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PERSPECTIVE – Estate Process – Part 2

BRIAN J. EVANS, Special to The Standard

Further to the last ‘Perspective,’ this is the second in the series on Estate Planning issues everyone needs to prepare for.

Since the beginning of time, living beings have come to the end of life. Because no one will avoid this event, it is prudent to be prepared and instruct those left behind. In this article, let’s think about a few other perspectives which may help in estate preparations.

The responsible use of your hard-earned funds: As much as a person may want to maximize the benefits after death for their family, handing over significant amounts of assets to beneficiaries may not be a good thing for them. In most cases, your estate is the result of your hard work, and that effort is often not understood or appreciated. A case in point is the call received from a lawyer’s office, several years ago, requesting a particular estate liquidation be expedited much faster, since one of the beneficiaries had purchased a new Mercedes and needed their estate funds to pay for it. The deceased person had scrimped and saved through life to be able to provide value for their family.

In most cases, you cannot ensure responsible use of your hard-earned funds by your family. Be assured, with many families there would be no problem. Yet, money inherited can easily change people who are not prepared. Some beneficiaries may benefit from a trust which puts certain restrictions on the use of funds or at least controls income and the distribution of assets over a certain time period.

Don’t forget the grieving process: Many people, when planning for their estate affairs and the care of their loved ones, fail to consider, the grieving process may put serious limits on their family’s ability to make good and appropriate choices. People who are grieving are often vulnerable and may make decisions they later wish to reverse. It is important to ensure appropriate counsel from trusted family, friends and advisors, who will have your family’s best interests at heart and a clearer head to help navigate through required decisions.

Trying to avoid all estate costs may not be best: The cost of authenticating a Will and authorizing trustees through the provincial courts is one of those estate requirements which may not be avoidable. It is commonly referred to as the Probate fees. Minimizing this tax is good. However, sometimes an attempt to reduce probate can create unexpected tax or estate costs. One example would be the potential tax implications, if a principal residence is re-registered to joint ownership with family, other than your spouse. Should the new joint owner already own property, a portion of your principal residence may lose its tax advantage. Changing the ownership of some investments would be another example which may create a deemed disposition, triggering a taxable capital gain, not anticipated.

Additionally, trying to avoid probate may lead to an inequitable distribution of your estate. Any assets with joint ownership or a named beneficiary are not typically included in an estate value for distribution. Surviving joint owners & beneficiaries would legally receive assets outside of your estate and then may also participate in the distribution of assets as directed by your Will. Some beneficiaries could receive more benefits which all beneficiaries were to share equally.

You need good professional advice on the most appropriate distribution and tax-effective transfer of assets to your beneficiaries. It might be better to pay a little and save more.

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