Top Estate Planning Strategies

It’s important to plan for your future as efficiently as possible, and that’s just what these top estate planning strategies will help you do. From designating key individuals in your plan to dealing with taxes, our top strategies have got you covered.

This guide to estate planning strategies will discuss:

  • Designating key individuals in your plan
  • Reviewing your insurance beneficiaries
  • Getting acquainted with “death taxes”
  • Finding tax exemptions
  • Consulting with investment and insurance professionals

 

Estate Planning Overview

Estate planning used to be reserved for the wealthy, but that is no more. Families across Ontario are realizing that estate planning is essential for anyone with assets and a family they will leave behind when they die.

An estate plan includes a will, but it doesn’t stop there. These plans ensure that everything you value is transferred to your beneficiaries in the most efficient way possible. Without an estate plan, transferring your assets to your loved ones can reach roadblocks and be extremely difficult for all parties involved.

 

Designate Key Individuals in Your Plan

If you are not alive or able to manage your assets, you’ll need to make sure the right people are appointed to take over the responsibility. This could happen when you die or in the unfortunate circumstance that you become incapacitated.

 

Estate Representative

An estate representative is someone, often named in your will, that is delegated with the task of managing your estate and wishes once you have died. This person is in charge of making sure that your will is carried out correctly.

An estate representative can deny this responsibility, so you should make sure to discuss this  with said person before designating them as the representative in your will.

 

Guardian

For those with children under their care, choosing a guardian is of the utmost importance. This individual will raise your children and decide things like where they live, where they study, and what activities they do.

 

Power of Attorney

A Power of Attorney (POA) is a legal document that gives a designated person the power to manage your money and property. This person is legally obligated to act in your own best interest.

You may name a personal contact or a trusted professional as your attorney – this does not mean they are a practicing lawyer.

The POA typically goes into effect when the estate holder is incapacitated. Legal incapacitation occurs when someone is substantially unable to provide food, clothing, or shelter for themselves or to care for their health or financial affairs.

 

Health Care Proxy

A health care proxy is a form that designates someone to make health care decisions on your behalf if you are unable to communicate. This person can be given priority to visit you in the hospital, receive your personal property from said hospital, and authorize medical treatment and surgical procedures.

This can be the same person as your POA or another individual.

 

Review Your Insurance Beneficiaries

For those with an active life insurance policy, it’s important to stay on top of things like term renewal dates, available cash value, and listed insurance beneficiaries.

Insurance professional Sim Gakhar highly recommends reviewing your insurance policy at least once a year, and especially if you have experienced a large milestone such as marriage, divorce, the birth of a child, or the death of a listed beneficiary.

Listed beneficiaries on personal insurance accounts, as well as other accounts like individual brokerage accounts, typically trump any listed beneficiaries on your will. In any case, if you list Person A as the beneficiary on your life insurance policy, be sure to also list them as the death benefit beneficiary in your will.

 

Review Your Retirement Beneficiaries

After going through your insurance policy with a professional, continue to review the beneficiaries for your retirement accounts. Without a living beneficiary listed on your retirement account, your funds will end up in probate court and be distributed according to the Ontario Wills and Succession Act.

 

Get Acquainted with Death Taxes

They say the only things certain in life are death and taxes, and in this case, it proves true. There are three types of taxes/fees associated with death in Canada: deemed disposition, taxable withdrawals from registered plans, and income for the year of death.

 

Deemed Disposition

After your death, your property will be evaluated, comparing its current market value to what you paid for the property. The difference is called capital gain, and half of this capital gain is taxable from your estate.

 

Withdrawals from Registered Plans

Upon your death, any RRSP or RRIF plan you may have been under is deemed a withdrawal. This means that the full amount becomes taxable.

 

Income Tax

Unless you die on the cusp of a new tax year, you’ll still owe income tax for your last year of life. The amount you’ve made in that final year must be included on your (deceased) final tax return. Your executor or estate representative will file this return.

 

Find Tax Exemptions

Although you may not be able to avoid “death taxes”, there are ways to take advantage of tax exemptions in Canada.

Firstly, there is no “gift tax” in Canada, meaning any inheritance to your beneficiaries will not need to be included in their income – unless the gift includes capital property or if the deceased owes money to the CRA.

Another way to use tax exemptions is through things like life insurance policies. Most amounts received from a life insurance policy are not subject to income tax, leaving a formidable financial cushion in the hands of your beneficiaries. Insurance agent Sim Gakhar is happy to answer any of your questions around this topic.

 

Consult with a Professional

Navigating estate planning, life insurance policies, and retirement accounts can be complicated. We hope you can utilize these top estate planning strategies to draft your estate plan.

Then, with the help of certified investment and insurance agents like Sim Gakhar, you can make the best decision for you and your loved ones’ futures while keeping your values and wishes first.

Reach out to Sim’s office today to resolve any inquiries you may have about your estate planning process.

 

FAQs & Helpful Resources Regarding Life Insurance for Estate Planning