Wondering about what is involved in planning your estate, and where to start?
For many business owners, “estate planning” eventually becomes a collaborative effort between your accountants, lawyers (business and estate lawyers), and financial advisors. A good place to begin, however, is with an estate lawyer, who can help you focus the conversation and create an action item list, then involve other advisors if appropriate.
A robust estate plan will consider all of these key points:
- A review of your assets and how you own them. Where possible, are all assets held jointly or set up to be beneficiary-designated between spouses? Do you own the assets personally, or do they belong to your company?
- What are your objectives? Whom do you want to include as beneficiaries?
- If capital gains are triggered by your death, what is the plan for payment of this liability, and what assets will be left for division among beneficiaries? Is there a way to minimize the tax payable by your estate?
- Risk of challenge to your Will by an unhappy spouse or child – is there a Wills Variation risk?
- Inter vivos trust planning (Alter Ego and Joint Spousal Trusts) – these can offer significant probate fee savings to your estate after your death, and can also mitigate wills variation risks.
- Multiple Will planning – having 2 Wills, a Personal Will and a Corporate Will can save significant probate fees.
- Family Trust succession – who takes over as Trustee of your Family Trust, if you become incapacitated, or after your death? When will the Trust need to wind up (usually within 21 years of its settlement) and where will the assets go at that point? Who decides how the assets of the trust are distributed if you are not there to decide?
- Business succession – on your incapacity or death:
- Who assumes control of your corporation(s) if you become incapacitated or die? (Usually, an alternate director, or perhaps the executor of your Will if you have sufficient voting control).
- Appoint an attorney (under a Power of Attorney) to control the rights you have as a shareholder (vote your shares in your stead).
- After your death, who receives your shares, or will your estate be bought out of the Company? (Review the Shareholders Agreement, life-insurance funded buy-outs, or other means of funding the buyout).
- Specific needs of your beneficiaries – do you need to establish trusts to manage inheritances for children or disabled beneficiaries.
- Family law considerations for your beneficiaries – parents planning for the transition of significant wealth to children often want to ensure their children have adequate plans in place to protect the inheritance, in the event of a divorce or marital breakdown.
- Executor choices – consider age, likelihood to outlive you, ability and potential conflicts of interest. Do you want to consider a professional Trustee such as a Trust Corporation?
- Medical decision-making – including end-of-life decisions. You may wish to appoint a specific person as your decision maker under a Representation Agreement (i.e. a medical Power of Attorney)
This process can be daunting, but talking to one of your advisors can help you get started. You do not need to have all the answers – all you need to do now is take the first step.