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Less-discussed aspects of estate planning: Longevity, a living legacy and your team

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financial advisor discussing estate planning with a client

Typical estate planning discussions revolve around core elements such as trusts, beneficiary designations, tax planning and wills—and for good reason. These are all critical considerations. However, there are other estate planning pillars that typically gain less attention, but can be just as important in helping you achieve overall financial wellness and security.

As we noted in our first blog in this mini-series, one of the main objectives of effective estate planning is to help ensure that estate assets transfer to your beneficiaries in a tax-efficient manner when you eventually pass away. The process can be complicated, especially when large estates with a diverse range of assets or one or more family businesses are involved. In those circumstances—especially if your affairs aren’t in order—your heirs could be left with a legal and tax compliance web that could take months (or even years) to untangle.

Successful estate planning involves finalizing myriad legal, accounting and financial details and customizing a comprehensive strategy that closes gaps and addresses your legacy-related wishes. It’s also about taking a holistic approach and thinking about other factors that could influence how those decisions are made. Here are three (often overlooked) points to consider:

Your longevity—Canadians are living longer than ever, but that enhanced longevity is putting a strain on long-term savings and impacting our ability to live the lifestyle we want well into old age. To address this challenge, tools such as annuities are coming back into vogue as interest rates have increased. They provide life-long income—as much as 8 per cent a year in the current high-rate environment—and essentially shift your longevity risk to the insurer while potentially reducing your tax burden in the process. Of course, annuities are just one of many risk-mitigating investment options. Work with your advisors and choose the solutions best suited to helping you achieve your lifestyle needs and estate goals.

Your living legacy—Gifting during your living years creates opportunities to watch your heirs use their inheritance. That could mean helping to pay down a child’s mortgage, or perhaps covering the cost of a grandchild’s post-secondary education. It’s a great way to enhance your legacy and take joy in supporting those in your life who matter most (which could also include causes such as charities, non-profits or community organizations).

Gifting assets can be used as a tax-mitigation strategy in your estate plan, but speak to your tax advisor(s) before giving away assets such as stocks. The Canada Revenue Agency may classify an equity transfer as an attempt to avoid paying tax, and they could treat it as a sale of the equity at fair market value, triggering significant tax liabilities. Gifts transferred at less than fair market value could also result in double taxation for both the grantor and recipient if the transfer isn’t properly structured.

Your estate planning team—Communication between your various advisors—which might include lawyers, accountants, financial planners and insurance professionals—is essential. At Bridgewell, for example, we advise on and implement a number of estate planning solutions, but we also like to ensure that our clients’ other professional advisors are in alignment.

It’s an important part of the process and one (of many) that can easily be overlooked.

The Bridgewell team

To learn more about our estate planning services, contact a member of our team today.

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