1.  2004 McGraw-Hill Ryerson Ltd. Kapoor Dlabay Hughes Ahmad Prepared by Cyndi Hornby, Fanshawe College Chapter 15 Estate Planning 15-1

2.  2004 McGraw-Hill Ryerson Ltd. Learning Objectives - Chapter 15 1.Analyze the personal aspects of estate planning. 2.Assess the legal aspects of estate planning. 3.Distinguish among formats of wills. 4.Appraise various types of trusts and estates. 15-2

3.  2004 McGraw-Hill Ryerson Ltd. Learning Objective # 1 Analyze the personal aspects of estate planning. 15-3

4.  2004 McGraw-Hill Ryerson Ltd. Why Estate Planning? Your estate consists of everything you own. An estate plan is how you set up to administer and distribute your property during your life (gifts) or after your death. Estate planning is not just for the wealthy. Estate planning includes both building your estate, and also transferring your estate upon your death. Used for tax purposes as well as choosing a guardian for your children and avoiding family fights over personal belongings. 15-4

5.  2004 McGraw-Hill Ryerson Ltd. What is Estate Planning? Two components of estate planning building your estate through savings, investments and insurance transferring your estate, at your death, in the manner you have specified Implemented by a will and trust agreements Knowledge in certain areas and good record-keeping are helpful. 15-5

6.  2004 McGraw-Hill Ryerson Ltd. Provincial Family Law Getting married will void a will made prior to getting married Divorce or separation may affect the validity of all or part of a will Has an impact on your capacity to order the disposition of your will designed to protect those financially dependant upon you If you die without a will (intestate) your estate is distributed through the legal system 15-6

7.  2004 McGraw-Hill Ryerson Ltd. Learning Objective # 2 Assess the legal aspects of estate planning. 15-7

8.  2004 McGraw-Hill Ryerson Ltd. Legal Aspects of Estate Planning Upon death proof of claims must be produced Important papers to maintain include; birth/marriage certificates legal name changes military service records government benefit documents insurance policies safe deposit box records bank accounts stock/bond certificates 15-8

9.  2004 McGraw-Hill Ryerson Ltd. Wills A will is the legal declaration of a person’s mind as to the disposition of his or her property after death. Marriage and divorce affect your will. Review your will with an attorney. Marriage may revoke your will. Legal costs to prepare a will vary with how complex it is. A standard will costs between $200-$500 dollars. 15-9

10.  2004 McGraw-Hill Ryerson Ltd. Learning Objective # 3 Distinguish among formats of wills. 15-10

11.  2004 McGraw-Hill Ryerson Ltd. Formats of Wills Holographic will A hand-written will you prepare yourself. May not be legal in some provinces Formal will. Can be prepared by an attorney. Can be typed or on a preprinted form. Names beneficiaries. Must be signed & have two witnesses. Beneficiary a person who has been named to receive property under a will 15-11

12.  2004 McGraw-Hill Ryerson Ltd. Intestate and Probate Intestate. Means you die without a will. The province distributes your assets, based on laws of descent and distribution. Probate. Probate court generally validates wills and make sure your debts are paid. 15-12

13.  2004 McGraw-Hill Ryerson Ltd. Choosing an Executor Find out if an executor is willing to accept this major responsibility. Find out if he/she is capable. If you don’t name one the court will. 15-13

14.  2004 McGraw-Hill Ryerson Ltd. Responsibilities of an Executor Prepare an inventory of assets and liabilities Collect any monies due and paying off any debts Prepare and file all income and estate tax returns Liquidate and reinvest other assets to pay off debts and provide income for family Distribute estate Make final accounting to beneficiaries and probate court 15-14

15.  2004 McGraw-Hill Ryerson Ltd. Selecting a Guardian If you have children you need a will to name their guardian. A guardian assumes the responsibility for providing the children with personal care and managing the estate for them. Be sure the person is willing to accept the responsibility and their values and child rearing practices match yours. Trustee: a person who holds or manages property for the benefit of someone else under a trust agreement 15-15

16.  2004 McGraw-Hill Ryerson Ltd. Altering or Rewriting Your Will Add a codicil. A document that modifies provisions in an existing will. Prenuptial Agreement waives rights to each others property that was acquired before the marriage agree on a settlement if you should divorce 15-16

17.  2004 McGraw-Hill Ryerson Ltd. A Living Will A document that enables an individual, while well, to express the intention that life be allowed to end if he or she becomes terminally ill Discuss your living will with those close to you, and your family doctor. Sign and date it before two witnesses. Give copies to those close to you. Requires careful thought. 15-17

18.  2004 McGraw-Hill Ryerson Ltd. Power of Attorney Power of attorney. Legal document authorizing someone to act on your behalf. Usually if you become ill or incapacitated Can be limited or gives a great deal of power. Conventional Power of Attorney is automatically revoked in case of legal incapacity 15-18

19.  2004 McGraw-Hill Ryerson Ltd. Letter of Last Instruction Not legally enforceable. Provides heirs with information. Should include... Your funeral preferences. Names of people you want notified. Location of safe deposit box & bank accounts. Assets and debts. 15-19

20.  2004 McGraw-Hill Ryerson Ltd. Learning Objective # 4 Appraise various types of trusts and estates. 15-20

21.  2004 McGraw-Hill Ryerson Ltd. What is a Trust? A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries. Trustor (grantor) is creator of the trust All trust assets added together are known as an estate. Benefits of trusts: Reduce estate taxes, avoid probate, free you from managing assets, and provide income for a surviving spouse, ensure property serves a desired purpose after your death. 15-21

22.  2004 McGraw-Hill Ryerson Ltd. Types of Trusts Living (Inter Vivos) Trust is created and provides benefits while you are alive Testamentary Trust established by the creator’s will that becomes effective on death Spousal Trust all income from trust must be paid during spouse’s lifetime capital cannot be distributed to anyone else during spouse’s lifetime 15-22

23.  2004 McGraw-Hill Ryerson Ltd. Make an Inventory of Your Estate Cash, bank accounts, GIC’s, money market funds Stocks, bonds and mutual funds. Life insurance, employee benefits and annuities. Your home and any other real estate. Business and farm interests. Corporate interests, partnerships Interests and trusts. Antiques, art, collections, cars. 15-23

24.  2004 McGraw-Hill Ryerson Ltd. Life insurance, annuities and RRSP’s go directly to the named beneficiary Assets held in joint tenancy confers rights of survivorship Life insurance and employee benefits free of income tax excluded from probate Lifetime gifts and trusts 15-24 Estate Assets not Distributed by A Will

25.  2004 McGraw-Hill Ryerson Ltd. Settling Your Estate If you have a will the executor will carry our your wishes Probate and Administrative Costs fees for attorneys, accountants, appraisers, executors and administrators (3-5%) probate costs rise with size of estate If you die intestate your estate is distributed according to provincial law Under control of court-appointed administrator 15-25