Two Estate Planning Strategies

What is Estate Planning?  Structuring a person’s legal and financial affairs so that, at death, his or her assets will be transferred:  to the desired recipients;  at the desired times;  with any desired restrictions;  in the simplest and most cost-effective manner;  with maximum tax relief.

Why Include Estate Planning in your Business?  Provides a wider range of service to your clients, adding value  aligns a client’s financial and personal planning goals  strengthens the client relationship, improving retention  improves your competitive position  You are able to provide impartial suggestions  Allows you to meet a client’s family  Increases your contact with legal, tax, and insurance professionals

Two Estate Planning Strategies  Operation of Law  joint ownership  beneficiary designation  Testamentary Trusts

Operation of Law  Assets bypass estate of deceased  provides simplicity  avoids delay  avoids probate (and probate fees)  avoids Wills Variation Act claims  provides privacy  Will has no effect

Operation of Law  Difficult to control size of gift  Does not avoid income tax  Does not facilitate income-splitting for recipient

Joint Ownership  All owners have both legal and beneficial ownership  Provides a right of survivorship  Often a good strategy between spouses  Rarely a good strategy between parent and child, or between siblings

Joint Ownership  Disadvantages during lifetime  a transfer to joint ownership triggers capital gains tax  spousal exception  a transfer to joint ownership triggers transfer fees  a transfer of a principal residence to joint ownership can create a partial loss of the future capital gains exemption  exposure to creditors of other joint owner(s)  exposure to loss  depletion  “blackmail”

Joint Ownership  Disadvantages at death  creates an unintended gift if ownership implications are not understood  creates an unintended distribution scheme if survivorship implications are not understood

Beneficiary Designation  No change of ownership  no capital gains tax  no transfer fees  no exposure to creditors of others  no exposure to loss  Beneficiaries can be changed  Often a good strategy between spouses, between parent and child, or between siblings

Beneficiary Designation  Appointment of alternate beneficiaries  avoid unintended distribution scheme  Appointment of trustee(s) for minor or mentally disabled beneficiaries  informal trust, limited to age of majority  available for life insurance proceeds  not available for registered plan assets

Testamentary Trusts  Established at death  in will, for estate assets  in insurance declaration (testamentary insurance trust), for life insurance proceeds  for registered plan assets  Inexpensive  Separates legal and beneficial ownership

Testamentary Trusts  Progressive income tax rates  no personal exemption  flexible year end  21 year deemed disposition  spousal exception

Testamentary Trusts  For protection of assets  minors  young adults  people with disabilities  spendthrifts  people with dependencies  people with creditors  future generations

Testamentary Trusts  To facilitate income-splitting  spouse  others  To create an education fund  To hold shares of a private company  To hold recreational property  For charitable giving

Testamentary Trusts  Trustee  spouse  family member  friend  business associate  professional  trust company  Co-trustees  Alternate trustee(s)

Testamentary Trusts  For insurance proceeds  insurance declaration (testamentary insurance trust) can be established in a will, or established in a separate document  life insurance proceeds are paid to insurance trustee(s)  to fund payment of date of death tax liabilities  to protect life insurance proceeds  to facilitate income-splitting  to create an educations fund  for charitable giving

Testamentary Trusts  For registered plan assets  can be established in a will, but some registered plan trustees will not transfer assets to a trustee  can be established in a separate document  a “semi-secret” trust  the trustee(s) and alternate trustee(s) are the designated beneficiary(ies) and alternate beneficiary(ies) of the registered plan  the beneficiaries know of the testamentary trust

Testamentary Trusts  For registered plan assets (continued)  to protect the registered plan assets  to facilitate income-splitting  to create an education fund  for charitable giving  generally not used in spousal situations

Disclaimer The estate planning strategies presented today are only general in nature. These strategies will not be appropriate for all clients, and clients will generally incur costs in implementing these strategies. Clients need to discuss specific estate planning strategies with their own legal, tax, financial and insurance advisors, and need professional assistance with the implementation of any strategies. Mackenzie Financial Corporation, its subsidiaries and affiliates (collectively, “Mackenzie”) make no representation or warranty as to the effectiveness of the estate planning strategies presented today. In addition, Mackenzie has neither consulted with nor sought approval from the Canada Revenue Agency nor any provincial tax authorities in respect to these strategies.

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