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| image source: Giordano, DelCollo, Werb & Gagne, LLC |
A wills and estate plan is an important part of financial
planning. Everyone needs to have one, even if you are not a wealthy individual
with millions in assets, as it will help protect your family in the event that
you die or become incapacitated and can no longer make decisions.
A basic wills and estate plan provides many advantages,
including the following:
Avoid probate court
Ending up in probate court is an expensive process. A vast
majority of people end up giving a large portion of their hard-earned money to
attorney’s fees just to prove the person authorized to represent your estate
and oversee the distribution of your assets and payments to creditors. It’s
also a very long process and it could take your loved ones, especially your
spouses and children months, and maybe even several years to receive a penny.
It’s not something you’d want them to deal with and you’d want to make sure
that they avoid it at all costs.
Lessen Estate Taxes
Advance wills and estate planning can help you take advantage
of tax-saving strategies to avoid significant loss of your estate to the
payment of state and/or federal estate taxes or state inheritance taxes.
Through the most basic plan, you can avoid three common
estate costs:
1. Probate fees - In Ontario, probate fees to settle your estate, which is
officially called an estate administration tax, can be very high and can reach
as much as 1.5% of your estate’s value.
2. Estate tax on capital gains - For income tax purposes, it
is considered that upon your death you have sold all your assets. Your estate must cover the tax on any profit
from the “sale” proceeds, of which 50 percent is taxed. If rental properties
are included in your assets, there may also be capital cost allowance or CCA
which is fully taxed.
3. Tax on tax-sheltered savings plans - Upon your death, your registered plans such as RRSPs
(registered retirement savings plans ) and/or RRIFs (registered retirement
income funds) can be transferred to your spouse’s or /common-law partner’s plan
free of tax. However, If you don’t have a spouse or /common-law partner, the
full value of each plan is fully taxable at your death and the remaining value
to be passed on to any of your blood-related heirs can be dramatically reduced.
Protect your Assets and Beneficiaries
A variety of advanced estate planning techniques, such as
using trusts, wills, and beneficiary designations, can help ensure that your
children are properly protected. You can name a responsible guardian or trustee
for them until they come of age to prevent any family discord and costly legal
expenses against the children’s inheritance. A wills and estate plan can also
add a layer of asset protection against creditors lawsuits and divorce decrees.
It also allows you to maintain control of your property while you are alive
regardless of your age, health or financial condition and to provide
instructions on your care and the care your loved ones in the event of a
disability.
The wills and estate law of Canada empowers you to set up a
comprehensive plan that will help you to achieve goals that will ensure the
protection of your assets during your lifetime and for your beneficiaries after
your death. It’s really more than just protection from federal tax laws, but a
lot more about making certain that your well-being as well as those of your
loved ones are taken cared of the way you plan it to.
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