Estate Planning

Estate planning is an emotional task with major financial consequences – it can feel overwhelming at times. Along with your will, your estate plan is simply your plan to distribute everything you own to people or organizations, after you die. Life insurance can preserve the value of your estate by helping you manage certain costs (like taxes and probate fees) that can chip away at the inheritance you want to leave your heirs.  There are several ways life insurance can be used in estate planning:
Help cover final expenses
This would include funeral costs, legal and executor costs.

Preserve your assets Naming beneficiaries on your life insurance can help you manage taxes and probate fees so more of your inheritance gets to your heirs. Probate is the court procedure to formally approve a will as the last valid will of a deceased person, and formally confirm the appointment of someone who’ll act as the executor of the person’s estate. Since the insurance payout goes directly to your beneficiary, it bypasses your estate and avoids any possible probate fees. 

Keep the cottage in the family
Transferring the cottage to the next generation can be both a blessing and a curse: your family will be on the hook for the capital gains tax that comes due when the cottage is sold or inherited. In many cases, the tax owing on the cottage is so high that the family finds they must sell the property to pay the tax bill. Thankfully, you have better options. The death benefit from a life insurance policy can provide an immediate source of cash once it’s paid out, so your family can make use of the tax-free proceeds to pay the capital gains taxes due. You can prepare now by purchasing a joint last-to-die policy with you and your spouse as the insureds.

Leave money to charity
Life insurance is a one of the most cost-effective methods of giving to a charity who will receive the death benefit from your policy after you die.

Business succession planning
Life insurance is also often used to divide business ownership to surviving partners after 1 partner dies, by using a buy-sell agreement to provide money for the other partners to purchase your share.

Fair distribution of inheritance
Most people want to leave their wealth to their loved ones fairly, leaving the same value in assets or cash to each family member or loved one. However, this can become difficult when you have assets of widely varying values, several beneficiaries and/or a blended family.

Let’s say you have a business that you want to leave to one of your children who is actively involved in it, but you don’t want to leave out the other child. Unfortunately, after tax, the rest of your estate wouldn’t provide enough in assets and cash to ensure that your other child receives an inheritance that’s equal to those of his/her sibling.
In such an instance, an estate equalization strategy could ensure that all children are treated fairly. By taking out life insurance, the other child would receive a tax-free lump sum that would balance out the values of each inheritance, so the estate is shared fairly.

Estate planning checklist
Once you’re ready to plan your estate, take some time to jot down questions to guide the strategy you’ll build with your financial advisor. Here are just a few things to think about:

• How can I minimize capital gains taxes?
• How will I preserve my assets from unnecessary probate?
• How can I preserve my RRSPs or RRIFs in their entirety for my heirs?
• Do I have an updated will?
• Have I established a power of attorney?
• Would I like to control how and when my heirs will have access to my assets?
• Is my life insurance policy sufficient for my needs and expectations – today and after I die?