estate planning

Estate Planning 101

A Comprehensive Guide to Estate Planning in Canada

Estate planning is an essential aspect of personal finance that helps individuals manage and distribute their assets effectively during their lifetime and after their death. Proper estate planning not only ensures that your loved ones are taken care of but also helps minimize taxes and avoid costly probate fees. In this article, we will provide an overview to help you get started.

Estate Planning Basics

Estate planning is the process of organizing and managing your assets to ensure their efficient distribution upon your death. It involves several aspects, such as wills, trusts, powers of attorney, beneficiary designations, and tax planning. The primary objectives of estate planning include:

  • Providing financial security for your family and loved ones
  • Minimizing estate taxes and other costs
  • Ensuring a smooth transfer of assets to beneficiaries
  • Designating guardians for minor children
  • Protecting your assets from creditors

The Estate Planning Process in Canada

The estate planning process in Canada typically involves the following steps:

  1. Identifying your assets: Make a detailed list of your assets, including real estate, investments, business interests, insurance policies, and personal property.
  2. Setting objectives: Determine your estate planning goals, such as providing for dependents, minimizing taxes, or supporting charitable causes.
  3. Choosing an executor: Appoint a trustworthy person to administer your estate according to your wishes.
  4. Preparing a will: A will is a legal document that outlines how you want your assets to be distributed after your death. Consult with a lawyer to ensure it meets all legal requirements.
  5. Establishing trusts (if applicable): Trusts can offer greater control over asset distribution and help reduce taxes. Consult with a lawyer or financial planner to determine if trusts are appropriate for your situation.
  6. Reviewing beneficiary designations: Ensure that your beneficiary designations on insurance policies, retirement accounts, and other assets are up to date and aligned with your estate planning goals.
  7. Preparing powers of attorney: Designate someone to make financial and healthcare decisions on your behalf if you become incapacitated.
  8. Tax planning: Work with a financial planner or tax professional to minimize the tax burden on your estate.
  9. Periodically reviewing and updating your estate plan: It’s essential to review and update your estate plan regularly, especially after significant life events, such as marriage, divorce, or the birth of a child.

Important Documents for Estate Planning

To create a comprehensive estate plan, consider including the following documents:

  • Will: Outlines your wishes for asset distribution and guardianship of minor children.
  • Trust documents (if applicable): Establish and manage trusts for asset distribution and tax benefits.
  • Power of Attorney (POA) for property: Designates someone to manage your financial affairs if you become incapacitated.
  • Power of Attorney (POA) for personal care: Appoints someone to make healthcare decisions on your behalf if you become incapacitated.
  • Living Will: Specifies your preferences for end-of-life care and medical treatment if you are unable to communicate your wishes.
  • Beneficiary designations: Ensure that the beneficiary designations on your insurance policies, retirement accounts, and other assets are up to date.
  • Letter of instruction: A non-binding document that provides additional guidance to your executor and beneficiaries regarding the location of important documents, account information, and personal wishes.

Trusts vs Wills

Trusts and wills are both tools used in estate planning to distribute your assets. While a will outlines how your assets should be distributed after your death, a trust can be used to manage and distribute assets during your lifetime and after your death.

The main differences between trusts and wills are:

  • Privacy: Trusts are private arrangements, while wills are public documents that go through the probate process.
  • Probate: Trust assets can bypass the probate process, making asset distribution faster and less expensive, while wills must go through probate.
  • Control: Trusts offer more control over asset distribution, allowing you to set specific conditions and terms, whereas wills provide for outright distribution to beneficiaries.
  • Tax benefits: Trusts can provide tax benefits by minimizing estate taxes, while wills do not offer the same tax advantages.

Estate Planning Checklist

To help you get started with your estate planning, follow this simple checklist:

  • Inventory your assets: Make a list of your assets, including real estate, investments, business interests, insurance policies, and personal property.
  • Identify your goals: Determine your estate planning objectives and priorities.
  • Consult with professionals: Seek the advice of a lawyer, financial planner, or tax professional to help create a comprehensive estate plan.
  • Choose an executor: Select a responsible and trustworthy person to administer your estate.
  • Prepare a will: Work with a lawyer to draft a will that outlines your wishes for asset distribution and guardianship of minor children.
  • Establish trusts (if applicable): Create trusts to manage and distribute assets according to your preferences.
  • Review and update beneficiary designations: Ensure that the beneficiaries listed on your insurance policies, retirement accounts, and other assets align with your estate plan.
  • Prepare powers of attorney: Designate someone to make financial and healthcare decisions on your behalf if you become incapacitated.
  • Draft a living will: Specify your preferences for end-of-life care and medical treatment.
  • Organize important documents: Keep all essential estate planning documents in a secure location and inform your executor and family members of their whereabouts.
  • Review and update your estate plan: Regularly review your estate plan to ensure it remains current and reflects any changes in your personal circumstances or financial situation.

Estate planning is a crucial aspect of personal finance that helps individuals manage and distribute their assets effectively. By following the steps outlined in this article and working with experienced professionals, you can create a comprehensive estate plan that ensures your assets are distributed according to your wishes, provides financial security for your loved ones, and minimizes taxes and other costs. 

This post was republished with permission and originally appeared on the Cash Management Group blog. The Cash Management Group has been providing investment management services to publicly-funded entities and public corporations for over 19 years.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

estate planning for blended families

Navigating Estate Planning for Blended Families: A Guide

Estate planning is an essential aspect of planning for your family’s financial future, and it’s particularly important and delicate for blended families. The dynamics of bringing separate individuals together as a blended family create unique considerations when planning for the next generation. Here’s a guide to how you can ensure your family’s financial future is well protected.

Understanding Estate Planning for Blended Families

Estate planning for blended families requires one to take into account the unique dynamics that past relationships, biological relationships, and current relationships create. Bringing two distinct sets of parents and children together is not easy — nor is planning for all members’ financial futures.

Some common issues that blended families frequently face are issues such as:

  • How to meet the needs of all family members
  • How to manage unequal assets and incomes
  • What a fair distribution of assets looks like
  • Whether children’s inheritance should wait for the death of a step parent
  • What inheritances from separated spouses might provide
  • Other issues, such as those already faced in other areas of life

These are not small matters, and they’re bound to bring forth some disagreements that must be worked through. The goal is to work through those with clear and honest communication, as this is how you can keep disagreements from becoming outright conflicts.

Of course, working with an experienced lawyer, accountant and financial planner can be a great help when working through these matters.

Estate Planning Strategies for Blended Families

There are multiple estate planning strategies that families can use to execute their desires. Estate planning for blended families is no different:

  • Will: One of the most crucial aspects of anyone’s estate planning is creating a well-drafted will. A will serves as a legal document outlining how your assets will be distributed upon your death, ensuring your wishes are carried out and potential disputes among family members are minimized.
  • Trust: Trusts offer a controlled and flexible way to distribute assets to beneficiaries. This tool allows you to specify when and how your beneficiaries receive their inheritance, providing an added layer of control over asset distribution. It also might have implications in how your savings are spent (or not spent) during senior years. Trusts can be especially useful for blended families that might want to navigate having children in different life stages.
  • Beneficiaries: Beneficiaries are the ones who receive benefits from insurance (e.g. life insurance) and retirement accounts, and the funds can usually be distributed without going through probate when a person is a named beneficiary. Make sure to update any named beneficiaries of accounts after establishing a new blended family. This typically requires filing a simple form.
  • Documents: It’s important to plan for incapacitation due to health. Make sure you know who will make decisions, and how they’ll best follow your wishes. Taking care of this requires a living will (for financial matters) and a medical power of lawyer (for healthcare/end-of-life decisions). These may have to be redone after establishing a blended family, if your choice of who takes on each role changes.

All of these should be prepared in concert with an lawyer so that forms are legal, properly established, and thorough.

Special Considerations for Blended Families

Every blended family is unique and has its own nuances to navigate. There are certain special considerations to most blended families, though. When estate planning for blended families, all parties should be aware of the difficulties that are inherent in:

  • Navigating relationships between biological children and stepchildren
  • Ensuring the surviving spouse is financially taken care of
  • Managing existing conflicts between various family members
  • Handling tax implications that can be extensive and substantial

Again, the key to doing this successfully is open communication and working with knowledgeable professionals. Those who are familiar with the nuances of estate planning for blended families are a great resource and guide for this process.

Get Help with Estate Planning for Blended Families

No matter what your family structure is, don’t neglect to properly go through the estate planning process. If you’re estate planning for a blended family, don’t let the additional challenges stop you from tackling this.

If you have a blended family in the British Columbia area, seek professional help for the best potential process and outcome. We at Avisar Chartered Professional Accountants are here to help. We’ve worked with many blended families, are a leading firm that offers estate planning in BC, and are ready to help you.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Previously Announced Measures

Budget 2023 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release.

  • Legislative proposals released on November 3, 2022 with respect to Excessive Interest and Financing Expenses Limitations and Reporting Rules for Digital Platform Operators.
  • Tax measures announced in the Fall Economic Statement on November 3, 2022, for which legislative proposals have not yet been released, including: automatic advance for the Canada workers benefit; investment tax credit for clean technologies; and extension of the residential property flipping rule to assignment sales.
  • Legislative proposals released on August 9, 2022, including with respect to the following measures:
  • borrowing by defined benefit pension plans;
  • reporting requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs);
  • fixing contribution errors in defined contribution pension plans;
  • the investment tax credit for Carbon Capture, Utilization and Storage;
  • hedging and short selling by Canadian financial institutions;
  • substantive Canadian-controlled private corporations;
  • mandatory disclosure rules;
  • the electronic filing and certification of tax and information returns;
  • Canadian forces members and veterans amounts;
  • other technical amendments to the Income Tax Act and Income Tax Regulations proposed in the August 9th release; and
  • remaining legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax, excise levies and other taxes and charges announced in the August 9th release.
  • Legislative proposals released on April 29, 2022 with respect to hybrid mismatch arrangements.
  • Legislative proposals released on February 4, 2022 with respect to the Goods and Services Tax/Harmonized Sales Tax treatment of cryptoasset mining.
  • Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
  • The transfer pricing consultation announced in Budget 2021.
  • The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
  • Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

retirement planning tips canada

Retirement Planning Tips from an Expert

Learn innovative retirement planning tips and strategies from an expert: Adam Bornn, CFP, Partner, Parallel Wealth Financial Group. A complete transcript can be found below the video for those who prefer to read.

Retirement Planning Tips Canada – Transcript

“Hi, my name’s Adam Bornn from Parallel Wealth.

Today I want to talk about retirement planning and a lot of you focus on building up for retirement, but when it comes time to retire, there are a lot of important decisions you need to make. When to take your CPP? When to take your old age security? How to draw down your registered accounts?

There’s a lot that goes on between your income stream and your tax stream. So today I want to talk a little bit about things you need to think about as you head into retirement and a couple retirement planning tips that you should probably implement within your retirement plan to make it more efficient as far as giving you more after-tax income and paying less tax to CRA.

I want to share the planning software that we use here, and this is called Snap Projections. Now, if your financial planner isn’t putting a plan like this together for you, loop back with him or her and have them do this. This is part of the service that you should be paying for with your financial planner.

So what we have here is a husband and wife, they turn 65 in 2022, and they’re looking to retire. They need to transition from saving up to join an income stream. And so you’ll see here if we plug in their information, so we have some CPP, some old eight security coming in, and they each have $300,000 of RSP and 100,000 of tax-free savings that they’ve saved up and built up over time.

If we take this client, put in their information, their assets, their CPP, and map them out all the way until age 90, so assuming they’re going to live till age 90, you can see on the left-hand side here a real dollar income.

We put a 2% inflation rate in this plan of $68,694. So that is their after-tax income on an annual basis from today, age 65 retirement all the way down to age 90. The nominal dollar beside it is just the actual dollar amount they were going to have in their pocket to spend every single year. So 6$8,694. Again, this has him starting CPP right away at 65, old age security at 65 as well, and starting to draw down on the registered accounts.

If I go into Mr. YouTube here, you’ll see his CPP amount, his old aid security amount, and then again he’s taking about just shy of $12,000 out of his RRSP or RRIF at that point and about $9,000 from his TFSA. And he’s paying average tax rate or effective tax rate of just shy of 6%, so it doesn’t look too bad. And again, a nice little income in retirement of $68,700 after tax.

Now while that plan looks really good, provides a good income, and that’s typically the type of plan you’re going to get from an advisor if you get a plan at all. But what you want to look at is, okay, well what happens if I delay my CPP or delay my old age security or draw up my accounts a little bit differently? What is the total tax bill? And so again, on that plan there that you guys were looking at, the total tax bill was $227,000.

So that’s the total amount of tax they’re going to pay from age 65 until age 90. When you build out a financial plan, ask like how much tax am I paying? What is my after-tax income? What does my estate look like? Again within this plan, if I click on that total tax bill, that’s where you see that $227,000 of total tax, that’s combined.

One of the issues I have with your stock plan, which is what we’re looking at here, is if we scroll down to age 86, which is near the bottom here, you’ll see we have a bunch of RRSPs or RRIFs left at that point, close to $300,000, which create a tax bill, right?

If both Mr. And Mrs. YouTube passed away, there’d be a tax bill of about $111,000, which obviously we want to try to avoid. And the better we can avoid that tax bill and kind of that money into your pocket versus series later, obviously that’s much better. So how do we do that?

So when billing out a clear and concise financial plan for our clients, we look at a couple things. Deferring CPP is one of the biggest things. And at the end of the day, we’ve put hundreds of these plans together, and I can tell you that for 99% of Canadians, you should be delaying your CPP, your Canadian pension plan, all the way to age 70 or as close to 70 as possible.

Typically, we would only recommend taking your CPP prior to age 70 or closer to 65 for that matter, is if you had a health issue or you just needed the income, like there was no other income sources to draw from and you had to draw on your CPP just to put food on the table and pay the bills.

So, let’s take a look at the same plan here, but what we’ve done is we’ve bumped a CPP until age 70, and you’ll see that in the CPP column here. Now we’ve left old age security at 65. There’s more of a benefit to delay your CPP than your old age security. I won’t go into that in this video. We’ll cover that on a future one, but if we defer that CPP until 70, that’s going to help us out.

Now the other thing I’ve done that I’ve kind of stepped into here as well is we’ve done what we call the RRSP meltdown, and that is drawing down your registered accounts as quickly but as taxed efficiently as possible. And you’ll see here in the RRSP, so we’ve converted to a RIF and we’re drawing out about $30,000 a year until CPP starts at 70. Then we’ve scaled it back to $20,000.

What’s nice is that registered account is gone by 83, 84, so life expectancy 86, 87, that registered account is gone by the time you pass away. Now you still have that TFSA account that you can use, draw money out tax free. It’s much more efficient type of plan.

One of the other pieces of the plan when you build it like this, is not only by 83, 84, there’s no estate tax because you’ve drawn out all your RIF account or registered accounts at that point, but your only income is coming in from CPP and OAS and your tax free savings account, which is non-taxable.

Later in life. If you have to go to a care facility or you need in-home care, most institutions will build you off of your income. Now again, you could have the same income, but because it’s coming from the tax free savings account, it’s not taxable income.

So that’s one of the big benefits that we see with our elder clients in that you have the same income, but a lot of it’s not taxable, which allows you to pay a little bit less tax for rather your care facility or in-home care.

So by delaying that CPP from 65 to 70 and by drawing down your RIF account, your registered accounts, in a more tax efficient manner, and again, if you have RSPs and LIRAs and other accounts, it’s the same process. You want to draw those out in an efficient manner by life expectancy, kind of your mid 80s.

And if we do that in this plan, you can see that real dollar after tax income jumps closer to $70,000. It’s almost $1,000 more after-tax adjusted for inflation every year from age 65 to 90. So quite substantial.

Not only that, but if we look at your tax bill, we’ve reduced it from $227,000 down to $191,000. And lastly, if we look at age 86, scroll over estate tax is going to be $0. So again, it’s a much more efficient type of plan to create if you’re looking to create more income, more after-tax income, less taxes, and a better estate plan.

Typically defer your CPP using that time where you’re not collecting your CPP but need an income to start drawing down on your registered accounts.

What I want to close with today is what we call the laddered income. And this is kind of the last step of the process. We’ve created the tax and income strategy and created the most efficient plan that we can create. But now I want to create an income stream that better matches your lifestyle in retirement.

There’s a lot of research done around this, but from data retirement till about 71 to 73 years old, that’s kind of your, we call a go-go phase of retirement.

So there’s three phases of retirement. Your go-go phase until we typically map it until 75. Then from 76 to 85, it’s your slow-go stage. You might do a bit of travel, you’re still spending a bit of money, but you scale back. And then from 86 onward, it’s your no-go stage. You’re not spending much, you’re not doing much. It’s a much lower expense time of life for you moving forward.

So, I want to create more of a laddered income strategy. So if I take that same scenario that we just looked at and ladder it out, here’s what it looks like.

So again, instead of $69,600 per year, we’ve laddered it out at $75,000. So giving you more early, you can travel more, you can spend more money, Let’s allow you to do that. So $75,000 all the way down to age 75. Then we’ve scaled it back to $65,000 from 76 to 85, and then down to just shy of $61,000 later in life.

So still lots of money later in life, enough to pay the bills. And again, for those of you that have real estate, typically you wouldn’t sell real estate in the plan, you might downsize if you want to downsize, but if you have to go to a care facility or need in-home care, there’s always that asset in the background to lean on.

Plus you still have $5,000 after tax of income from 85 onward. I don’t know any clients of mine that are spending that amount of money at that point in their life, it’s typically 1,500 to $2,500 a month. So there’s lots of free cash flow there to help for a care facility or in-home care for those of you that are worried about that.

So hopefully that gives you a bit of a glimpse on what you should be looking for when your financial retirement plan is built out. Again, you want to look at when is the best time for you to take your CPP and hold date security and again, have your advisor run that for you and show you the differences of taking it now, whatever that means for you, 65, 70, somewhere in between, same with your old date security, look at the tax situation, your estate tax situation.

All these things come into play. Again, you want to create the most efficient tax and income strategy for you, and then look to create that laddered income. Again, you want more money early in retirement, but with the peace of mind that you’re going to have enough later in life.

I know doing this for the last 17 years that most people when they hit retirement, they’re not spending enough money early in retirement. What creating that laddered strategy does is it gives you that peace of mind of look, I can go spend that $75,000 knowing that I still have 60 later on in life.

So thanks again for joining me again in this video. Hope you enjoyed it. Hopefully you learned something through these retirement planning tips and we’ll do this again soon. Thank you.”

You can get more great insights and tips from Adam on his own YouTube channel.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

living will

What is a Representation Agreement (Living Will)?

Our guest author for this post is Flavia Zancope of Zancope Notary Public.

Whether or not it’s nice to admit, aging and accidents are an inevitable part of life. The best one can do is to be prepared, and a little bit of foresight and proactive planning can save one’s family members from having to spend a lot of money to be able to participate on the decision making and to be on the loop of our medical conditions.

Having a Representation Agreement (RA) (sometimes referred to as a Living Will) is one such way to be prepared. When preparing a Will, it is a good idea to prepare your Representation Agreement at the same time.

A Representation Agreement is the name of a document that allows representatives to make health and personal decisions on your behalf, in case you are alive, but cannot speak for yourself. Many people assume that a Power of Attorney (POA) grants those powers. Unfortunately, that is wrong. A POA only grants powers for legal and financial decisions.

With a Representation Agreement, there is no deceased and therefore no estate to divide; it is concerned specifically with medical procedures while the person is still alive.

It provides a way to make provisional medical decisions for oneself in the future. If circumstances leave you unable to communicate your wishes, a Representation Agreement can specify which medical procedures will be authorized or declined on your behalf. The representative appointed will have powers based on what you have given them. These can be full powers or restricted in any way, based on specific wishes.

Though not necessarily required by law, having a notary prepare the Representation Agreement can facilitate the process and ensure that everything conforms to requirements. For important decisions such as this, a notary can help provide peace of mind that everything is in proper order.

We do offer a package deal that saves you money, as we can do both the will and Representation Agreement at the same time. If you already have a Will, not a problem, we can prepare a RA on its own.

This post originally appeared on the Zancope Notary Public website under the title What Is a Representation Agreement, and How Can a British Columbia Notary Help.


About Zancope Notary Public

At Zancope Notary Public, our specialty is Wills and Estate Planning documents (Representation Agreement and Power of Attorney). We are a full-service firm with two notaries full time at the office. We also offer real estate services for clients in Langley and throughout Greater Vancouver and the Fraser Valley. We can help you with buying, selling, and refinancing real estate, and provide family property transfers and independent legal advice.


Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

estate planning checklist

The Ultimate Estate Planning Checklist: Business and Personal

If you’re like most Canadians, you probably haven’t given a lot of thought to having a plan for after you pass and aren’t sure where to start. That’s why we compiled this helpful estate planning checklist for business owners and individuals.

According to a 2018 Angus Reid poll 51 percent of Canadians had no will in place, and only 58 percent of those 55 and older had one. And a will is only one element of your estate plan.

It’s not something most of us like to dwell on, but having a plan in place for what happens to your assets after you pass will make it much easier for your loved ones in a time when they are already coping with the emotional toll of your death. Use this estate planning checklist to ensure you have the right pieces in place.

Estate Planning Checklist for Individuals

There are two key documents that make up the first two items on our estate planning checklist:

Power of Attorney

A power of attorney, also called a living will, sets out who will make decisions on your behalf should you become unable to do so. Be sure this is someone you trust and that they are aware of your wishes under various circumstances.

Your Will

Your will is the cornerstone of your estate plan. It sets out how your assets will be distributed and who will oversee the process (your executor). Some things you will need to decide/document in your will:

  • A list of your assets
  • Beneficiaries (are there specific items you want to leave to certain people, or will your assets be divided equally between all beneficiaries?)
  • If your beneficiaries are minors do you have a trust or guardian in place?
  • Are you donating any assets to charities?
  • Who is your executor? This is the person responsible for carrying out your wishes as outlined in your will. You can name one or more people to this role and you should peak to your executor to be sure they are willing and able to carry out their duties.

Other items to consider when creating your estate plan include:

  • Funeral wishes – ensure your family is aware of your wishes in case your will is not read until after the funeral
  • Life insurance – make sure all beneficiaries are up-to-date
  • Location of key documents – make sure your family is aware of the location of key documents like your will and power of attorney
  • Digital assets – most of us have multiple social media profiles and accounts with various online entities. Compile a list of these, including passwords, and make sure your family is aware of how you want them dealt with after your death or incapacitation.

Estate Planning Checklist for Business Owners

If you’re a business owner you also have to think about how your business assets and responsibilities will be dealt with when you die. In addition to the items in the individual estate planning checklist, here are some items you may consider depending on your situation:

  • If you are a Sole Proprietor your business assets and liabilities will be treated as personal and should be accounted for in your will
  • Have a succession plan in place
  • Who will deal with closing your CRA account if the business will be dissolved?
  • Creating an emergency business plan
  • If you have partners or shareholders, prepare shareholder/partnership buy-sell agreements or other contractual arrangements
  • Should you create a holding company for your assets?
  • Is an estate freeze necessary to protect against capital gains?        

Estate Planning with Your Accountant

Most people think about lawyers when they think about estate planning, and certainly they are important when preparing your will and power of attorney. But working with your accountant can help you create an estate plan that ensures your goals (personal and professional) are achieved.

An accountant can provide insights and develop a plan that minimizes the tax implications to your estate and beneficiaries, and make the process as easy as possible for your loved ones. At Avisar, we help our clients with:

  • Will review and planning, including written instructions to a lawyer
  • Assessing the appointment of executors
  • Succession planning including potential business re-structuring
  • Advising on the use of trusts and additional companies
  • Estate freezes
  • Analysis of methods to preserve wealth
  • Recommendations for the possibility of incapacitation
  • Coordinating with your insurance broker to cover potential taxes and debts
  • Advising your executor after you’re gone

If you haven’t started your estate planning yet use this checklist to get started and then schedule a free consultation with one of our estate planning experts to discuss how we can help ensure your estate plan will achieve your goals.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2022: Previously Announced Measures

Budget 2022 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

  • Legislative proposals relating to the Select Luxury Items Tax Act (a tax on certain automobiles, boats and aircrafts) released on March 11, 2022.
  • Legislative proposals released on February 4, 2022 in respect of the following measures:
  • electronic filing and certification of tax and information returns;
  • immediate expensing;
  • the Disability Tax Credit;
  • a technical fix related to the GST Credit top-up;
  • the rate reduction for zero-emission technology manufacturers;
  • film or video production tax credits;
  • postdoctoral fellowship income;
  • fixing contribution errors in registered pension plans;
  • a technical fix related to the revocation tax applicable to charities;
  • capital cost allowance for clean energy equipment;
  • enhanced reporting requirements for certain trusts;
  • allocation to redeemers methodology for mutual fund trusts;
  • mandatory disclosure rules;
  • avoidance of tax debts;
  • taxes applicable to registered investments;
  • audit authorities;
  • interest deductibility limits; and
  • crypto asset mining.
  • Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
  • Legislative proposals released on December 3, 2021 with respect to Climate Action Incentive payments.
  • The income tax measure announced in Budget 2021 with respect to Hybrid Mismatch Arrangements.
  • The transfer pricing consultation announced in Budget 2021.
  • The anti-avoidance rules consultation announced on November 30, 2020 in the Fall Economic Statement, with an expected paper for consultation over the summer of 2022, and legislative proposals tabled by the end of 2022.
  • The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
  • Measures confirmed in Budget 2016 relating to the GST/HST joint venture election.

Budget 2022 reiterates the government’s intention to return a portion of the proceeds from the price on pollution to small and medium-sized businesses through new federal programming in backstop jurisdictions (Alberta, Saskatchewan, Manitoba and Ontario). Budget 2022 proposes to provide funds, starting in 2022-23, to Environment and Climate Change Canada to administer direct payments to support emission-intensive, trade-exposed small and medium-sized enterprises in those jurisdictions.

Budget 2022 also reaffirms the government’s intention to revise the Employment Insurance (EI) system, including its support for experienced workers transitioning to a new career and coverage for seasonal, self-employed and gig workers. A long-term plan for the future of EI will be released after consultations conclude. As an interim measure, Budget 2022 proposes to extend previous expansions to EI coverage for seasonal workers.

The Difference Between Capital Gains and Investment Income

Can Smart Capital Gains Financial Planning Save You Money?

What are capital gains? The profit people generate from selling an asset or investment is typically referred to as a “capital gain.” The term has also become synonymous with taxation, because a percentage of the profit margin may end up in the government’s coffers. But it’s important to understand that not every asset falls under the capital gain rules. Financial planners and accountants have strategies to utilize to minimize tax liability.

How Are Capital Gains Taxed in Canada?

Profits made from selling items such as stocks, bonds, mutual funds, and exchange-traded funds generally fall under capital gain rules. The same applies to tangible assets, such as rental properties, second homes, equipment, and luxury items, which also may be subject to after-sale taxation. Principle homes generally are exempt as long as they remain a primary residence.  

Although there is not necessarily a “capital gains tax” explicitly written into law, 50 percent of the profit earned from the sale of an asset becomes taxable. The rate of taxation is based on the person’s marginal tax rate. For instance, if you sold a second home for $100,000 above the purchase price, minus expenses, you’d apply $50,000 (half) to your taxable income. If you’re in the 33 percent bracket, then one-third of the $50,000 goes to taxes. The remaining two-thirds plus the untaxed $50,000 are free and clear profit.

That’s why it’s crucial to maintain diligent records regarding reasonable expenses associated with an asset. Fees, commissions, maintenance, advertising, and improvements are generally deducted from the amount of capital gain total and potential taxes.

The Difference Between Capital Gains and Investment Income

It’s not uncommon for people to find the difference between capital gains and investment income confusing. This holds particularly true when dealing with investment opportunities such as stocks.

While the two are not necessarily mutually exclusive, investment income generally refers to ongoing profits. Dividends on a lucrative stock or monthly rent payments from a real estate property are examples of investment income. They are not subject to the same tax formula as a capital gain generated from the sale of an asset.

How to Minimize Taxes on Capital Gains

The fact that someone makes a hefty profit on the sale of an asset doesn’t mean they must pay the full face value in taxes. A savvy accountant may employ the following strategies to reduce capital gains tax liability.

  • Establish Tax Shelters: These financial umbrellas shield investments and allow people to buy and sell stocks in a duty-free environment. Shelters such as a Registered Retirement Savings Plan, Registered Education Savings Plan, and Tax-Free Savings Account rank among the popular ways Canadians manage wealth without incurring taxes on annual capital gains. However, tax shelters do limit your ability to deduct capital losses.
  • Deduct Capital Losses: Sometimes, people become hyper-focused on paying taxes on profits and overlook losses. This scenario proves common with real estate investments. Property owners may lose track of the ongoing expenses, fees, taxes, interest payments, and wide-reaching other costs. Although you may have earned sound investment income over the years, the final sale could result in an overall loss. It’s critical to subtract all of your expenses before arriving at a capital gains figure.
  • Know When to Pay: One of the capital gains caveats involves deferment. If you receive a capital gain from a divorced spouse or deceased parent, the taxable amount does not necessarily come due that year. The new owner of an asset incurs the tax liability when they sell it and earn a profit. It’s important to keep in mind that the profit will be calculated based on the value when your ex-spouse or parent purchased the asset.
  • Lifetime Exemption: Certain small business owners may be eligible for the Lifetime Capital Gains Exemption when selling farms, fishery property, and qualifying private interests. Canada’s lifetime exemption proves complicated, and it’s advisable to consult with a tax professional.  

An experienced advisor can help you minimize their tax liability by spreading the profits over years. This strategy, often called a capital gain reserve, does more than simply postpone payment. A capital gain reserve can reduce the amount you pay.

What Is a Capital Gains Reserve?

A capital gains reserve effectively reduces the amount of profit you enjoyed as income in a given year. After calculating your capital gain, everyday people can lower that figure on the income by claiming a reserve amount. Taxpayers can usually spread the total revenue over five years using a specific formula.

In cases involving family farms, fishing businesses, among others, a qualifying capital gains reserve may be extended for upwards of 10 years. This type of deferment helps prevent the gain from driving you into a higher tax bracket and unnecessarily giving more of your hard-earned money to the government.  

While Canadians all need to pay their fair share of taxes, it’s equally important to ensure the best financial stability for you and your business.

Want to know more about the difference between capital gains and investment income? Contact Avisar Chartered Professional Accountants and schedule a consultation today. 

Avisar is a highly-regarded accounting firm operating in Langley, Abbotsford, Surrey, Vancouver, and the rest of the Lower Mainland.


Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

What does probate mean

What Does Probate Mean?

A lot of people ask, what does probate mean when they hear it for the first time. Probate is the court process to approve the validity of a deceased person’s Will. It also includes appointing an executor for their estate who can then transfer assets to the beneficiaries.

Probating a Will may not be required in all scenarios, such as when the first partner of a married couple dies or when there is no real estate or significant financial assets in the estate. However, probate is required when there is real estate not jointly held with
a right of survivorship (i.e., it does not pass directly to the co-owner), or if a financial institution holding any of the deceased’s funds or investments requires it.

In this article we’ll look three key areas:

  • Applying for Probate
  • Assets Included in the Estate
  • Probate Fees

What Does Probate Mean: Applying for Probate

The executor will normally apply for probate in the province in which the deceased ordinarily lived. It may take many months to obtain a probate order in some jurisdictions, delaying the ultimate distribution of the estate to the beneficiaries.

The fees for obtaining probate, known as “Estate Administration Tax” in some jurisdictions, vary significantly between provinces. For example, the fees for a $2 million estate can range from a nominal fee in Quebec to have the Will authenticated by the Superior Court, to more than $30,000 in probate fees in Nova Scotia. In Ontario, probate fees are calculated at 0.5% on the first $50,000 of the estate and at 1.5% on the remainder, but no fees are payable for estates valued at less than $1,000.

For estate certificates requested after December 31, 2019, Ontario has eliminated the Estate Administration Tax for all estates valued at less than $50,000, so the total probate fees will be 1.5% of the value of the estate in excess of $50,000.

What Does Probate Mean: Assets included in the estate

Probate fees are based on the fair market value of the assets in the estate at the date of a person’s death. These assets include:

  • real estate – net of encumbrances (e.g., mortgages and home equity lines of credit)
  • bank accounts
  • investments
  • life insurance policies that list the estate as the beneficiary
  • vehicles and vessels
  • collections
  • furniture

Probate will not apply to real estate jointly held with the right of survivorship, as the ownership is transferred directly to the co-owner. Similarly, life insurance policies as well as investments in Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and Tax-Free Savings Accounts (TFSAs) that name a specific beneficiary are distributed directly to that beneficiary and therefore not included in the estate.

A probate order will only apply to the assets in the province in which the deceased ordinarily lived. If the deceased had assets in another province, the executor will have to apply to “reseal the probate,” which requests that the courts in the second province confirm the Grant of Probate in the first province. For example, if the deceased normally lived in Ontario but also owned a ski chalet in Alberta, the executor would apply for the probate Certificate in Ontario to cover the home, investments and other assets there, and pay the appropriate probate fees to Ontario on those assets. Once the Ontario probate Certificate has been received, the executor would apply to reseal the probate in Alberta to cover the ski chalet and pay the appropriate probate fees on
the value of it to Alberta.

It is worth noting that while mortgages are deducted from the value of the real estate, other debts such as car loans, credit cards or unsecured lines of credit are not deducted from the value of the estate. Similarly, there is no deduction for the potential selling costs for any assets in the estate.

What Does Probate Mean: Probate fee planning

Probate fees can be expensive, but there are some planning opportunities to minimize the costs. The first is to make sure that you name a beneficiary for all life insurance policies, RRSPs, RRIFs and TFSAs to ensure that these assets transfer directly to the beneficiary rather than be included in the estate.

Caution should be used in how you do this, as there could be unforeseen consequences. For example, if you name one child as the beneficiary of your RRSP, that child would receive the total value of those assets. However, the RRSP is deemed to have collapsed on the death of the owner, and its fair market value is included in income in the final tax return of the deceased, unless the spousal rollover rules apply. Therefore, the estate would have to pay the taxes on the value of the RRSP assets that only one child received, which may not be a fair result to all the beneficiaries.

A second planning opportunity that is sometimes mentioned is to add an adult child to the title of the home. This is often considered when the first parent of a married couple passes away. While this may reduce the probate fees on the death of the second parent, there may be some significant taxes and other issues to contend with, so extreme caution should be used in implementing this strategy.

Adding the child to the title of the home is considered a “gift” for tax purposes, and there is a deemed disposition at its fair market value at the date of transfer. This would likely not trigger a taxable capital gain at that point, since the home would qualify as the principal residence for the parent. However, if that home was sold in the future and if the adult child has another residence, there could be a taxable capital gain on their share of the home for the difference between the fair market value at the date of transfer and the ultimate sale price. The value of the child’s portion of the home could also be included in their assets if they became divorced or if a creditor sued them. Effectively, the parent has given the child control over half their home. This may also result in unequal treatment of the beneficiaries under the terms of the Will.

Another planning strategy includes using multiple Wills. The primary Will covers all assets that require probate
in order to be transferred to the beneficiaries, which generally include bank accounts, investment portfolios and real estate. The secondary Will covers assets that can be transferred without requiring probate, including private company shares and personal effects, such as jewellery and artwork. When drafting these Wills, care should be taken to ensure that one does not have the effect of revoking the other, that each Will clearly identifies which assets it covers and that multiple Wills are recognized in the province of residence.

Finally, you can always consider giving assets to your future beneficiaries during your lifetime, as there is no gift tax imposed in Canada.

While probate fees may be a significant expense for an estate, it is important to obtain professional advice to ensure that you are not generating a steep income tax liability down the road or creating ill feelings between your beneficiaries that may last for generations.

Disclaimer:
Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Registered Retirement Savings Plan VS. Tax-Free Savings Account—What’s The Difference?

Both the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) allow you to build savings in a tax-sheltered environment. So, what are the differences between the two – and when does it make sense to invest in one over the other?

The purpose of the RRSP, as its name states, is for long-term savings for your retirement. The TFSA is a more flexible vehicle to save for more immediate goals, such as buying a new car, house, or creating an emergency fund. And it may also be used to save for retirement.

Who Is Eligable?

The RRSP has no minimum age, but you must have “earned income” in the prior year to create contribution room. Earned income includes income from employment, self-employment and certain other sources, and is reduced by some employment-related expenses, and business and rental losses. The RRSP matures in the calendar year in which you turn 71.

For the TFSA, you can begin contributing as of age 18, and there is no maximum age.

How Much Can You Contribute?

With an RRSP, you can contribute up to 18% of your earned income in the preceding year, up to a maximum annual limit ($27,830 for 2021). Your contribution room is reduced when you have an employer-sponsored pension plan. The contribution for the year must be made by the 60th day of the following year – so, close to the end of March – and you can carry forward any unused contribution room indefinitely.

Keep in mind that if you overcontribute to your RRSP by more than $2,000, there is a penalty of 1% per month. You can deduct up to the greater of your actual contributions and your contribution limit for the year from your taxable income, reducing the amount of tax you pay on other sources of income.

TFSA contributions must be made by December 31 of the relevant year. Here are the annual contribution limits:

2009-12               $5,000

2013-14               $5,500

2015                  $10,000

2016-18               $5,500

2019-21               $6,000

Similar to RRSPs, unused TFSA contribution room can be carried forward. For example, if you turned 18 in 2018 and have never contributed to a TFSA, your limit in 2021 is $23,500 ($5,500 + $6,000 + $6,000 + $6,000).

And as with an RRSP, you also face a 1% per month penalty if you go over your contribution limit.

Withdrawing from The Fund?

With an RRSP, you may be able to withdraw funds to buy your first home or finance a return to school without being liable for taxes right away.

  • The Home Buyers Plan (HBP) allows you to withdraw up to $35,000 to help pay for your first home; you pay this money back into your RRSP through instalments over 15 years.
  • Under the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 in a calendar year, to a maximum total of $20,000, to finance full-time education or training for you, or for your spouse or common-law partner. These funds must be paid back through instalments over 10 years.

Any unpaid instalments for either the HBP or LLP are added to your taxable income for that year. Any other withdrawals from your RRSP are also included in your taxable income in the year that you receive them, and you cannot re-contribute that amount once you have withdrawn it.

Just as there was no tax deduction for TFSA contributions, you do not pay tax on TFSA withdrawals. You can recontribute the withdrawn funds to your TFSA in a subsequent year (just not the same year you withdrew it). The amount withdrawn gets added to your contribution room for future years.

How Does Having A Spouse Help?

If you have a spouse or common-law partner, you can invest up to your contribution limit to a spousal RRSP. Generally, the amounts your spouse withdraws from these plans would be included in their taxable income, rather than in yours. Some restrictions apply.

If there is a significant difference between the incomes of two spouses, the spousal RRSP can minimize the total tax that the family pays in retirement by splitting income between one spouse in a higher tax bracket and the other in a lower tax bracket.

There are no spousal TFSAs. However, you can give money to your spouse for their own TFSA contribution and the income earned will not be subject to tax.

When To Invest In One VS The Other?

There are many factors that would affect whether investing in your RRSP rather than your TFSA may make sense, and these can be quite complex. Here are some general factors that you may consider helpful.

YOUR TAX BRACKET

If you are in a higher tax bracket when you are making the contribution and expect to be in lower tax bracket when you will be withdrawing the funds, the RRSP can offer significant advantages. But if you are in a lower tax bracket when contributing, those benefits will not be as great – though you still benefit from deferring tax from the year you made the contribution to the year that you withdraw the funds.

YOUR TIMELINE FOR WITHDRAWAL

The timeline for when you expect to need the funds is another important factor. When your RRSP matures in the year that you turn 71, you have two options for relief from being liable for taxes immediately: You may transfer the balance in the account to a Registered Retirement Income Fund (RRIF), or use it to purchase an eligible annuity.

RRIF plans require that you withdraw a minimum amount each year, based on your age. It’s also worth noting that any RRSP or RRIF withdrawals or annuity payments are added to your taxable income and may trigger a 15% clawback of the Old Age Security for income above a certain amount ($79,845 in 2021).

While the HBP and the LLP offer you some flexibility to access your RRSP funds without paying tax, the TFSA is much more flexible since you can withdraw funds on a tax-free basis and recontribute them in a future year.

YOUR INVESTMENT TYPE

Your choice of investment type may also affect your choice of RRSP vs. TFSA. For example, if your portfolio includes United States stocks, their Internal Revenue Service (IRS) recognizes the RRSP as a retirement savings account and does not withhold tax on the dividends you receive.

On the other hand, the IRS does not recognize the TFSA in the same way, so there will be a 15% withholding tax charged on those dividends. There is no foreign tax credit to offset that 15%, as there would be for investments in a non-registered account.

The RRSP and the TFSA are both important savings vehicles for Canadians. Understanding the differences between the two can help you make the decision when to use either (or both!) to meet your savings goals.


Disclaimer:
Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.