Estate Planning in the Post COVID Tax World

October 17, 2020

When discussing Estate Planning most people think of a carefully drafted will as the tool to get it done. A carefully drafted or updated will is crucial to make sure you accomplish your Estate goals, but it is only one tool in the kit! With increased government spending and the elimination of some traditional tax tools it will be more beneficial than ever to examine what tools are available to help plan your Estate effectively.

Government spending is hitting record highs as a result of fulfilling political promises and the economic stimulation needed because of COVID. In the Financial Advisory community, we are anticipating increased taxes to help gain control of this mounting debt. Whether it be increases to Capital Gains inclusion rates, income tax rates, sales taxes, or new taxes such as Estate or Wealth taxes we know we will have to pay for the past and current level of spending. Now is the best time to prepare for this by doing some Financial and Estate Planning as there are some tried and tested strategies to help out.

Spending time with a trusted advisor to adequately discover your goals and build out your family vision is a necessity. The resulting analysis will help uncover your assets needed for you to live out your definition of financial security, hopefully until a ripe old age. Once you are convinced that your financial security is looked after, a proper analysis will define what is left for your beneficiaries and community. This is where some decisions can be made around your assets and intentions.

Aside from your Principal Residence and your TFSA’s, everything else will be taxed throughout your lifetime and/or in your Estate. By planning ahead, you can make the decision as to where you want your money to go rather than leaving it up to Ottawa with the proceeds from your terminal tax return. Our biggest three suggestions for our clients are to:

  • Shelter/delay taxes
  • Avoid paying tax for your entire lifetime on assets that you are going to leave behind
  • If you can use an asset today at a lower tax rate than you will leave it behind at then do so

There are many strategies now to deal with these planning opportunities: proper life insurance planning with the right products for your needs; RRIF burn; donation of public shares to charity (if philanthropy is a goal); Individual Pension Plans for Business Owners; corporate and trust structures; family foundations; Donation of Private Company shares in a Family Enterprise in multi-generational investment or other types of family business.

The list goes on, and it seems complicated and tedious but with proper planning with a skilled team it can be an enjoyable and rewarding process. We often see families get into arguments when there is uncertainty or misperception around their families wealth, or they become estranged upon the settling of an estate due to grief and tension.

The best time to start planning and create the efficiencies and peace of mind is now. If you want to know more or want to review your estate plan, reach out to a Wealth Strategist.

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