A recent survey by a major bank in Canada indicated that more than 75 percent of Canadians do not have an inheritance plan. This is a surprising result given that somewhere in the area of $400 billion is going to pass to inheritors within a generation.
Estate planning can be humbling process. It forces us to contemplate our mortality. A conscientious estate plan may well involve an unequal division of assets: not an easy thing to discuss with family members.
The cornerstone of an effective estate plan is the will. Yet even the most exhaustively constructed will can run aground if contrary actions are taken outside of it. For example: assets held in joint ownership (with right of survivorship), or with beneficiary designations, will pass outside of the will. An effective estate plan co-ordinates the virtues of both "in the will" and "out of the will" planning, since the two do not have to be mutually exclusive!
A crucial aspect in any estate plan is the effect of taxation: both from the perspective of your own "final" tax bill in addition to tax considerations relating to your estate beneficiaries. For example: unless you have a beneficiary who is a spouse or a financially dependent child, the remaining balance on your Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs) must be included as income on your final tax return. Looking at your estate on an after-tax basis will go a long way towards protecting against unforeseen consequences in distribution.
Despite recent changes reducing their tax effectiveness in some situations, there remain areas where the use of trusts can be an effective estate tool, particularly in planning for disabled estate beneficiaries.
Do you have an estate plan?
If yes, when was the last time you reviewed it? Regardless of whether your answer is yes or no, a discussion with a Scrivens Certified Financial Planner can be part of the solution. We are able to provide financial planning services for an hourly fee. The process involves identifying your objectives, accounting for the components of your estate - both assets and beneficiaries - and considering aspects such as taxation. If you have an existing plan in place, a review can be beneficial so as to ensure that you are taking maximum advantage of current tax planning opportunities.At Scrivens, we can complement the development of an effective estate plan with investment and insurance solutions that help address taxes upon death as well as the value of portfolio assets at that time.The bottom line: You are never too young - or old - to have an estate plan.