Two Estate Planning Strategies

What is Estate Planning?

Structuring a person’s legal and financial affairs so that, at death, his or her assets will be transferred:

to the desired recipients;

at the desired times;

with any desired restrictions;

in the simplest and most cost-effective manner;

with maximum tax relief.

Why Include Estate Planning in your Business?

Provides a wider range of service to your clients, adding value

aligns a client’s financial and personal planning goals

strengthens the client relationship, improving retention

improves your competitive position

You are able to provide impartial suggestions

Allows you to meet a client’s family

Increases your contact with legal, tax, and insurance professionals

Two Estate Planning Strategies

Operation of Law

joint ownership

beneficiary designation

Testamentary Trusts

Operation of Law

Assets bypass estate of deceased

provides simplicity

avoids delay

avoids probate (and probate fees)

avoids Wills Variation Act claims

provides privacy

Will has no effect

Operation of Law

Difficult to control size of gift

Does not avoid income tax

Does not facilitate income-splitting for recipient

Joint Ownership

All owners have both legal and beneficial ownership

Provides a right of survivorship

Often a good strategy between spouses

Rarely a good strategy between parent and child, or between siblings

Joint Ownership

Disadvantages during lifetime

a transfer to joint ownership triggers capital gains tax

spousal exception

a transfer to joint ownership triggers transfer fees

a transfer of a principal residence to joint ownership can create a partial loss of the future capital gains exemption

exposure to creditors of other joint owner(s)

exposure to loss

depletion

“blackmail”

Joint Ownership

Disadvantages at death

creates an unintended gift if ownership implications are not understood

creates an unintended distribution scheme if survivorship implications are not understood

Beneficiary Designation

No change of ownership

no capital gains tax

no transfer fees

no exposure to creditors of others

no exposure to loss

Beneficiaries can be changed

Often a good strategy between spouses, between parent and child, or between siblings

Beneficiary Designation

Appointment of alternate beneficiaries

avoid unintended distribution scheme

Appointment of trustee(s) for minor or mentally disabled beneficiaries

informal trust, limited to age of majority

available for life insurance proceeds

not available for registered plan assets

Testamentary Trusts

Established at death

in will, for estate assets

in insurance declaration (testamentary insurance trust), for life insurance proceeds

for registered plan assets

Inexpensive

Separates legal and beneficial ownership

Testamentary Trusts

Progressive income tax rates

no personal exemption

flexible year end

21 year deemed disposition

spousal exception

Testamentary Trusts

For protection of assets

minors

young adults

people with disabilities

spendthrifts

people with dependencies

people with creditors

future generations

Testamentary Trusts

To facilitate income-splitting

spouse

others

To create an education fund

To hold shares of a private company

To hold recreational property

For charitable giving

Testamentary Trusts

Trustee spouse

family member

friend

business associate

professional

trust company

Co-trustees

Alternate trustee(s)

Testamentary Trusts

For insurance proceeds insurance declaration (testamentary insurance trust) can

be established in a will, or established in a separate document

life insurance proceeds are paid to insurance trustee(s)

to fund payment of date of death tax liabilities

to protect life insurance proceeds

to facilitate income-splitting

to create an educations fund

for charitable giving

Testamentary Trusts

For registered plan assets

can be established in a will, but some registered plan trustees will not transfer assets to a trustee

can be established in a separate document

a “semi-secret” trust

the trustee(s) and alternate trustee(s) are the designated beneficiary(ies) and alternate beneficiary(ies) of the registered plan

the beneficiaries know of the testamentary trust

Testamentary Trusts

For registered plan assets (continued)

to protect the registered plan assets

to facilitate income-splitting

to create an education fund

for charitable giving

generally not used in spousal situations

Disclaimer

The estate planning strategies presented today are only general in nature. These strategies will not be appropriate for all clients, and clients will generally incur costs in implementing these strategies.

Clients need to discuss specific estate planning strategies with their own legal, tax, financial and insurance advisors, and need professional assistance with the implementation of any strategies. Mackenzie Financial Corporation, its subsidiaries and affiliates (collectively, “Mackenzie”) make no representation or warranty as to the effectiveness of the estate planning strategies presented today. In addition, Mackenzie has neither consulted with nor sought approval from the Canada Revenue Agency nor any provincial tax authorities in respect to these strategies.

Two Estate Planning Strategies

QUESTIONS?