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Estate planning strategies – beyond the basics

Estate planning strategies – beyond the basics

You’ve worked hard to accumulate assets and you know that the best way to preserve them and pass them on to your heirs is through an estate plan. That’s why you have carefully put in place a legal Will, chosen an executor (and guardian for minor children or other dependants), established powers of attorney for property and personal care, and set aside adequate funds to support your dependants, pay off your debt, and/or to pay the taxes and other costs of settling your estate.


Those are the basics of an estate plan, but you may need to do more. Here are some estate planning strategies you should consider:


Probate or not? Probate is the process by which your Will is validated by a court with fees paid to your provincial government calculated on the fair market value of the assets in your estate. Although reducing probate fees may be desirable, avoiding probate through the use of strategies such as beneficiary designations and joint ownership can lead to problems if some beneficiaries receive more of the estate than others. You can reduce probate fees through the following strategies, although you should speak to your estates lawyer before proceeding with any of these suggestions, since some of these transfers could trigger income taxes sooner than anticipated, and may not be appropriate in every case:


                        You can add a joint owner to your non-registered assets with a right of survivorship, meaning that the asset may pass directly to the surviving owner.


                        You could distribute assets that you no longer require during your lifetime – either directly or through a trust -- to reduce the value of your estate.


                        You could name a beneficiary on your registered plans or life insurance, so that the beneficiary will receive those assets directly at the time of your death, but in the case of registered assets, be sure you understand how the taxes on that asset could impact your estate.


These comments are based on the probate process outside of Québec, since the probate process is different in the Quebec province.


Set up a Trust? A Trust specifies a trustee who will manage the assets during your lifetime and/or after you die. Two types of trusts are most commonly used as part of an estate plan:


                        Inter vivos trusts are trusts created during your lifetime where assets are transferred immediately to the trust and managed by the trustee. They can be used to minimize probate taxes or assist with the transition of a business to the next generation.


                        Testamentary trusts allow you to keep control of your assets during your lifetime. These trusts come into effect only after your death and their terms can be changed while you live by simply revising your Will. They are useful for having assets managed on behalf of minor children or providing on-going support to your spouse during his or her lifetime and then having those assets pass to another beneficiary. These types of trusts can provide many advantages to your beneficiaries, but can only be used to the extent that you have assets in your estate. If you have transferred all of your assets outside of your estate for the sole purpose of avoiding probate, your beneficiaries may lose the benefits that could have been provided by these trusts.


Your personal estate planning strategies depend on your financial situation and the rules in your province. As financial professional advisor and notary or lawyer can help ensure your legacy is left as you wish while limiting probate costs and taxes.

About the author

Pl. Fin. Noël Hémond

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