Wine Industry Articles
Estate Planning
May 2006
By: Brian Cockburn
Most Canadians wouldn’t consider estate planning as something they need. After all, few of us own estates. But regardless of how much you make or own, it is a tool of financial management that offers something for everyone.
In simple terms, estate planning is the managing of your assets while you are alive and, after your death, the distribution of those assets according to your wishes. Often associated with the wealthy, it is commonly considered a way for the rich to minimize the amount of tax their heirs pay on their inheritance. In fact, even not-so-rich Canadians can benefit from estate planning, especially for the peace of mind it offers for yourself and your family, and it should be a financial priority for all adults no matter what age.
Estate plans are specifically designed for the individual, built around such determining factors such as age, health, lifestyle, assets and life goals. In creating an estate plan, a financial professional uses a person’s personal criteria to determine the structure best suited to achieve the desired outcome.
At the basic level, an estate plan can be a simple will. Everyone over the age of 18 should have a will, even young people with few assets. The document, which can be updated as a person gets older, ensures one’s family is not caught up in some unforeseen legal entanglement that can happen if the person dies intestate.
For married couples with children, each spouse should have their own separate will. Guardians and contingent guardians should be named for minor children, along with the clearly spelt out distribution of property and assets. Without a will, the province will appoint a guardian, and can even dictate how an inheritance is divided.
For common-law couples a will is essential to ensure in the case of the death of one partner jointly held property and other assets are transferred to the surviving spouse. Again, without a will the province can step in and direct that only close relatives of the deceased have claim to their assets.
Estate planning should also be considered for someone in their 30s looking ahead to retirement.
The Canada Pension Plan (CPP) and Old Age Security programs, although solid, do not pay out enough for even the average Canadian to live their senior years in relative comfort.
Along with a will, all adults should consider a living will and establishing a power of attorney in case they are incapacitated at any time. Recent events in the U.S. have shown the anguish relatives and survivors risk if the wishes of a person are not clearly defined in advance of them losing the ability to act and think for themselves.
For Canadians with considerable assets, estate planning is essential as a tax-efficient way to transfer your wealth to loved ones while minimize the government’s bite.
For instance, such planning lets one maximize the asset rollovers transfers to your spouse and defer capital gains liabilities. Trusts can also be established to see that beneficiaries are looked after, and life insurance can be bought to provide tax-free payouts to beneficiaries.
From these few examples, one can conclude that it’s never too soon to start your estate plan – regardless of wherever you stand financially. And you don’t have to be a millionaire to need the services of a good financial professional.
Brian Cockburn is a Partner in the Vernon BC office of BDO Dunwoody LLP. He is involved in all areas of client service including accounting, auditing, taxation, business consulting and succession planning. He can be reached at tel. 250.545.2136; bcockburn@bdo.ca
