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Wealth and estate planning: what to keep in mind early on

You are never too young to write a will, especially if you have a family and significant wealth to transfer after you pass away.

You are never too young to write a will, especially if you have a family and significant wealth to transfer after you pass away.

Manning Elliott partner and wealth and estate tax adviser Abbe Chivers, CPA, CA, says it’s important to have open and ongoing dialogues with your family and business partners on what kind of legacy you wish to leave, and how your hard-earned wealth should be allocated.

“You need to ask yourself: what do I want when I’m no longer here? What should I do with my wealth?” said Chivers.


Taking care of your children

Leaving your estate to a spouse is the smoothest transition, as there is no income tax. But sometimes there is no spouse and things can get a bit more complicated, said Chivers.

“What about a child? You might have to consider that a child may not be fiscally responsible. Do you want to set up a trust for that child so that the money you wish to leave him or her is managed by someone else?”

Chivers said it’s also important to consider who will be the guardian of your children in the event of sudden death.

“Determine whether you want to have some money set aside specifically for the care of your children.  You may wish to help the guardian by arranging for funds to help pay for expenses,” she said.

Choosing an executor

When setting up a will, it’s important to choose an executor who can act impartially when dealing with your estate; whom you trust with handling burial and funeral arrangements if you haven’t previously made them; and who’s not going to be influenced by the beneficiaries of the estate, said Chivers.

“There are many responsibilities to being an executor, so it’s not a person (or persons) that you name without considerable thought.”

You must trust them to keep track of all monies that have come through your estate, as well as to get a valuation of all your assets for probate and income tax purposes or a possible sale.

Keep in mind, making an inventory of your assets makes things easier for your executor or family once you’re gone, said Chivers.

Splitting up the wealth

One of the most important parts of preparing a will is considering how and to whom you want to leave your assets.

If you wish to have some of your money given to charity after you die, make sure your family understands exactly where it’s going.

“If you want to leave a legacy, identify the charity and the amount in your will. That amount can be claimed as a tax credit on your final tax return,” said Chivers.

A lot of allocating wealth depends on your family dynamics, said Chivers. You need to take into consideration, if you are the last to die (i.e., after your spouse), what your children will inherit.

“If you’ve got one child working in the business and generating income there, and the siblings are just entitled to get a share of the profit, that may not sit too well with the one that’s actually doing all the work,” she said.

Consider what percentage of the profit individual children should get, or what salary if they are working in the business, said Chivers. Or consider splitting the wealth by having children not involved in the business inherit other properties or investments.

“Make sure that things are set up in your will, and that you’re discussing it all the time with your family. That will go a long way to keeping the peace when you are gone and the will takes effect.”

Those over 65 years old can consider setting up an alter ego trust or joint partner trust to hold their assets.  The trust assets and the income from them are still available to the settlor of the trust and no one else can access these assets until the person dies.

“The trust document states how the assets will be split, and it is very difficult to challenge this agreement in court. It’s not like a will where one child feels they were hard done by and goes to court to prove that they should have received more of the estate,” Chivers said.

Creating a trust also means that your assets will not be subject to probate fees. However, any appreciation in the value of the assets will be taxed in the trust when you die.

“There are certainly important benefits of having a trust, especially if you’re in a situation where there might not be cohesion in the family,” Chivers said.

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