Estate planning can be awkward, but it’s not all about money

Personal Finance Family Finance

Estate planning is about family harmony, which is especially important in these challenging times

Publication date:

28 Jan 2022 • 28 Jan 2022 • Read 3 minutes • Join the conversation If estate equalization is the goal, it’s important to consider how taxes come into play. Photo by Getty Images/iStockphoto Files

Reviews and recommendations are unbiased and products are selected independently. Postmedia may earn an affiliate commission for purchases made through links on this page.

Let’s start with a fun family story. As the ‘lady of the house’ I plan family vacations, take the family to the dentist, add our baby to the daycare waiting list, etc. My husband is often perplexed when I bring up this topic and say, ” Well, if you told me what to do, I would!”

This ad hasn’t loaded yet, but your article continues below.

Often, but not always, the task of planning falls on women, and estate planning is no exception.

“Estate planning isn’t about money, it’s about family harmony” is something we often share at the beginning of every estate review. I emphasize this first because of the importance of harmony in the family, especially during this challenging time.

Legacy wishes can be an uncomfortable topic for family discussions, but I advocate that parents get into the habit of communicating early and often and sharing their motivations. A great resource is the book Willing Wisdom by Thomas William Deans, which describes a family tradition of recording probate conversations at family gatherings and shows how they make it a meaningful, yet fun exchange on what will be tricky topics.

This ad hasn’t loaded yet, but your article continues below.

What is fair?

Some parents choose to divide the estate equally among the heirs, while others find it appropriate to give additional compensation to the child who does the most to provide for their needs.

If estate equalization is the goal, it’s important to consider how taxes come into play. For example, registered accounts such as Registered Retirement Savings Plans (RRSPs) can be fully taxable upon the death of both parents, while the primary residence is tax-exempt.

It is important to consider the after-tax value when settling the estate between the heirs and which party is responsible for the taxes to be paid.

What about the dreaded legacy?

Executors will typically have to prepare a will in the provincial or territorial court to gain the authority to act, and this process involves an estate tax. Probate is a question that comes up often and people sometimes go to great lengths to plan and minimize it.

This ad hasn’t loaded yet, but your article continues below.

There are a few easy ways to reduce the estate. One is to name beneficiaries on your registered plans, such as RRSPs and tax-free savings accounts (TFSAs). Review your designations of beneficiaries regularly with your financial advisor and make sure they are up to date, and make sure that the designations of beneficiaries are not contradicted in your will, as discrepancies can lead to disputes in the future. Similarly, you can directly designate insurance beneficiaries. As long as you do not designate your estate as a beneficiary, the estate will not apply.

There is more to it than just taxes when your partner dies

Three Ways To Shift Your Focus From What You’re Missing So You Can Enjoy An Abundant Mindset

This is how you stay informed of your finances due to another possible lockdown

This ad hasn’t loaded yet, but your article continues below.

Another strategy is for parents to own property with their children. However, there are pros and cons. First, there may be tax implications when converting the property into co-ownership. Second, the property can now be subject to the children’s creditors, including a spousal creditor.

Suffice it to say, the potential costs of joint ownership can be higher than the probate itself, so both the pros and cons should be thoroughly examined.

Do I have to give possessions to my children?

There is no correct answer to this question. The main benefit of gift giving is that parents can watch their children enjoy the gifts during their lifetime, although it can also be an effective tax planning strategy. Donating certain assets can reduce the future tax burden on the estate. However, parents will have to accept that they will lose control of the gifted possession.

How much is an appropriate amount to donate? I would advise people not to jeopardize their own retirement. Consult with your financial advisor how much you need and whether there is enough space available. Only then should you consider donating some assets early.

Rita Li is an investment advisor at RBC Dominion Securities,RBC Asset Management

†

For more stories like this, Sign Up for the FP Investor newsletter.

†

This ad hasn’t loaded yet, but your article continues below.

Thanks for signing up!

Postmedia is committed to maintaining a lively yet civilized discussion forum and encourages all readers to share their thoughts on our articles. It can take up to an hour for comments to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We’ve enabled email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update to a comment thread you’re following, or a user follows comments. Visit our Community Guidelines for more information and details about customizing your email settings.

This post Estate planning can be awkward, but it’s not all about money

was original published at “https://financialpost.com/personal-finance/family-finance/estate-planning-can-be-uncomfortable-but-its-not-just-about-money”