Gary Dick Insurance & Estate Planning & Preservation, Chatham, Ontario Will Planning

THE MOST BASIC OF ESTATE PLANNING TOOLS:

For many individuals the drawing up of a will may be the only estate planning that is ever done. It could be argued that in many situations the will can provide all that is necessary to ensure an orderly transfer of assets following death.

When drafting a will there are two considerations that must be kept in mind:

a) the dispositive wishes of the client, ie: how and to whom they would like their assets to go to, and
b) the potential income tax costs that will be incurred.

The will enables the testator (the person making the will) to have a certain degree of control over who his or her assets after death. It must be realized that other people have to carry out these wishes and it is nearly impossible that all contingencies are foreseen, hence, it is imperative to incorporate a degree of flexibility into the will.

Professional advice in drafting the will is important and especially when the estate consists of a large variety of assets. Under the Income Tax Act in its present form, it is not the size of the estate but rather the different kinds of assets that will determine the potential tax liabilities.

DYING WITHOUT A WILL

A person who dies without a will leaves the distribution of his or her estate to the provisions of the applicable provincial intestate succession legislation. Not only is there the risk of an inappropriate division of property, with some intended beneficiaries possibly receiving nothing, but the legislation will not take into account the tax consequences of the particular scheme of distribution.

Therefore no one over the age of 18. who has or may acquire assets, should be without an up to date will.

PRIMARY BENEFITS

The primary benefits of a well- planned and up to date will are:

1) Assets will be distributed to beneficiaries of choice, instead of by a government formula.
2) Tax paid on assets may be reduced.
3) The estate will be settles quickly and efficiently, without burden to the testator's family.
4) If necessary, children will be cared for by a guardian of choice.

TYPES OF WILLS

Wills can be prepared independently by the testator, by using a lawyer or a notary ( in Quebec) or even by using a trust company. Some of the formats are:

A HOLOGRAPH WILL:

The wills are hand written and signed by the testator. No other formalities are required, and as such, these wills could present some fundamental legal problems.

CONVENTIONAL OR WILLS IN ENGLISH FORM:

The standard requirement for these wills is that it be a written or typed document which must be signed by the testator or by some other person in the testator's presence and by the testator's direction.

NOTARY WILLS:

These wills are used in Quebec and are executed before two notaries or before one notary and two witnesses.

WILL PLANNING

The degree to which a will is successful in meeting objectives is directly related to the quality of up front planning that goes into it.

Many things must be considered including the tax considerations and the important decision of choosing the right executor.

TAXES

The overall estate planning objectives would be to minimize taxes at death and to preserve most of the estate. Some of the techniques that can be considered to achieve this are:

Trusts for children to ensure tax savings in the future.
Transferring assets to family members in a lower tax bracket.
Making the best of dividend tax credits, tax shelters, holding companies, estate freezes and charitable donations.
Adequate life insurance protection to offset tax burden.

CHOOSING THE EXECUTOR

All estates have either an executor or an administrator. An executor is named in your will and an administrator is appointed by the court in the absence of a will. No matter how well a will is planned, a poor choice of executor can ruin one's entire estate plan. The executor's role is basically to act as "Personal Representative" in resolving all financial aspects of the estate. Generally an executor is chosen among members of the family, friends, business associates, trust companies or professional advisors. The choice will vary often depend upon the nature of the will plan, as well as the testator's relationships with the choices listed above.

Executor fees is another factor that may affect the ultimate selection. These fees could arrange from 3 - 5% of the value of the estate with additional fees for ongoing estate management if required.

THE ROLE OF LIFE INSURANCE

Although governments will have us believe that succession duties do no exist; death taxes ranging from Capital Gains to probate fees could considerably reduce an estate and impact the dispositive wishes of the testator.

Under the current rules, the potential impact of taxation on even small to moderate size estates may be significant. The accumulation of unrealized capital gains and varieties of unrealized income in the terminal year may provide a "bunching" effect which affects the rates of tax levied.

Life insurance is one of the most cost effective methods of providing cash to reduce the impact of these tax liabilities on death. The combination of an up to date and well planned will, with sufficient life insurance funding, should ensure that the dispositive wishes are met and that the estate is sufficiently preserved.

I can offer a broad range of life insurance products that can be used to fund the preservation of your estate.

By implementing a financial plan which takes advantage of the tax-free benefit of life insurance, a large portion of your estate can be preserved. If you have questions or concerns regarding this topic, please do not hesitate to call me or to use the Book An Appointment Form.

Additional Article: Setting Up a Will

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300 Merritt Ave., P.O. Box 425,
Chatham, Ontario, N7M 5K5

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Fax: (519) 352-3055
1-877-670-2818