Account (TFSA), you can name a beneficiary, a successor holder, or both. Only your spouse can be named as the successor holder. This means your surviving spouse can take ownership of the assets in your TFSA without affecting their own contribution room. A beneficiary can get your TFSA assets tax-free and can apply them to their contribution room if they have enough space. It’s important to note that any increase in the value of the TFSA between your death and the date of the transfer will, unfortunately, be taxable to the beneficiary

Registered Retirement Plans (RRSPs and RRIFs)

When you name your dependent child or your spouse as the beneficiary of your RRSP or RRIF, the plan assets roll over on a tax-deferred basis. The same is not true if you name an adult child or anyone else as the beneficiary. When transferring your retirement funds to someone other than a dependent child or spouse, the tax liability for the transfer will go to your estate. This will reduce the amount of money you have to give through your other non-registered assets.

Segregated Funds and Life Insurance Policies

In some situations, you may want to consider using a testamentary trust instead of naming a spouse or child as a beneficiary of life insurance or segregated funds. When you name a minor as a beneficiary, the proceeds of the policy or investments must be paid into a trust in their name. If you name your own testamentary trust, you can control where your trust will be held and who will be managing your funds. This is especially a good idea in blended families. You can guarantee each child and spouse gets exactly what you desire, even if they are a minor.

The implications and rules of naming a beneficiary are complex and can very daunting to work out on your own. An estate planning expert at The Beacon Group of Assante Financial Management Ltd. can help you review your personal estate planning goals in order to name an appropriate beneficiary or successor holder for your registered and non-registered accounts.

Minimizing Financial Conflict with Siblings

Minimizing Financial Conflict with Siblings

by Estate PlanningFinancial PlanningInheritance

It’s the sad reality of the world we live in, but conflict surrounding money within families is all too common. There are no set rules or guidelines when it comes to siblings and money. We have listed three typical situations that you may find yourself in that involve your family and money, and some strategies to help get through them while keeping everyone happy.

Inheritance

It is common practice for a parent to name one of their children as executor or estate trustee of a will. Unfortunately, this may cause some discord between siblings. A sibling that is not the executor may feel that key decisions should be made together, which could cause some conflict. The money involved in inheritance can also be a point of contention. One sibling might feel like the assets are being split up unevenly. These matters aren’t usually resolved overnight and can lead to delays and family conflicts lasting years. The best way to prevent this problem is by making your will as fair as possible. You should consider naming someone other than one of your children as executor as well. Speak with your financial advisor at The Beacon Group of Assante Financial Management Ltd. about your estate planning options.

Lending money

What do you do if one of your siblings comes to you and asks for a loan? It’s easy enough to give a loved one some help in their time of need, but you need to consider what the money is going to be used for. If your sibling is living a troubled life, giving them more money will enable them to continue. You aren’t likely to get this money back in this scenario either. If your sibling is looking for help to send their child to university, you will be helping them immensely and you are likely to get your money paid back. It is okay to put the loan and the repayment terms in writing. This will help legitimize the lending and help protect your relationship. You are allowed to say “no” to your family too. Either way, you should only loan money out if you can afford to lose it if it’s not repaid. There are so many choices when it comes to lending cash to siblings, but at the end of the day, you need to do what feels right to you.

Caring for a disabled sibling

If you have a sibling with special needs that requires lifetime support, what happens to them when your parents pass away? Is another sibling going to pick up the slack? Caring for your sibling could require bringing them in to live with you or organizing and handling the finances involved in caring for them. This is something you need to discuss with your parents long before they have reached the end of their life.

The financial advisors at The Beacon Group of Assante Financial Management Ltd. can help you with any financial matters concerning your family.

How to Choose the Right Estate Executor

How to Choose the Right Estate Executor

by Estate PlanningInheritance

Everyone knows that it’s a smart and responsible choice to have a will, but not everyone understands the importance of selecting the right estate executor to help manage their affairs and distribute their assets upon death. Picking the right executor will mean that your loved ones will receive their rightful inheritance in a timely manner. Picking the wrong executor could lead to a load of problems including tax issues and late payments. Read further for information on choosing the right executor and what that will mean for you and your family:

The role of an executor

An estate executor is the person named in your will that will be your personal representative after your death. This person is legally responsible for carrying out your wishes outlined in the will. An executor can be one of your children or your spouse, a family friend, a professional advisor, or a trust company. You will need to weigh the pros and cons of each option to find the right person or company for the job.

Choosing an executor

An estate executor must be willing to take on that role. Nobody can be forced to do it. Your executor should be trustworthy, organized, and have the time and availability to act if called upon. You can name more than one executor in your will but in these cases, it’s best to include a decision-making mechanism in your will. You should also consider naming an alternate executor in case your primary one is unable to act. If there is no alternate, the court will decide who will be your executor. It is important to get the approval of the individual(s) you plan to name executor in your will before putting them in your will. Doing so will help with the administration of your will when the time comes.

Executor compensation

Acting as an estate executor is not a charitable act. Every executor is entitled to fair compensation for the responsibility and time spent acting on your behalf. The compensation can be based upon the size of the estate, the time spent administering the estate, among other factors. Spouses and close family members tend to charge the least while trust companies will charge the most. The skills and expertise provided by an advisor or trust company can be well worth the extra cost, though.

If you have any questions about your will, estate planning, or naming an executor, contact a financial advisor at The Beacon Group of Assante Financial Management Ltd. today.