The Precept Group - Wealth Management Investing

Estate planning is a process of distributing one's estate during one's lifetime and after death to chosen beneficiaries, that is consistent with one's goals and desires. The main goals of estate planning are to provide effectively for beneficiaries, such as family members and other loved ones, to increase one's assets as much as possible, to distribute assets in a timely manner and to minimize taxes the beneficiaries will pay. A solid Estate Plan can help you distribute your assets the way you intended, e.g. pay for your funeral expenses or provide for your family's living costs, leave more money to your beneficiaries, and minimize taxes and probate fees. In addition, an estate plan can help business owners ensure continuity of their business.

Our team of experienced financial services representatives will be happy to answer any questions that you have and help you create a right estate plan based on your needs and priorities.

What is the difference between estate planning and tax planning?
Tax planning is part of estate planning. In order to minimize taxes on your estate, you need to structure your estate properly for distribution.

Is estate planning only suitable for large estates?
Estate planning is suitable for all assets, especially as your estate will consist not only of what's in your bank account, but also your real estate, investments, and collectibles. A solid estate plan will help ensure proper distribution of your assets.

Can the estate planning be done after death?
Estate planning needs to be done before one passes away. After death, estate is up for a settlement and it is too late for estate planning.

What assets will be a subject to taxes in my estate?
Usually, you will need to pay taxes on your RRSPs, RRIFs, cottages, rental properties, some of your business assets and your income in the year of death.

Will my spouse have to pay tax if I die first?
As spouses usually own their assets jointly, your assets can be rolled over tax-free upon death to the surviving spouse. Also, the surviving spouse would be entitled to tax-free rollover of RRSPs, RRIFs, investments and real estate. However, if proper estate planning is not done, some of the assets may be subject to tax and/or probate. Usually, only assets that pass through the estate would be subject to probate.

I don't have a surviving spouse. What taxes will need to be paid upon my death?
If there is no surviving spouse to whom you can roll over your assets, you can expect to pay taxes on your RRSPs, RRIFs, cottages and rental properties. Your RRSPs and RRIFs will be fully taxed as income in the year of death at your marginal tax rate and your cottage will be subject to capital gains tax.

Is there any tax payable on my home when I die?
Your principal residence is free from tax upon death or disposition regardless of how long you have owned it. Real estate other than your principal residence, such as a family cottage or rental property, will be subject to capital gains tax upon death or disposition.

How can life insurance help me in my estate planning?
Usually, by purchasing a Joint and Last to Die life insurance policy, you can preserve the value of your estate. This way you will prevent income tax and capital gains taxes from eating into a very significant portion of your estate. The Joint and Last to Die life insurance policy will insure both spouses and pay the benefit at the second spouse's death, and thus provide the funds necessary to pay taxes owing.

How can I reduce tax in my estate?
Only two things are sure in life...death and taxes! However, with proper planning, you can help reduce or even eliminate taxes in your estate as follows:

Joint ownership of your assets with your spouse will ensure that your assets are rolled over tax-free upon death to the surviving spouse. In order to eliminate probate you can also enter into joint ownership with someone else other then your spouse, e.g. your children, but it is highly recommended that you first discuss with your lawyer any issues that may arise from this.
In the year of death, 100% of charitable gifts are eligible for a tax receipt. Through the use of life insurance large gifts can reduce or even eliminate tax in the estate.
Consult your advisor on spending down your registered assets during your lifetime in order to reduce tax. This can be done if you have sufficient income from other sources to sustain your current lifestyle. Also, you must carefully plan the amount of income that you can take out so that it doesn't put you into a higher tax bracket.
Since pensions and RRIFs are paid out as income and are taxed according to one's personal tax rate, there are opportunities to split government pensions between spouses which in turn may reduce income tax.
A Prescribed Annuity can help you increase your after-tax income. An annuity is similar to a mortgage payment that would work in reverse. Instead of borrowing money for your mortgage, you invest money with a life insurance company. In exchange for this investment, the life insurance company will provide you with regular income payments, containing both principal and interest, for a specified period of time, usually for the rest of your life. The principal portion of your capital is tax free and the interest portion will be included in your income. Since annuity payments may stop at death, in order to replace the capital for your heirs, you may purchase a life insurance policy. Even though you would incur an insurance premium cost, such a policy would increase your after-tax income and guarantee it for life, while preserving capital for your heirs.