two estate planning strategies. what is estate planning? structuring a person’s legal and...
TRANSCRIPT
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Two Estate Planning Strategies
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What is Estate Planning?
Structuring a person’s legal and financial affairs so that, at death, his or her assets will be transferred:
to the desired recipients;
at the desired times;
with any desired restrictions;
in the simplest and most cost-effective manner;
with maximum tax relief.
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Why Include Estate Planning in your Business?
Provides a wider range of service to your clients, adding value
aligns a client’s financial and personal planning goals
strengthens the client relationship, improving retention
improves your competitive position
You are able to provide impartial suggestions
Allows you to meet a client’s family
Increases your contact with legal, tax, and insurance professionals
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Two Estate Planning Strategies
Operation of Law
joint ownership
beneficiary designation
Testamentary Trusts
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Operation of Law
Assets bypass estate of deceased
provides simplicity
avoids delay
avoids probate (and probate fees)
avoids Wills Variation Act claims
provides privacy
Will has no effect
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Operation of Law
Difficult to control size of gift
Does not avoid income tax
Does not facilitate income-splitting for recipient
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Joint Ownership
All owners have both legal and beneficial ownership
Provides a right of survivorship
Often a good strategy between spouses
Rarely a good strategy between parent and child, or between siblings
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Joint Ownership
Disadvantages during lifetime
a transfer to joint ownership triggers capital gains tax
spousal exception
a transfer to joint ownership triggers transfer fees
a transfer of a principal residence to joint ownership can create a partial loss of the future capital gains exemption
exposure to creditors of other joint owner(s)
exposure to loss
depletion
“blackmail”
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Joint Ownership
Disadvantages at death
creates an unintended gift if ownership implications are not understood
creates an unintended distribution scheme if survivorship implications are not understood
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Beneficiary Designation
No change of ownership
no capital gains tax
no transfer fees
no exposure to creditors of others
no exposure to loss
Beneficiaries can be changed
Often a good strategy between spouses, between parent and child, or between siblings
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Beneficiary Designation
Appointment of alternate beneficiaries
avoid unintended distribution scheme
Appointment of trustee(s) for minor or mentally disabled beneficiaries
informal trust, limited to age of majority
available for life insurance proceeds
not available for registered plan assets
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Testamentary Trusts
Established at death
in will, for estate assets
in insurance declaration (testamentary insurance trust), for life insurance proceeds
for registered plan assets
Inexpensive
Separates legal and beneficial ownership
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Testamentary Trusts
Progressive income tax rates
no personal exemption
flexible year end
21 year deemed disposition
spousal exception
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Testamentary Trusts
For protection of assets
minors
young adults
people with disabilities
spendthrifts
people with dependencies
people with creditors
future generations
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Testamentary Trusts
To facilitate income-splitting
spouse
others
To create an education fund
To hold shares of a private company
To hold recreational property
For charitable giving
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Testamentary Trusts
Trustee spouse
family member
friend
business associate
professional
trust company
Co-trustees
Alternate trustee(s)
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Testamentary Trusts
For insurance proceeds insurance declaration (testamentary insurance trust) can
be established in a will, or established in a separate document
life insurance proceeds are paid to insurance trustee(s)
to fund payment of date of death tax liabilities
to protect life insurance proceeds
to facilitate income-splitting
to create an educations fund
for charitable giving
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Testamentary Trusts
For registered plan assets
can be established in a will, but some registered plan trustees will not transfer assets to a trustee
can be established in a separate document
a “semi-secret” trust
the trustee(s) and alternate trustee(s) are the designated beneficiary(ies) and alternate beneficiary(ies) of the registered plan
the beneficiaries know of the testamentary trust
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Testamentary Trusts
For registered plan assets (continued)
to protect the registered plan assets
to facilitate income-splitting
to create an education fund
for charitable giving
generally not used in spousal situations
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Disclaimer
The estate planning strategies presented today are only general in nature. These strategies will not be appropriate for all clients, and clients will generally incur costs in implementing these strategies.
Clients need to discuss specific estate planning strategies with their own legal, tax, financial and insurance advisors, and need professional assistance with the implementation of any strategies. Mackenzie Financial Corporation, its subsidiaries and affiliates (collectively, “Mackenzie”) make no representation or warranty as to the effectiveness of the estate planning strategies presented today. In addition, Mackenzie has neither consulted with nor sought approval from the Canada Revenue Agency nor any provincial tax authorities in respect to these strategies.
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Two Estate Planning Strategies
QUESTIONS?