Introduction

This document contains information for the planning  your Will and Powers of Attorney. It provides you with subject matter and related issues, to assist you in making key decisions.

Planning Your Will – An important part of your Estate Plan

Your Will should reflect your current circumstances and should be planned and updated.

 Should you die without a Will (or a Will that does not distribute all of your assets), the “intestacy” laws would apply that may not reflect your wishes. Without an appropriate Will, the administration of your estate would be more complex and costly. By not having an up-to-date Will, you could miss some strategies to minimize tax and avoid family disputes. It may not reflect your current circumstances or deal with all of your assets.

Tax implications of dying

Planning to minimize taxes is an important objective in estate planning. When a person dies, they are deemed to sell all their property for its value at that time. This fictional sale occurs immediately prior to death and reported in the final tax return of the deceased person.

This results in:

  • The realization of any capital gains or capital losses and the taxation of those gains
  • Registered plans, such as RRSPs and RRIFs, are taxed on their full value

The most significant exception is where property is left to a surviving spouse (or partner) or a qualifying spousal trust. In that case, the tax implications are deferred until the surviving spouse dies or until the property is sold. Another exception relates to the principal residence exemption that may be used to shelter the capital gain that is realized on a home or recreational property. Probate fees or taxes are calculated based on the size of the estate.

What will be in your Estate

First steps in planning your Will:

  • determine which assets will form part of your estate and be dealt with by your Will. This depends on how you own your property and if you named beneficiaries in life insurance policies, registered plans, etc.
  •  property jointly owned will not form part of your estate.
  •  where a beneficiary has been named in a registered plan or insurance policy, proceeds will go directly to that beneficiary and are not governed by your Will.

It is important to examine the relevant documents (e.g. title documents, account documents etc.) to confirm the owner and type of ownership and whether a beneficiary has been named.

Essential Elements of a Will

A carefully planned and drafted Will should consider your current financial and personal circumstances and reflect your goals regarding the distribution and administration of your estate.

Here are the essential elements of your Will:

Naming Executors, Trustees and Guardians:

  •  Who would be best suited to handle your estate, and manage trusts created in your estate? Executors handle the administration. Trustees manage ongoing trusts that may be created under your Will. They do not need to be the same people.
  • If you appoint multiple individuals to act together, how should decisions be made?
  •  If there are minor children, who would you wish to name as guardians?

 Distribution of your assets:

  • Who should receive your assets? You should name primary beneficiaries and alternate beneficiaries in case the primary beneficiaries die before you.
  •  Are there certain of your assets that you should deal with specifically? (business interests, home, family cottage, personal effects, etc.)
  • Should testamentary trusts be used – for children (grandchildren) or to hold assets for a spouse (see testamentary trusts below).

Using Testamentary Trusts in your Will

Testamentary Trusts offer ways to save income tax and provide peace of mind by allowing assets to be managed by trustees on behalf of your beneficiaries.

A “testamentary trust” becomes effective on the death of the person making the Will. The terms and conditions that apply to the trust are set out in the person’s Will.

Common forms of testamentary trusts:

  •  Spousal Trust – for the benefit of the surviving spouse. Rather than assets being transferred directly to the surviving spouse, they are held in trust for the spouse. It requires that all income of the trust be paid to the surviving spouse, and no one other than the surviving spouse can have access to the capital of the trust while he or she is alive.
  • Trust for Child – for the benefit of a surviving child/grandchild. Assets are held in trust for the surviving child/grandchild instead of being transferred directly into the beneficiary’s hands.

Benefits of testamentary trusts:

  • Reducing total income tax payable on future income earned on the inheritance.
  • Protects the beneficiaries’ inheritance from claims by creditors of the beneficiaries, family property claims and/or financial mismanagement by the beneficiary.
  • Ensures the testator’s wishes/intentions will be respected regarding the use of the inheritance.

Executors Trustees and Guardians

Executors are responsible for making funeral arrangements, safeguarding your assets, and carrying out your wishes under the terms of your Will.

Trustees are responsible for administering testamentary trusts under your Will.The executor and trustee can be the same person or a different individual to perform each role. 

You may appoint more than one executor and trustee. In that case, and indicate how decisions are to be made.

Carefully consider executor(s) and trustee(s) They will make crucial decisions and should have good judgment, business sense, and relate well with members of your family. Also consider their availability, willingness, age/health, residency, trustworthiness, impartiality, and financial stability. Discuss and familiarize your executors and trustees with your affairs.

You may appoint a guardian for children under the age of 18. They must be approved by the courts whose primary concern is the best interests of the child. Your wishes or preferences are not binding on the court; however, it is valuable to include your preferred guardians in your Wills.

Your Powers of Attorney

Your Powers of Attorney are the key legal tools while you are alive if you have become unable to look after your financial affairs or are unable to make decisions for your medical or personal care.

When managing property, it permits the appointed person(s) to deal with your assets. An “enduring” power of attorney is one that remains valid even after the individual granting the power becomes mentally incapable.

You may provide the authority of the attorneys to act on your behalf only commences when you lose your mental capacity (sometimes referred to as a “springing” power of attorney), or alternatively that the attorneys have authority with immediate effect.

A Power of Attorney to manage your health care authorizes the appointed person(s) to make personal or health care decisions on your behalf, should you become incapable of doing so.

You may revoke a Power of Attorney at any time while you are mentally capable.

Summary

Have a clear picture of what is in your estate, identify your beneficiaries, determining whether testamentary trusts will be used, and select your executors, trustees, guardians, and attorneys.

Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. The information is provided solely for informational and educational purposes and is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal, or accounting advice. Professional advisors should be consulted prior to acting on the basis of the information contained herein.

Assante is an indirect, wholly-owned subsidiary of CI Financial Corp. (“CI”). The principal business of CI is the management, marketing, distribution and administration of mutual funds, segregated funds and other fee-earning investment products for Canadian investors through its wholly-owned subsidiary CI Investments Inc. Wealth planning services may be provided by an accredited Assante advisor or by the professionals of the Wealth Planning Group of Assante Private Client, a division of CI Private Counsel LP.