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David Allard

Protect the inheritance you leave behind

While it is not possible to “rule from the grave”, many people, wishing to ensure that the legacy they have built up during their lifetime lasts, try all manner of things to ensure that the next generation does not foolishly spend it away. While you cannot restrict completely what or how much a beneficiary will spend; there are a few basic tips to ensure that your inheritance is protected for future generations.

One of the first things to consider in ensuring that your estate is wound up properly is to give careful thought to the choice of your executor. The executor of your estate is responsible for ensuring that numerous tasks are completed before a distribution can be made to your beneficiaries. Some of the things they are responsible for range from submitting your will to probate, gathering in and liquidating assets, ensuring that all taxes are properly remitted to the tax department, preparing an accounting to the beneficiaries of all monies received and disbursed, etc. Ideally, your executor should be someone sophisticated enough to understand the legal proceedings, the tax implications on your estate, the management of the ongoing investments. A knowledgeable and experienced executor can actually protect and/or increase the value of your estate through proper tax planning. Perhaps, in scenarios where the estate is complex and family members remote thought should be given to whether appointing a corporate executor is warranted for your own estate planning.

One of the most common mistakes made which could have an adverse effect on your intentions is the failure to provide for a gift, both with respect to legacies and to the residue of your estate. A legacy is a specific gift left to someone under your will, most commonly in the form of a cash gift. Your will should always provide for a gift to an alternate beneficiary in the event that the original beneficiary has predeceased you. The failure to do so will result in that gift failing and the proceeds becoming part of your estate when your intent could have been to benefit someone else. Even more catastrophic to your estate plan is the failure to name alternative beneficiaries to inherit the residue of your estate. In basic terms, the residue of your estate is the pool of funds gathered after all debts, taxes and legacies have been paid. For most people this is the bulk of their estate. The failure to name an alternative will result in intestacy, so that the rules of intestacy under legislation will determine who inherits, giving absolutely no effect to your true intentions.

Another frequently mentioned concern is that of protecting a beneficiary’s inheritance from that person’s spouse in the event of separation and/or divorce. In Ontario, the gift you leave to your child or any beneficiary is protected by legislation from property division should that beneficiary later separate or divorce. However, what is not protected is the income generated from that gift or the appreciation or growth in value of that gift. A simple way to avoid this is to include in your will what lawyers will often call a “Family Law Act Clause”. The insertion of this clause will ensure that not only will the actual gift be protected from division, but the income and growth of that asset will also be protected from division should your beneficiary separate or divorce.

The last piece of advice I would offer is to seek professional help in structuring your estate plan and will. Be wary of drafting your own will or of using ready-made kits so that mistakes are not made which obviate your true intentions. As always, seek the advice of your lawyer, accountant and other financial advisors to ensure that your plan will be carried out according to your wishes upon your passing.

 

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. (“SCI”), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

After two decades in the financial services industry, Jeff's experience as an advisor and branch manager define his approach to providing customized financial planning, estate planning, and managed income solutions. Key to this approach is a thorough understanding of the unique challenges and goals that exist in every client's life. He is a partner in Navigation Wealth Management.

Jeff holds the Certified Financial Planning and Chartered Investment Manager designations. He lives in Kelowna with his wife Tanya, and their two (almost adult) enterprising children.

 

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca




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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.



These articles are for information purposes only. It is recommended that individuals consult with a financial advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.


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