Effective Estate Planning

Effective Estate Planning

We’ve all heard the old refrain that nothing is certain except death and taxes. Although death is an uncomfortable topic for most, failing to implement an effective estate plan may create even more uncertainty. It may leave your loved ones in the unpleasant position of having to guess at what you would have wanted in addition to dealing with their grief.

An effective estate plan will minimize estate taxes (also known as probate taxes) and guide your estate representatives in the distribution of your assets upon your death. It may (but is not always) necessary for your estate administrators to apply to the Court to “prove” your Last Will. If satisfied that you have presented the Last Will, the Court will provide your administrators with a Certificate of Appointment, allowing them to deal with institutions on behalf of your estate. This is commonly known as “applying for probate”.

It may become necessary to prove your Last Will if certain institutions, such as banks, refuse to provide your estate administrators with access to your accounts and funds. If it becomes necessary to prove your Last Will, then estate taxes will become payable on the value of your entire estate. In Ontario, if the estate is worth more than $50,000.00, estate taxes are $15.00 for every $1000.00 of the value of the estate. For example, if an estate is worth $1,000,000.00, the estate tax would be $14,250.00.

In Ontario it is possible to create two valid Last Wills, a Primary Will and a Secondary Will (also known as an Excluded Property Will) which is useful for reducing probate taxes by legally allowing your estate administrators to withhold certain assets from the probate process. The assets that are included in a Secondary Will may be personal or household belongings, assets that do not have registered title, and shares in a private corporation. For example, a business owner with a corporation worth $2,000,000.00 could save as much as $28,500.00 in estate taxes if she or he passed their shares outside of probate.

There are important steps that need to be taken when drafting a Primary and a Secondary Will. For example, it may be necessary to consider and/or ensure whether a Secondary Will is drafted in accordance with a Shareholders’ Agreement. Often, the estate planning process is a good opportunity for me to ask my clients questions about their business organization, and sometimes it becomes clear that further steps can be taken to avoid uncertainty and/or undesirable situations when a business owner passes away. For example, some business owners may prefer that their children inherit the shares of a family business but conversely may not want their children’s spouses to inherit those shares because the spouse has little interest in the affairs of the corporation.

The intersection of business law and estate law can be complicated, but our job is to make it simple and leave you with a little extra peace of mind. Contact us today to set up a consultation.