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Solutions and ServicesEstate Planning


When we think about estate planning, we often think that creating a will is all there is to the distribution of our wealth. We seldom think about, or even have knowledge about, the estate administrative costs before the distribution of your estate can actually be made.


Reducing your Estate Costs


After your death, your debts must be paid first – before any money or property you leave behind is passed on to your loved ones. There may also be funeral costs, legal fees and other administrative expenses in settling your estate. And there may be other estate costs, such as probate fees and taxes on investments that you may not have considered.


Common Estate Costs:

  • Probate Fees: When you die, the executor of your estate will need proof that they are the person authorized to represent your estate. Based on the size of your estate you may be required to go through the probate process which will provide the executor with court certification. The probate fees to settle your estate can be high. In Ontario, the EAT (Estate Administration Tax) equal almost 1.5% of your estate’s value.
  • Tax on Capital Gains: You’re deemed to dispose of all capital property at death. Your estate must cover the tax on any capital gains.
  • Tax on Tax-Sheltered Savings Plans: Registered plans such as RRSPs and RRIFs can be transferred tax-free to your spouse’s plan. If you don’t have a spouse, these savings are fully taxable at your death.


Ways You Can Manage Estate Costs


1. Leave a Valid Will.


Your Will represents the most fundamental element in your estate plan. If you die without a valid will, your estate gets settled according to the laws of the province you live in. This can be a more complicated process, with higher legal fees and the potential for costly disputes. It's easy to make a mistake or to write a confusing will—and you won't be there to fix the problem. Legal advice is almost always beneficial. Most lawyers and notaries have a low-cost service for simple wills. They can also alert you to other issues you may not be aware of.



2. Ensure Beneficiaries are Named in Your Insurance Policie(s) and Registered Plans.


This means the money bypasses the estate process and is paid directly to that person. When you buy life insurance or open a retirement savings plan, name the beneficiary you want to get the money in the event of your death. This means the money bypasses the estate process and is paid directly to that person. You can also name a backup beneficiary in case your first choice dies before you do. You can reduce estate costs if you name as beneficiary a spouse or common-law partner, a dependent child under age 18, a grandchild or, in some cases, a disabled adult child.



3. Transfer Property to Joint Ownership.


One of the simplest forms of transferring assets from your estate is through the registration of assets in joint ownership, like registration of a home or vacation property with another person. This is another strategy for reducing probate fees. Joint assets pass automatically to the surviving joint owner – and are generally not considered part of your estate or subject to probate fees.


However, there can be complications to joint ownership, especially if you co-own an asset with someone other than your spouse. For example:

  • If you transfer half-ownership of an asset to one of your children who is married, but they later separate. In this situation the spouse could have a claim on your child’s half of the asset.
  • If your child has financial problems or declares bankruptcy, their ownership in the asset could be subject to claims by creditors.
  • If the asset has increased in value, you may have to pay tax on any capital gains when you transfer your half ownership. This is because a transfer is considered a sale for tax purposes.
  • The deceased cannot control the disposition of the jointly-held property once they are gone. The property passes to the surviving joint owner regardless of the provisions in your will. Hence, it is important that the other joint owner is also the intended beneficiaries. Otherwise the asset will pass to an unintended heir upon death.

 4. Plan and Prepay Your Funeral


Preplanning and prepaying your funeral doesn’t necessarily save you money, but it does remove a key expense that your family or estate must cover upon your death. You and your loved ones will have more peace of mind if you plan your funeral. In most cases, there's no charge for this. You can describe the kind of funeral you would like, and sign papers so that you can donate body organs to help someone else. When you prepay, the money goes into a trust account or insurance fund until your funeral. This lets you pay the costs on your own schedule rather than when your loved ones are dealing with your death.


5. Buy Life insurance to Cover Expenses.


You can use the death benefit from life insurance in a number of ways:

  • Leave a tax-free, lump-sum payment: If you name a beneficiary, the insurance money will pass to them without any taxes or probate fees.
  • Provide a steady stream of income: Your loved ones can use the death benefit to buy an annuity for monthly income. They won't have to pay taxes on that income.
  • Cover final estate costs: If you name your estate as the beneficiary for your life insurance policy, your executor can use the money to cover any final costs, including funeral and probate fees, outstanding debts and taxes owing. However, the money will be added to your estate and subject to probate fees.


Example: Let's say you leave your children a cottage that has been in the family for many years. If the value has increased, it could be subject to capital gain taxes, which become due when the property is transferred. If the children can't afford to pay the taxes, they may have to sell in a hurry. They may not get the best price in a rush sale and may lose something that has a special meaning to the family. If you have enough life insurance, it will cover the cost of the tax.


6. Give Some of Your Money as Gifts Before Death


If you leave money to charity in your will, your estate will get a tax deduction in the year of your death. Some people use life insurance to fund a gift of this kind. Get expert advice.


7. After you Retire, Spend Unsheltered Assets First.


If you have unsheltered savings—savings that are not in a tax-sheltered plan such as a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF)—you can reduce estate taxes by spending the unsheltered savings first. If your spouse or common-law partner is the beneficiary of a registered plan, the money will go to him or her without any tax or probate fees if they meet certain conditions.


8. Take Advantage of Final RRSP Contributions.


With some RRSPs, you can instruct your executor to add money into a spousal RRSP account up to 60 days after your death. This can turn taxable income into a sheltered investment, so there will be less tax and lower fees on your estate.


Estate planning is an important part of managing your money and meeting your financial goals. But, as with other financial choices, you may have to trade off different values. When you think about your estate, review your options with an experienced financial professional. Ensure that you keep enough flexibility to continue to meet your current needs and financial goals while arranging for the future. With the right strategies, you can reduce the costs and taxes that can eat up your estate when you die. You won't be around to fix any problems, so it's usually wise to get professional advice to arrange your affairs in a way that won't leave problems for your loved ones.



Estate Planning Checklist


Review the tips below. Decide if each is suitable for you or not, if you plan to take action, or if you need to look into it more.


Mark each one in the appropriate column.




Will Do

Will Look Into It

Not For Me

Leave a Will


Name Beneficiaries in Insurance Policies


Plan Your Funeral


Prepay Your Funeral


Buy Life Insurance to Cover Expenses


Give Gifts Before Death


Spend Unsheltered Assets First


Use Final RRSP Contributions


Buy Permanent Life Insurance as an Investment


Transfer Property to Joint Ownership


Set Up a Trust Fund


Make Arrangements in Case of Emergency





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