Estate planning with the right insurance protection
Article Licenses: CA, DL, unknown
Advisor Licenses:
Compliant content provided by Adviceon® Media for educational purposes only.
A proper estate plan will include an updated Will and a plan to avoid paying too much tax on investment assets such as stocks, bonds, mutual funds, and other properties that may have accrued capital gains. It will seek to minimise probate, pay off debts and prepare to meet specific family income needs. Estate planning often includes detailed life insurance planning designed to pay out a benefit upon the death of one whose estate is about to wind down.
When transferring your assets, including mutual funds, using a Will (also referred to as a Testamentary Trust), the key is to position as much of your wealth as possible to pass to your heirs. If you hold equity mutual funds that buy and hold stocks, they may have accrued capital gains. There will be a deemed disposition of all your property at fair market value at your death. For some, this could mean that there may be an existing capital gains tax liability. There are a few things to assess as you begin an estate plan.
Assess your tax liability. List each separate asset you own, the purchase price and date, and its current value. Include your non-registered investments in stocks, bonds, and mutual funds. Have your accountant assess what the tax liability will be.
Assess how you and your spouse can defer taxes Property willed to your spouse can be rolled over tax-free on your death. Your spouse will inherit the assets at the property’s entire adjusted cost base (cost amount). The taxation of the investment will then occur when your spouse disposes of the property or at the spouse’s death. This tax deferral is beneficial, especially if you have significant holdings in equity mutual funds invested for value as in large-cap or blue-chip stocks. Alternatively, you can choose to transfer any asset to your spouse at fair market value on death and recognise the accrued gain or loss.
Assess RRSPs if you have dependent children RRSPs can be transferred tax-deferred to your dependent children or grandchildren, even if a spouse survives you.
Assess income splitting using a testamentary trust By establishing a testamentary trust in your will, you will be able to maintain control during your lifetime over the use of your assets such as a mutual fund investment portfolio. The trust can provide guidelines for the treatment of these assets after your death. The trust document can specify the split of income among heirs. Carefully planned income splitting may allow for significant tax savings.
Assess insurance solutions There are estate planning solutions that only insurance can offer, providing both personal and business solutions to ensure you have financial security. First, assess your tax liabilities with an estate lawyer and/or accountant and make estate plans to determine how to pay them. Consider the following various insurance plans, such as life insurance where the capital gains tax liabilities are substantial.
Personal insurance solutions to protect you and your family include:
• Life Insurance
• Critical Illness Insurance (CI)
• Long Term Care Insurance (LTC)
• Estate Preservation
• Individual Health and Dental plans
If you own a business, insurance solutions include:
• Partnership Insurance
• Buy/Sell Agreements
• Key Person Insurance
• Business Disability Insurance
• Business Office Overhead
• Collateral Loan Insurance
• Group Health Benefits
Publisher's Copyright & Legal Use Disclaimer
All articles are a legal copyright of Adviceon®Media.
The particulars contained herein were obtained from sources which we believe
are reliable, but are not guaranteed by us and may be incomplete. This
website is not deemed to be used as a solicitation in a jurisdiction where
this representative is not registered. This content is not intended to
provide specific personalized advice, including, without limitation,
investment, insurance, financial, legal, accounting or tax advice; and any
reference to facts and data provided are from various sources believed to
be reliable, but we cannot guarantee they are complete or accurate; and it
is intended primarily for Canadian residents only, and the information
contained herein is subject to change without notice. References in this
Web site to third party goods or services should not be regarded as an
endorsement, offer or solicitation of these or any goods or services.
Always consult an appropriate professional regarding your particular
circumstances before making any financial decision.
Mutual Funds and/or Segregated Funds Disclaimer
Commissions, trailing commissions, management fees and expenses all may
be associated with mutual fund investment funds, including segregated
fund investments. Please read the fund summary information folder prospectus
before investing. Mutual Funds and/or Segregated Funds may not be
guaranteed, their market value changes daily and past performance is not
indicative of future results. The publisher does not guarantee the
accuracy and will not be held liable in any way for any error, or omission,
or any financial decision. Talk to your advisor before making any financial
decision. A description of the key features of the applicable individual
variable annuity contract or segregated fund is contained in the
Information Folder. Any amount that is allocated to a segregated fund is
invested at the risk of the contract holder and may increase or decrease
in value. Product features are subject to change.
