Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company. KEEPING IT "ALL IN THE FAMILY“ Estate Preservation

2/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY ASSET ACCUMULATION Many Canadians have been very successful in building their asset portfolio through investments, business, real estate or RRSP's BUT…with this "success" comes a Deferred Tax Liability

3/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY To Your Family Not CRA Your estate WHERE WILL YOUR ESTATE GO?

4/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |4 TAXATION at DEATH Two major areas of taxation WILL ARISE at the time of death: –Tax on capital gains –Tax on RRSP/RRIF balance

5/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |5 WILL PLANNING If there is a surviving spouse, assets can be transferred tax free and deferred until surviving spouse's death If no surviving spouse, or assets left to non-spouse beneficiary, tax liability arises at testator's death If no will, intestacy laws usually lead to non-spouse distribution and tax

6/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |6 CAPITAL GAINS TAXATION Assets such as a stock portfolio, mutual funds, shares of a private corporation or non-principal residence real estate Taxation occurs when asset passes to non-spouse beneficiary (i.e. children) at death

7/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |7 CAPITAL GAINS TAXATION 50% of capital gain is taxable tax of $20,000 for every $100,000 of growth 40% tax bracket)

8/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |8 For example – rental real estate* Cost = $200,000 Value at time of death = $800,000 Capital gain = $600,000 Taxable amount = $300,000 40% tax bracket = $120,000 Also, possible recapture of Capital Cost Allowance would give rise to taxation CAPITAL GAINS TAXATION

9/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |9 RRSP or RRIF TAXATION Assets such as GIC’s, mutual funds, stocks, etc. registered as RRSP/RRIF Taxation when balance of RRSP or RRIF passes to non- spouse beneficiary(i.e. children) at death

10/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |10 RRSP or RRIF TAXATION For every $100,000 of RRSP or RRIF balance… $40,000 of tax arises 40% tax bracket)

11/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |11 PAYMENT of TAXES How will your estate liabilities be paid? Which would you prefer? TAX Estate OR For your estateFrom your estate

12/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |12 Options To PAY Tax Liability From Your Estate Save MoneySell Assets Borrow Estate Preservation Fund For Your Estate

13/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |13 BUT… What are the consequences of the alternatives…

14/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |14 Risk averse Preserve capital (now and for heirs) Have discretionary assets or income Want access to funds Reduction of taxes CASE STUDY - "MODEL" INVESTORS

15/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |15 CASE STUDY John, 62 and Mary, 60 3 children, 1 grandchild House, $450,000 GIC's = $50,000 RSP = $180,000 Cottage = $75,000 Antique car = $20,000 Boat = $15,000 Open account = $200,000 Pension income - $63,000/yr. Estate value = $990,000

16/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |16 CASE STUDY Estimated estate liabilities –RRSP = $90,000 –Open account = $28,000 –Cottage = $10,000 –Funeral and final expenses = $22,000 –(including debts) $150,000 for Estate Liability purposes

17/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |17 LET'S COMPARE Selling assets or using current estate liquidity and establishing an estate preservation fund

18/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |18 Many people will say that their estate can sell off assets to create liquidity That's fine, but what will it cost your heirs? FROM YOUR ESTATE

19/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |19 If capital or liquid assets are sold or used, the actual cost is –Lost capital –Lost revenue –Lost growth ACTUAL COST – FROM YOUR ESTATE

20/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |20 $150,000 at 3% would grow to –$201,587 in 10 years –$270,917 in 20 years OR –provide an annual before tax income of approx. $9,000 forever (annuity) ACTUAL COST – FROM YOUR ESTATE

21/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |21 That's the "lost opportunity" for your heirs and for future generations to come!! ACTUAL COST – FROM YOUR ESTATE

22/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |22 ALTERNATIVE STRATEGY Establish an… Estate Preservation Fund!

23/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |23 for John and Mary Joint last-to-die life insurance coverage Benefits received when survivor passes Economical coverage RECOMMENDED SOLUTION

24/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY SUCCESSION TAXES COVERAGE Company While Alive At Death of Survivor Desjardins Pay $168/month* Estate receives $150,000 to pay taxes “X” Mutual Premiums deferred Pay $150,000 from estate assets * $150,000 Joint Last to Die Foundation male,62, N/S & Female, 60 N/S

25/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |25 PAYMENT of TAXES Don't let taxes take a big bite out of your estate! TAX Estate

26/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Money Market Fund Bonds Stocks Real Estate & Misc. Estate Preservation Fund Keep your estate together for your heirs! ESTATE PRESERVATION

27/28 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY DESJARDINS FINANCIAL SECURITY |27 ESTATE PRESERVATION Don't let your best assets be SACRIFICED to pay liabilities arising at the time of death!

28/28 FOR REPRESENTATIVES' USE ONLY 28DESJARDINS FINANCIAL SECURITY | Thank you!