Monthly Archives

November 2018

Estate Planning: A Snowbird Checklist

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Heading south this winter? Winter is the time of year when many Canadians plan their escapes from the cold and head to warm weather destinations. While many planning efforts are focused on setting up tee times, updating travel insurance and protecting houses before leaving, one important consideration should be making sure your estate plan is in good order.

 

If you are a snowbird, here is a short list of some estate planning considerations to address before you leave for your warmer destination:

  • Have a valid and updated will and powers of attorney. Those empowered by the documents should know where they are stored should something happen to you while you are away.
  • Keep an updated list of all of the institutions where you have assets or that provide professional services to you (i.e., banks, accountants, lawyers, insurance brokers, etc.) and a contact person at each company.
  • If you own property outside of Canada, you may need to seek legal advice to determine if you need a separate will and powers of attorney for that country. If so, ensure that your foreign will and powers of attorney are properly integrated with your Canadian documents.
  • Consult an accountant to plan around any potential income or estate tax liabilities relating to the ownership of foreign property.
  • Keep track of the number of days you spend away as you may be deemed a resident for tax purposes in another jurisdiction if you spend more than 182 days per calendar year outside of Canada.

To help give you further peace of mind before you depart, consider completing the following as part of your ‘to-do’ list:

  • Make a list of all your investments, bank accounts, credit and banking cards so you have a clear picture of your overall financial status before leaving.
  • Leave copies of important documents with a trusted individual back at home for safekeeping.
  • Provide instructions to your financial institution regarding term deposits and Guaranteed Investment Certificates (GICs) renewal.
  • Pre-arrange Registered Retirement Income Fund (RRIF) deposits for a steady stream of income while away.
  • Pre-arrange re-occurring bill payments through online banking or by automatic withdrawal to ensure timely payments.
  • Set up direct deposit for your government allowances such as Canada Pension Plan (CPP) and Quebec Pension Plan (QPP); GST credits; Old Age Security (OAS) to avoid missing out on income.

Contact us today at 204-259-2859

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ESTATE PLANNING: Understanding Trusts

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When developing an estate plan, the inclusion of a trust, or multiple trusts, may help you to achieve your personal objectives and enhance benefits to be received by future generations.

 

WHAT IS A TRUST?

A trust is a relationship where a person (the settlor) transfers property to another person or company (the trustee) who holds that property for the benefit of another person (the beneficiary). In general, it is possible to have more than one settlor, trustee, and/or beneficiary of a trust.

TYPES OF TRUSTS

There are two categories of trusts: i) inter vivos, a trust created during the settlor’s lifetime; and, ii) testamentary, a trust created as a consequence of an individual’s death by way of their will.

TAXATION OF TRUSTS

Since a trust is a relationship and is not generally recognized as a legal entity, trusts are regarded as individuals for income tax purposes.

In an inter vivos trust, all of the trust’s income is generally subject to tax at the highest marginal rate for individuals. With the exception of a Graduated Rate Estate (a designated testamentary trust subject to tax at the graduated rates in the same manner as an individual for the first 36 months of an estate), testamentary trusts are also subject to tax at the highest marginal rate for individuals.

While trusts are treated as individuals for tax purposes, they do not receive the benefit of being able to claim personal tax credits.

All, or a portion, of the income earned by a trust in a taxation year can be paid or made payable to all, or some, of the beneficiaries of the trust. This income will retain its character (e.g., eligible dividends, capital gains, etc. earned by the trust and distributed to beneficiaries will be considered to be eligible dividends, capital gains, etc. of the beneficiaries) and will be subject to tax in the recipient beneficiaries’ hands. Any income that is not distributed to the beneficiaries in a taxation year will be subject to tax within the trust.

POTENTIAL USES AND BENEFITS

A trust may be used as part of an estate plan to provide some of the following benefits:

Income Splitting —Tax savings may be achieved by distributing all, or a portion, of the income earned by the trust to beneficiaries who are subject to tax at a lower marginal rate than the trust, or who have unused loss carry forward balances or personal tax credits, since

the income will be taxed in the beneficiaries’ hands.

In the case of an inter vivos trust, careful planning is required to ensure that the income attribution rules do not apply in any potential income splitting strategy.

Asset Protection — If structured properly, trusts may help to protect assets from your/the beneficiaries’ creditors, the potential breakdown of your/the beneficiaries’ marriage, and from the beneficiaries themselves (in the event they are minors, disabled, or not currently at a stage in life where they have the capacity to own certain assets outright).

Further, for individuals residing in certain provinces, the trust may protect the assets held within it from estate administration (i.e., probate) fees.

If you would like to further explore the potential benefits
of setting up a trust, or need assistance with other aspects of the estate planning process, please give us a call or visit our website.

Contact us today at 204-259-2859

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