Section 10 – Estate Planning
To retain control over property accumulated over the years, protect the financial interests of loved ones and leave an estate in accordance with one’s personal wishes, every individual should carefully plan his/her succession. A number of items should be considered in the will to protect equity and the heirs, and to ensure that it reflects the individual’s wishes. The following questions may be useful in this exercise:
- Do I have a will?
- If so, is it up-to-date?
- Does it take into account the partition of the family patrimony?
- Does it make provision for a guardian for my children?
- Does it give my liquidators sufficient flexibility to make elections and decisions to reduce the income taxes payable by my estate or my beneficiaries?
- Does it transfer properties on which there is an unrealized gain to my spouse or a spousal trust?
- Does it create trusts for the members of my family?
- Is it properly drafted in order to ensure adequate transfer of my property held outside of Canada to my heirs while minimizing foreign income taxes?
- Does it provide for any members of my family who are not involved in the business fairly and adequately?
- Have I prepared a recent list of my property, the location thereof and the tax cost of such property?
- Have I named a specific beneficiary of my RRSPs, my RRIFs or my life insurance policies?
- Are there sufficient funds in my estate to cover the income taxes payable by my estate?
It is essential to ensure that the terms set out in your will are consistent with those set out in your marriage contract and shareholder agreement, if any.
Will and estate planning ensure that an individual’s affairs are properly planned. The key element is a will. It sets down the parameters of an estate plan, indicating in particular the manner in which assets are to be distributed to the heirs and ensures that the wishes of the deceased are respected.
A will also makes it possible to minimize the taxes payable by the estate and the beneficiaries through the judicious use of the provisions in the tax legislation, e.g. testamentary trusts. Since amendments to the tax laws and changes in an individual’s personal situation might change his/her objectives, a will should be updated periodically.
A will is the only legal document that makes it possible to determine how an individual’s patrimony will be distributed among the heirs or trusts on their behalf; it also appoints a guardian for minor children as well as a liquidator.
In Canada, if an individual dies intestate, his/her estate will be distributed in accordance with the laws of the province where he/she resided. In such cases, the legislators divide the assets among the deceased’s spouse,2 children and family members in accordance with legal provisions. This may produce quite different results from what the individual would have wanted for his/her beneficiaries. In order to avoid such situations or jeopardize the estate, every individual should ensure that he/she has a proper will.
Ensuring that your last will and testament accurately reflects how you want your estate passed on by consulting experienced professionals will make life easier for your family and will allow them to make the best choices, from a tax perspective.
2 Common-law spouses are normally not recognized by law for this purpose.
This document is up to date as of August 1, 2019 and reflects the status of legislation, including proposed amendments at this date.