One significant component of wealth management is transferring your property at the time of death.

The objective of will and estate planning is to ensure that your property transfer is as straightforward as possible and maximizes the tax benefits. In practice, among others, planning serves to determine your personal and financial objectives to:

  • Protect your heirs’ financial interests;
  • Minimize taxes, administrative costs and delays;
  • Ensure the smooth settlement of your affairs.

A will is undeniably the best way to set out your objectives and intentions.

Reduce your estate’s tax burden

The terms and clauses in this document will determine the parameters of your plan to transfer your property by setting out how it will be distributed to your heirs. You can, therefore, ensure that the people you choose are financially protected while maintaining overall wealth management.

By judiciously using the provisions in tax legislation, you can also reduce your estate’s and heirs’ tax burden. Depending on the type of property you own (real estate, private company shares, partnership units, registered plans [RRSP, RRIF and TFSA], investment portfolio, etc.) and what your will states, you can define strategies to meet your needs while maximizing the tax considerations.

Questions to guide your estate planning

The following questions could help guide your estate planning thought process:

  • Do you have a will? If so, is it up-to-date?
  • Have you listed all of your assets and liabilities (current and potential)? If so, are the lists recent?
  • Have you determined who should inherit what? If so, do you want to make changes?
  • Do some of your heirs have special needs?
  • Will your estate have sufficient cash to cover the taxes payable at the time of your death and any cash legacies you may wish to make?

A careful analysis of your financial situation and defining an estate plan that reflects your wishes will avoid conflicts and confusion in settling your estate. Our will and estate planning experts can support you in the process to ensure that your planning is compliant and to provide you with peace of mind.

 

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Adviser alert – January 2018

A briefing for Chief Financial Officers

The Grant Thornton International IFRS team has published the 2017 edition of Navigating the changes to International Financial Reporting Standards: A briefing for Chief Financial Officers. This publication has been designed to provide chief financial officers high-level awareness of the recent changes that will affect companies’ financial reporting in the future.

This publication covers both new standards and interpretations that have already been issued, and new amendments made to existing ones, giving brief descriptions of each.

Navigating the changes – What’s new?

The 2017 edition of this publication has been updated for changes to International Financial Reporting Standards (IFRS) that have been published between December 1, 2016 and November 30, 2017 and now covers the following financial year-ends:

  • March 31, 2017;
  • June 30, 2017;
  • September 30, 2017;
  • December 31, 2017;
  • March 31, 2018.

This publication has been designed to help entities planning for a specific financial reporting year-end identify changes mandatorily effective for the first time, changes not yet effective, and changes already in effect. For each change included in the publication, commercial implications are outlined with information on how many entities will be affected, and potential impacts on such entities. A traffic light system indicates the assessment of the answers to these questions.

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Do you want to undertake a strategic planning initiative in your business? The first, and certainly, most important step is to complete a strategic diagnosis. This is the foundation that will help any organization get specific insight to clearly identify its priority issues.

Strategic Planning for a Well-Prepared Garden

Consider the example of a well-prepared garden, with enriched soil and appropriate plants—the crop will be all the more plentiful. Similarly, a richer and carefully crafted diagnosis will more clearly define the right course of action and show the next steps a business should take.

An objective and truly honest 360-degree diagnosis is designed to help you analyze your business’s various organizational functions and identify opportunities and threats that are specific to its field of activity. It synthesizes and interconnects strengths and weaknesses (internal environment) as well as opportunities and threats (external environment).

Here is a brief summary of some of the numerous tools and techniques that can be used to complete the diagnosis.

Set up a work plan

To maintain the focus on the main goal and avoid becoming overwhelmed by too much information, it is essential to set up a work plan that sets out the most important questions you may be asking:

  • What is your market share?
  • What markets are growing?
  • What products are the most in demand?
  • What are the latest consumption trends?
  • Who are the most innovative players on the market?
  • How does the market perceive my business?

The next step is to identify what sources of information are available. In some cases, these numerous sources require some resourcefulness. For instance, you may have to search for specific conference papers, or the particular findings of a specialized study on horticultural science. Other sources require a more complex analysis, like the reports published by Statistics Canada; Innovation, Science and Economic Development; or workforce sectorial committees.

However, these data can be highly beneficial to help you get clear insight into your organization and the issues it faces.

Secondary data

Secondary data are external, public or private, available data (whether free or not). They can consist of information gleaned from published studies or research, official statistics, scientific articles, reports, in short, existing literature.

These data are useful for various aspects of the diagnosis, to get a better idea, for example, of:

  • business trends in a specific sector,
  • growth expectations,
  • consumer spending,
  • competition factors.

Benchmarking is another tool that helps companies to compare their own situation to that of their main competitors in terms of criteria, such as:

  • the range of products and services,
  • rates,
  • distribution methods,
  • marketing.

If questions remain after consulting secondary data, you could consider collecting your own primary data.

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Primary data

Primary data pertaining to your clients, suppliers, competitors and partners can be directly collected using various techniques, such as interviews, surveys, focus groups, mystery customers, etc. How primary data are collected depends on your business objectives, the level of precision sought, as well as time constraints to collect the information.

Assessing all information collected on the company’s external environment will enable it to capture market opportunities and understand potential threats.

As an example, let’s take a look at how the Lafleur Greenhouses could collect primary data to answer specific questions on the competitive environment (download the example).

Internal diagnosis

When conducting a diagnosis, it is also important to take the internal pulse of the organization by collecting useful information on its main strengths and weaknesses. To objectively assess the current situation, it is essential to have a global vision of the points of view of the employees and not just management.

This part of the investigation can be conducted as interviews or focus groups, but it is paramount to select the right method and ensure that participants can freely speak their mind in a constructive atmosphere to propel the organization forward. Here are a few examples of questions to ask in this context:

  • What are the company’s main strengths?
  • Which ones can be further developed to increase leverage?
  • What are the company’s main weaknesses?
  • What could potentially impede its growth?
  • Are all company products and services relevant?
  • Are you successful at fulfilling your mission?
  • What could you improve?
  • What do you know about your clients’ needs, satisfaction and expectations?
  • What should you improve?

A neutral and objective external party could be useful in facilitating the exchange of ideas and information during this process.

Consulting other stakeholders could enhance your internal profile of the company. This could include suppliers, financial or strategic business partners, your Board of Directors. They can provide different, impartial insight—as external players they may compare your situation to that of competitors they deal with.

The focus of an internal diagnosis is to address all your organization functions, including sales and marketing, finances, operations, human resources, etc. Thus, it’s important to ask questions to address all aspects, in order to draw the most exhaustive profile possible of the company.

Preparing the global diagnosis

Many tools are available to analyze the information collected, and guide you through an in-depth analysis of interrelations between your findings. The most famous is the SWOT method, which provides a global, internal and external, profile of the organization.

For strategic planning purposes, it is important to understand what strengths to leverage, what weaknesses to work on, what opportunities to capture and what threats to consider and to define a strategy that reflects all of these factors. It is also important to connect each aspect by answering certain questions, which can provide very important insight:

  • What strategies are based on your strengths to leverage opportunities?
  • What strategies help offset your weaknesses and leverage opportunities?
  • What strategies enhance your strengths to address threats?
  • What strategies minimize your weaknesses to avoid threats?

Lastly, the diagnosis helps outline your true ability to implement your growth vision . Organizations may sometimes have high ambitions, but a careful analysis can reveal specific obstacles to overcome before they can reach their objectives. This is the purpose of the diagnosis.

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We have called upon the contribution of tax experts from the Raymond Chabot Grant Thornton for a network series of articles providing answers to questions raised by our clients doing business abroad.

A tax specialist is a professional who specializes in the application and interpretation of tax rules and regulations. These often complex rules are constantly evolving. The tax specialist’s role is to advise clients so that their tax burden is minimized to the extent permitted by law. The courts in all jurisdictions have long recognized that, unless otherwise  provided by law, taxpayers are entitled to arrange their affairs to attract the minimum amount of tax.

Q: What is the U.S. estate tax?

A: The U.S. estate tax is a tax that is payable by non-residents of the U.S. who own property in the U.S. at death. This estate tax is calculated on the fair market value of property located in the U.S. at the time of death.

Q: If at the time of my death I own real estate in Florida valued at $1,000,000, do I have to pay the U.S. estate tax?

A: For the year 2018, if the value of your worldwide estate is less than $11,200,000 (including your RRSPs), no estate tax is payable upon death. However, if the value of your worldwide estate is greater than this amount, you should consult a tax adviser from Raymond Chabot Grant Thornton.

Q: If at the time of my death, I own real estate in the U.S. but no estate tax is payable, do any U.S. tax forms still have to be filed?

A: Yes. The requirement to file form 706-NA is mandatory if, at the time of your death, you own property in the U.S. valued at over US$60,000.

Q: What is the best way to own real estate in the U.S. (condo/house)?

A: It all depends on the facts at hand, and as such, each case must be assessed individually. You should always consult your tax adviser before buying property in the U.S.

Q: Could other fees be payable at the time of my death if I own real estate in the U.S.?

A: Yes, probate fees could be payable to the State. Some planning options can make it possible to avoid probate fees.

Q: Should I prepare a mandate in case of incapacity if I own real estate in the U.S.?

A: The Canadian mandate in case of incapacity is not recognized in the U.S. You should therefore have a durable power of attorney which is recognized in the U.S.

Q: Should I amend my Canadian will if I own real estate in the U.S.?

A: In some cases it would be preferable to have a specific, English-language will for that property. Such a specific will could make it easier to transfer the property to the heirs at the time of death.

Do you have questions relating to U.S. tax issues? The tax experts of Raymond Chabot Grant Thornton can help you!