- Collection and review of financial and personal data
- Review of beneficiary designations and title documents for real property
- Review of relevant contracts such as family law and shareholder agreements
- Review estate administration tax and income tax implications
- Formulate options
- Preparation of documents to implement plans such as Wills, trusts, powers of attorney, mutual Will agreements, and shareholder agreements
- Review and revise existing plans
- Coordination with client advisors such as accountants, financial and insurance specialists
- Coordination with foreign counsel for cross border planning
You do not have to have a vast fortune to benefit from estate planning. The process can help everyone as it is designed to coordinate various components like your Will and beneficiary designations to ensure the best results including avoiding conflicts. It also addresses incapacity planning through the use of powers of attorney and other relevant documents.
Not all assets have their distribution controlled by a Will. Beneficiary designations on a plan or policy is one example of assets being distributed outside of a Will. Property owned jointly with rights of survivorship is another. The ability to transfer assets can be restricted through contracts such as cohabitation or separation agreements as well as shareholder agreements.
In Ontario people have a considerable amount of flexibility regarding how they distribute their estate. The main restriction is that each person must satisfy their legal obligations such as those to creditors, spouse, children and parents. There may be other restrictions imposed by contracts that will depend on individual circumstances.
Probate planning is an aspect of estate planning that can be helpful if done correctly but also has potential risks and should be undertaken with great care. The goal of estate planning is to minimize exposure to the estate administration tax which is 1.5% in Ontario on estate values over $50,000. Overall this is a fairly small amount, relatively speaking, and trying to reduce it should not be done without consideration of the potential risks.
A popular strategy to try to reduce the estate administration tax is holding assets in joint names with rights of survivorship. Unfortunately, this has a range of possible problems. The first is loss of control. Once you own an asset with another person, they have a say in what happens to it. The next problem is that the property can be considered a marital asset subject to family law property division rules. Another consideration is the Supreme Court decision which says that if property is held in joint names with rights of survivorship between a parent and adult child, it is presumed that the property is held on resulting trust. This means the assets falls into the estate and does not avoid the estate administration tax. Those claiming on the death of a joint owner would have to prove a gift was intended.
A final problem with transferring assets to joint ownership is that it can trigger an immediate income tax liability far greater than teh 1.5% tax you are trying to avoid. Whenever you transfer assets to another person, you are deemed to have sold it for fair market value. Unless there is an exemption that eliminates the exposure to tax, you will have to report the gain for the tax year in which the transfer took place. If the asset is your principal residence, there is an exemption but the new joint owner may not live there so a part of the property would no longer qualify when it is sold later on.
Beneficiary designations can be useful to avoid the estate administration tax but if the person is a minor, the money will have to be paid into court until they reach the age of majority. A Will would allow the funds to be held in trust to a more appropriate age and provide a trustee to manage the funds rather than the court.