For the person who wants to maximize the gift that they leave to the next generation.
For the person who wants to preserve the value of their estate so that other assets don’t need to be sold to pay final costs and taxes.
People are often surprised by the hidden costs and total amount that needs to be paid to the CRA, to probate, through the estate and to the professionals that help administer it. As a result of this, the beneficiaries end up with less than what was intended.
The executor is left having to make difficult decisions because the estate simply did not have enough cash to pay all the bills. Will they need to sell an asset of emotional significance or pride like a cottage or a vehicle? Will other family members agree with the decision? What if they do not? Will there be lingering feelings of discord or even a court case to debate the executor’s actions?
The good news is that this is all preventable. It starts by determining how much money needs to be set aside for taxes and final expenses.
Then, you have a decision to make. How will these expenses be funded? Do you want to self fund using your other assets or use a product like life insurance to solve the problem? Setting up a Family Wealth Transfer Plan will tell your family members and executors what you have decided and how you have made those decisions, in your own words so that it is clear that this is what you wanted. By preparing ahead of time your executor wont be left with the hard decisions, and your wishes can be carried out as intended.
Insurance policies can provide the funding to help take care of the people you love
- You can invest through some types of insurance policy and have the proceeds paid out tax free on death. This enhances the amount of cash going to your estate or directly to your beneficiaries.
- You can name a beneficiary so that the proceeds of the life insurance policy flow outside of your estate directly to the intended recipient.
- You can set up life insurance policies in the names of your adult children or grandchildren. Depending on the product, this insurance structure has potential for growth over time. You can pay for these ahead of time so that they are an asset to your family members.
Insurance is a powerful tool that allows money to go directly into the hands of your named beneficiaries. It flows outside of your will, which lets it get settled and paid out quickly. Unlike the majority of your other assets, if it’s set up and monitored correctly it will not be taxable on your passing.