The Three Estate Buckets

Annually with clients, we review how their estate will be distributed to their beneficiaries. We determine if there are any changes in their desires, or opportunities to save taxes and/or fees.

In a recent webinar by Michael Kitces, Mathew Jarvis, a US Financial Advisor, shared a concept he uses with clients called the Estate Buckets. I thought it was a great way to conceptualize how assets are distributed.  He reviewed the concepts of the Documents and Beneficiary Bucket, and I’ve added the Joint Ownership bucket.

The Three Estate Buckets: 

🪣 The Beneficiary Bucket

🪣 The Joint Ownership Bucket

🪣 The Documents Bucket

These will be reviewed below. To help with your planning process, you may wish to review your assets and place them in the appropriate bucket using the following descriptions:

The Beneficiary Bucket

These assets will be distributed according to the named beneficiary on the account or policy.  Investment assets can include:

• Registered Retirement Income Plans (RRIF)
• Registered Retirement Savings Plans (RRSP)
• Tax Free Savings Accounts (TFSA)
• Life Income Funds (LIF)
• Locked in Retirement Accounts (LIRA)
• Company Savings Plans
• Life Insurance Policies
• Non-Registered Segregated Fund policies.

 

When using named beneficiaries:

• you can avoid the Estate and Administration Tax (avoid probate)
• there can be some tax savings with some named beneficiaries depending on the plan type and beneficiary type 

 

Avoid a huge $$ mistake, Check your beneficiary designations now!

The Joint Ownership Bucket

Items in the joint ownership bucket are assets that you own with someone else, more formally known as joint tenancy or “joint tenants with right of survivorship”. With this type of ownership, the assets ownership remains with the other when one joint owner passes away.   Normally these are items you jointly own with your spouse or common-law partner (CLP). Items can include:

• home when owned with your spouse or CLP
• joint bank accounts
• jointly owned non-registered investments

 

Should I transfer the ownership of my house or investment account into joint ownership with my children to avoid probate fees?

The Document Bucket

These are assets that will be distributed based on your estate documents, which could be your Will and/or a Trust Document.     Assets can include:

• personal belongings
• bank accounts
• non-registered investments
• real estate 
• vehicles
• art, collectables
• anything you own that doesn’t have a named beneficiary or is in joint tenancy ownership. 

 

For assets that are distributed via your Will, typically you must have your will probated, and you will have to pay the Estate and Administration fees to do so.

Key Points for Wills and Powers of Attorney’s

Why Probate may be a good thing!

Action Item – Place your assets into the Estate Buckets

You may wish to review all your assets and place them in the appropriate bucket.  By using the estate buckets as a framework, it will be easier to review your estate plan for any changes.  

Over time some assets can also move from one bucket to another. For example, a joint investment account that passes to the first spouse or CLP as joint tenancy, and then it is distributed from the Documents Bucket on the last spouse’s or CLP’s death via their Will.

Another part of the estate puzzle is each of the buckets can have a different tax and estate fee, so this will have to be taken into consideration as well.

Your accountant, lawyer, and CFP® professional should be able to assist you with this process over time.

For more information, you can refer to Preserving Wealth: The Next Generation – The definitive guide to protecting, investing, and transferring wealth by Jack Lumsden, MBA, CFP®

For your FREE Copy CLICK HERE

Have Questions?

If anything above isn’t clear or if you’d like to talk through any of it, let’s set up a quick call or virtual meeting. 

Book time with us HERE

Looking forward to helping you stay on track. Best Regards, Jack Lumden, MBA, CFP® Financial Advisor, CI Assante Financial Management Ltd.

Jack Lumsden, MBA, CFP®, is a financial advisor at CI Assante Wealth Management Ltd. with over twenty-five years of experience. He focuses on helping those transitioning from their working years to retirement, creating lifelong income and cash-flow strategies from accumulated financial assets.

A Burlington resident, Jack enjoys staying active and coaching high school football. He values family time – attending sports events with his son, Connor, and country music concerts with his daughter, Paige. He and his wife Sandi, also love to travel. Jack holds a BBA from Wilfrid Laurier University and an MBA from McMaster University, and he is a CERTIFIED FINANCIAL PLANNER® professional.