The world of investing is very black and white to some, with options for estate and legacy protection being either obvious, or so far beyond the average person's understanding that they rely on their financial advisors to ensure they are taken care of. For investors whose portfolio has been sitting in one or two funds or stocks, with little actual discussion of what happens to their money after they die, their executors will be left to muddle through the mess left behind.
As the typical Canadian assumption is that there is only one way to avoid the CRA, probate taxes, lawyers, and accountants taking a big chunk of your estate, investors end up setting up trusts that are not just expensive but can complicate instead of simplify. The investor then thinks they have a 'fix', but still have no idea of how it will work when they are gone. There is definitely a place in estate planning for holding companies and trusts, but it can be excessive and complicated for an estate that does not hold extensive real estate and/or corporate shares.
There are investments that can mimic a trust but cost much less.
There are ways to structure accounts to move money out of the estate, and thus out of probate, with a 'trust-like' investment account for adult children and/or grandchildren.
For investors that are living comfortably on pensions and/or income from registered accounts (RRSPs that became RIFs), and not touching certain investment accounts, there are simpler ways to safeguard your money from the next generation during your lifetime, and from the CRA after the fact. Simple ways to restructure the assets you plan to pass on by use of investment accounts designed for estate/legacy planning, and tax efficiency.
The ability to reorganize assets is essential and these accounts make it possible.
One example of 'simple made complicated' is the primary residence. If you are living there at your death, and have a will in place, your home will pass tax free to your chosen beneficiary. But what if you have to move to assisted living and your spouse is not the owner (nor the beneficiary) of the home but stays living there indefinitely? Or, you are able to sell in your lifetime, but the money ends up in non-registered investments or sitting in a bank account? And what if any of those accounts are held Jointly (JWROS) with someone who is not the named beneficiary in your will, or at least not the only beneficiary?
Executors will be able to ensure your wishes are met when proper estate planning is done in advance, with all considerations taken into account.
Structuring your assets into the right types of account(s), well in advance of your death, allows your estate wishes to be carried out as you wanted, paying out to whom you want to benefit. The executor's job is made easier and family harmony is more likely to be maintained.
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Copyright © Garat Financial Group. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article is not to be copied or republished in any format for any reason without the written permission of Garat Financial Group. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission. Mutual funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc. This article was written by Darlene Garat who is a Investment Funds Advisor at Garat Financial Group, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.