1. Estate Planning Presented by Richard Rizzo, CPA CA Tax Partner June 6, 2016

2. Agenda  Estate Planning process  Tax implications in your Estate  Tax deferral strategies  Wealth transfer strategies  Estate Administration Tax (Probate) Planning

3. What is Estate Planning  Process to determine administration of your estate  Consider all perspectives:  Family  Legal  Tax  Team approach is crucial

4. Estate Planning is NOT  Product driven  Advisor driven (lawyer / accountant / insurance / investments)  Just a Will  Just about tax and probate fees

5. Process of Preparing an Effective Estate Plan  Determine personal and family objectives  Fair does not necessarily mean equal  Determine assets/liabilities (Adjusted Cost Base & Fair Market Value)  Quantify tax liability on death  Strategy to mitigate tax liability at death and post-mortem

6. Process of Preparing an Effective Estate Plan  Identify & Quantify probate fees  Mitigate probate fees  Funding tax liability at death

7. Tax Implications at Death  Deemed disposition of all capital property at death at Fair Market Value  Deemed distributions of RRSPs and RRIFs  Exception: spousal rollover  Tax filings at death (Terminal Tax return & Rights or Things return, if applicable)  Potential double tax exposure for Owner Managed Enterprises

8. Post Mortem Planning Rights or Things  Elective tax planning opportunity  Items receivable by taxpayer at time of death Some examples:  Declared but unpaid dividends  Matured uncashed bond coupons  CPP benefits  Retiring allowance entitlement

9. Post Mortem Planning Spousal Rollover  Defers deemed capital gain on death to surviving spouse  May consider electing out of rollover to realize:  Unused capital gains exemption  Capital loss carry forwards  Unrealized capital losses

10. Post mortem Planning Double Tax on Death  Issue arises where estate pays tax on deemed disposition of shares  Company owns assets with accrued but unrealized gains  Options – depends upon nature of company; assets; future intention of surviving shareholders

11. How can I mitigate the tax consequences in my estate?

12. Tax Deferral Strategies RRSP/RRIFs  Tax free transfer to surviving spouse  RRSP/RRIFs fully taxable on death of surviving spouse  SOLUTION: Consider how to reduce assets held in these accounts when possible

13. Tax Deferral Strategies Corporate Accounts (Opco & Holdco)  Assets fully taxable on death  SOLUTION:  Estate Freeze

14. Tax Deferral Strategies ESTATE FREEZE  Freeze value of assets owned by parent  Pass growth to: children / other shareholders / employees  Maintain control after freeze  Change compensation model after freeze

15. Tax Deferral Strategies Corporate Estate Freeze OPCO FMV = $1M Mr. X 100% common OPCO Mr. X 100% Preference Shares FMV = $1M Kids 100% common

16. Wealth Transfer Strategies  Inter-vivos gifts  Private loans  Inter-vivos trusts  Testamentary trust  Spousal trusts

17. Wealth Transfer Strategies Inter-vivos Trusts  Advantages: ⁻ Maintain control of assets ⁻ Income splitting opportunities ⁻ Asset protection ⁻ Not subject to Estate Administration Tax (Probate)

18. Wealth Transfer Strategies Inter-vivos Trusts  Disadvantages: ⁻ No tax deferred transfer of assets ⁻ Income taxed at top marginal tax rates ⁻ 21 year deemed disposition rule

19. Wealth Transfer Strategies Testamentary Trusts  Advantages: ⁻ Maintain control of assets ⁻ Marginal rates of tax – no personal credits

20. Wealth Transfer Strategies Spousal Trust  Alternative to leaving all assets to each other  Surviving spouse will receive lifetime use of assets and income derived from said assets  Upon death of surviving spouse, assets pass on to children or other beneficiaries  Protects intended beneficiaries of deceased spouse

21. New Legislation  Effective January 1, 2016  Graduated Rate Estate (GRE) ⁻ Marginal rates for 36 months – trusts created by Will not eligible Impact on multiple estates ⁻ Only one estate can be designated as GRE ⁻ How does trustee decide which beneficiary is to obtain benefit of better rates?

22. New Legislation (Cont’d) Deemed year end December 31, 2015 for all existing estates with non calendar year ends Impact on Spousal trusts and Alter Ego trusts Testamentary Qualifying Disability Trust Requirement of installments

23. Estate Administration Tax (EAT)  What is EAT?  1% on first $50,000; 1.5% thereafter  Exclusions:  Insurance payable to named beneficiaries  Assets held on joint account  Real estate outside Ontario

24. EAT Planning How can I reduce EAT?  Inter-vivos Gifts  Inter-vivos Trusts – Alter Ego  Registering assets in joint tenancy (vs. tenants in common)  Specific beneficiary designations  Multiple wills

25. Estate Execution – New Rules  Executors now required to give additional information in a prescribed ‘Estate Information Return within 90 days.  Minister can assess and reassess if values are disputed  Offences and penalties ⁻ Executors should consult Counsel to ensure meeting obligations

26. Questions? Richard Rizzo (905) 632-6400 rrizzo@batemanmackay.com