Estate planning actually refers to the process required to transfer and preserve your estate in both an orderly and tax-effective manner. The WILL forms the centerpiece of a well structured estate plan. The will gives clear direction as to how the assets will be distributed. The estate plan also focuses on the tax implications with a goal of minimizing and deferring taxes on death so that the estate can be preserved for its beneficiaries.
Dying without an estate plan will leave your family's financial future uncertain. The government will use the "deemed disposition" rule, which considers all of your assets to be sold at market value, and therefore taxable. Despite Canada not having a death tax, many Canadians receive the single biggest tax bill when their terminal tax return is filed. For most of us, we would have a preference to leave as much of our hard-earned wealth to our chosen beneficiaries, as opposed to CRA. The two sure things in life are death and taxes, and the former brings plenty of the latter.
There are several opportunities to achieve minimum taxes and maximum value for your estate. Strategies include:
- Having assets transferred to family members or friends in a lower tax bracket
- Establishing a trust for your children/spouse/any other beneficiary
- Using charitable donations to achieve maximum tax credits
- Insurance to cover taxes and creditors
- Avoiding probate fees by having assets in joint names
Many people are apprehensive towards making an estate plan; the belief that planning for death may bring bad luck, or they just don't want to think about the prospect. However, an effective estate plan allows the family to grieve without being burdened by the additional responsibilities.
We respect the courage and wisdom that it takes to put together your estate plan. At Wealth Innovations, we make sure that your will and estate plans are accurate and reflect the needs and wishes of you and your family.