Estate Planning Essentials – Mistakes to Avoid

1. Failing to maintain an up to date (legal) Will or other wealth transfer mechanism; such as an Inter-Vivos Trust or by naming beneficiaries on life insurance policies.
2. Not recognizing that an integrated legacy plan which takes into account legal concerns, tax strategies and emotional issues is key.
3. Failing to account for all assets subject to probate and failing keep valuations up to date.
4. Not considering tax and other consequences of wealth transfer; including ownership of assets including life insurance policies.
5. Not recognizing that immediate liquidity will be necessary to aid in the settlement of your estate – sometimes referred to as an “Estate Bond” a permanent life insurance policy with proceeds payable into your Estate may be considered.
6. Not understanding your obligations to your beneficiaries – in British Columbia, recent legislation in the form of the Wills Variation Act may in some circumstances, impede an equitable asset distribution to named beneficiaries.
7. Failing to distribute assets prior to death if/where appropriate – gifting early to beneficiaries may be appropriate in circumstances where assets are not required in support of your retirement lifestyle and where tax consequences are considered favorable.
8. Overlooking the creation of living legacy – gifting to your church or charity and/or creating a private foundation for the benefit of others.
9. Not considering the potential tax consequences of gifting or asset transfers between family members. Whether personal or business related, early distributions may compromise your goal of an equitable gift-over and/or may expose the assets to increased taxes and/or creditors.
10. Failing to take steps to reduce taxes – though the focus of Estate Planning is the efficient transfer of wealth on to your beneficiaries, you are in your right to pursue strategies which have the potential to decrease final taxes paid as well as related Probate fees. Tax leveling strategies including structured RRSP/RRIF withdrawals and income splitting may help reduce your final tax obligation. A permanent life insurance funded “Estate Bond,” in combination with early distribution of assets to beneficiaries where appropriate as well as gifting strategies to charity and/or to your private foundation are just a few of the tax-reduction measures available to Canadian taxpayers.