Estate planning might sound like a tool for the wealthy. But the truth is, just about everybody has an estate. Most of us need a plan to ensure it is properly distributed to family and other beneficiaries when we die.
For financial planning purposes, your estate isn’t a mansion or a huge tract of land. Rather, it’s everything you own, plus anything that will be received after your death — such as proceeds from a life insurance policy, or pension payments that continue after you die.
If you don’t make provisions for the disbursement of your wealth, it could end up in the wrong hands. You need a strategy for transferring personal and business wealth from investments and other assets as quickly and tax efficiently as you can.
Here are the basic elements of an estate plan.
A Will: A properly drafted Will ensures that your wealth is distributed according to your wishes. Without formal instruction, provincial legislation will determine how your assets are divided – which could have little to do with your wishes.
Tax plan: You can reduce taxation of your assets by structuring them properly while you’re alive. In Canada, your estate won’t face death taxes as it would in some countries. But for income tax purposes some of your assets may be deemed to have been “sold” when you die, which means the estate could face a hefty tax bill for items such as capital gains. A number of strategies can help ease the tax burden, including transferring assets to children while you’re alive. Trusts within your will can also be used to save tax for beneficiaries after you are gone.
Continued next week?
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your financial advisor.