 |
|||||||||||||||||||||||
|
Two Things Are Certain
Death and taxes. Whether you are nearing retirement or prudently investing for that seemingly far-off future, you may be accumulating a substantial portfolio for your retirement years. This may include contributions to an RRSP, a private pension plan and perhaps investments in mutual funds, shares, stocks and bonds, a cottage or rental property. If you are an entrepreneur, you may also have a successful company that you may plan to sell or pass on to family members when you retire. But what happens when you die?
In tax law, a person is deemed to dispose of all property at fair market value immediately before death. As the income from that property will be taxed as part of the deceased's estate, the taxes will ultimately affect the size of the estate that you pass onto your beneficiaries. Unless you have made appropriate plans, this accumulated wealth may be subject to substantial income taxes as well as probate fees/taxes.
Of course, the tax liability of the deceased's estate will depend upon a number of variables, such as a surviving spouse or partner, bequests willed to charities, the amount of tax already paid at source and income earned from investments.
When Should You Start Your Estate Planning? Many taxpayers may feel that tax planning for the event of their death is not an urgent matter.
However, estate planning is an essential part of your personal financial planning, regardless of your age or the size of your portfolio. As such, it is something you should be doing now, not some time in the future.
Prepare a Will The most basic estate planning strategy is making sure you have a will. Anyone who owns assets should have a will to simplify matters upon death and to ensure that all property is distributed according to his or her wishes.
When drawing up your will, it is important to get professional advice on ways you can: Minimize or defer taxes upon death. Provide a means of funding taxes upon death.
What are the Tax Implications? Discussing the tax implications of your estate planning with your chartered accountant will give you the opportunity to find ways to minimize or defer taxes on your estate.
Get Professional Advice Estate planning is a complicated area of tax law. Simple solutions do not exist as each individual has particular circumstances, holdings, expectations and financial requirements. Your chartered accountant can help you carry out a preliminary analysis of: Cash flow; Estimated tax liability at death; Disability insurance needs; Life insurance needs; Estimated probate fees/taxes; and Calculation of estate needs after death.
With this analysis, your chartered accountant can then help you address the ways you can achieve your estate planning goals and minimize the impact of taxes upon your death.
Estate planning also involves consulting your lawyer and, depending on your particular circumstances, other professionals such as your banker, trust officer, insurance agent, investment advisor, financial planner and a valuator or real estate appraiser.
An Estate Plan is Dynamic Be sure to review your estate plan periodically. Circumstances change. Tax laws and other laws change. As these changes can have an impact on your estate planning strategies, adjustments may be necessary.
You cannot cheat the inevitability of death, but can achieve the satisfaction of knowing you beat the taxman.
|
||||||||||||||||||||||
