I get that estate planning is a boring topic and that you don’t want to think about your demise, but do me a favour and read this! It’s important. Here are a few tips courtesy of Jon Hreljac, AVP Regional Tax, Retirement & Estate Planning Services, Wealth at Manulife Financial. Much of what you will see below has been taken from a presentation given by Jon recently*.
Your (Short) To Do List
- Make sure your beneficiaries are current.If you are going to have multiple beneficiaries, it is best to give assets that have grown in value to your spouse and to give assets that have less growth (and therefore less tax) to the other beneficiaries.Your spouse will not have to pay taxes on the growth but others will.
- If in your will (or at any time), you are gifting assets to charities, consider gifting them securities in kind.Your estate will avoid having to pay the capital gains on the assets and your estate will get a nice tax write off for the charitable donation as well.
- Make sure you are not committing any of the following mistakes.
Common Estate Mistakes
- Not having a will!
You may think that your estate is simple and that the people you love will receive your assets. HOWEVER, it is the government who determines how the assets are distributed using intestacy rules if there is no will.
Here’s an example:
Jackie passes away in Ontario with $1,000,000 of assets and no will. She has a spouse, Joel and 2 children Jack and Jill.
The rules will give $200,000 plus 1/3 of $800,000 to Joel, and 1/3 of $800,000 each to Jack and Jill. If you were Jackie, is that how you would want your assets to be divided?
- Treating Equal Beneficiaries Unequally
Say you have 3 children and you want them to split your assets equally. You have a $1 million RRSP, $1 million home and $1 million non-registered investment account. Simple, give each child one asset, right?
No, these assets are taxed differently. The child who inherits the non-registered asset is very likely to end up with a fraction of his/her portion as the taxes on the assets in both the RRSP and the non-registered account will be paid by the non-registered account. And the same family drama that this creates will exist whether you have $3 million, $300,000 or $3000.
Some assets can be excluded from Probate fees (estate taxes). Your RRSP/RIF and TFSA should have direct beneficiaries in order to do that. Non-registered assets will avoid probate if they are an insurance contract, for example, segregated funds. These same assets will therefore bypass the Estate and also be protected from creditors or challenges to the will.
Keep in mind that we are not lawyers or accountants and that you should refer to those specialists for advice specific to you.
You made it!
Thank you for getting this far – pass this on to everyone else in your world who needs to be reminded that they are not immortal.
* Disclaimer: This material was for general information only and should not be considered investment or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this
information is appropriate to their specific situation.
Manulife Securities related companies are 100% owned by The Manufactures Life Insurance Company (MLI) which is 100% owned by the Manulife Financial Corporation a publically traded company. Details regarding all affiliated companies of MLI can be found on the Manulife Securities website www.manulifesecurities.ca