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Investment Planning Component Six: Estate Planning

A little over six months ago, we started looking at six components that make up a successful investment plan.  If you’ll recall, they are as follows:

  • Financial Management
  • Insurance and Risk Management
  • Investment Planning
  • Retirement Planning, and
  • Tax Planning

Today we come to the sixth and final component, Estate Planning.

In many ways, the words “Estate Planning”, whenever they were chosen in history, were an odd choice.  They paint a picture of a vast sweeping estate of land, likely in the country, with a great big house or ‘manor’.  Perhaps there are beautiful gardens or parkland and the entire property is owned by some family of noble heritage.

As romantic as that is, most of us don’t have a vast estate, and although perhaps we are noble in spirit, we are certainly not noble by birth.  In our lifetimes, and through our efforts, perhaps we’ve acquired for ourselves a house, a pension, some RRSPs, TFSAs, or other savings.  Does this modest accumulation truly require estate planning?

It turns out that it does.  From our point of view, “Estate planning focuses on the payment of expenses and obligations at death and the transfer of assets to successors under the Will and outside the Will.”  To put it more simply, you will want to be prepared to pay any leftover bills, debts, and taxes once you die and can’t do it yourself.  Once completed, you’ll have arranged the transfer of what’s left over to the people or organizations you care about.

Given that, what is involved, and why is it important for you not to neglect it?  Let’s look at all the things that Estate Planning looks to cover.

Anticipating What You’ll Have at the End

Looking at the definition above, “estate planning focuses on the payment of expenses and obligations at death,” consider your own assets and liabilities.  Do you owe a lot of money on a mortgage for example?  Do you have young children?  Could your spouse manage all your family expenses if your earning power suddenly disappeared with your passing?

There are different needs at different periods of your life.  If you do owe a lot of money on a mortgage, and have young children, and are a family that relies on your income or the dual income of you and your spouse then your death could have significant repercussions on their lifestyle.  You can; however, address these in advance.

On the other hand, perhaps, you’re retired, have RRSPs, TFSAs, a paid for house, etc.  With the help of Gary Koss, and LGK Wealth, you can look forward and project the value of your estate into the future, and as a result, anticipate what you’ll have left over to pass along once you’re gone.  Doing this exercise may create opportunities to make changes (i.e. reduce taxes) that would allow you to pass on more in the end.

How Will You Dispose of Your Assets?

The first place most people start is by creating a will.  A will is a legal expression of your wishes regarding the disposal of your assets after death.  If you pass away without one, you are considered to have passed away intestate, and provincial legislation will decide how your assets will be disposed of.  In other words, by making a will, you control how your assets are disposed of, not the government.

The person who will do the work on your behalf, and essentially follow the wishes you’ve laid out in your will is called the Executor.  To learn more about this role, please see our article from March, 2017 entitled “How to Choose Your Executor”.

Prior to the distribution of your estate, the executor will need to apply to the provincial court to get the will validated and to give them the authority to act on your estate’s behalf.  These Letters of Probate are requested by organizations like banks and insurance companies to protect them when they’re asked to transfer property to beneficiaries.  Obtaining Probate has fees associated with it based on the value of your estate.  These fees can often be reduced with a little advance planning and when you know how you wish your estate to be distributed.


There are a number of ways that tax may arise upon your passing.  For example, at death, you are deemed to have disposed (sold) all of your assets at their current fair market value.  If you paid less for them than their fair market value, you’ll have a capital gain on the difference which will be taxed on your final return.  Another example might be your RRSP.  If you have investments left in your RRSP at the time of your death, the value is considered income and will be taxed accordingly before any of the money can be distributed to your beneficiaries.

There are ways to reduce the amount of tax you pay at death, some you may already be doing (i.e. naming your spouse as beneficiary on your RRSP), while other’s you may not have considered (i.e. taking more money out of your RRSP annually while you are alive and in a lower tax bracket so that you don’t end up with a large tax bill at death).

When considering taxes, there is potentially an opportunity for everyone to maximize their savings, investments, and ultimately their estate, while not overpaying the Canada Revenue Agency.

Trusts, Charity, US Assets

In the future, we’ll write separate articles on each of these topics, but for now we’ll provide a very brief introduction.

Trusts:  Trusts are powerful tools and have many uses.  The CRA defines a trust as “a binding obligation, voluntarily undertaken, but enforceable by law when undertaken.”  You can set up a trust in life (inter-vivos) or at death (testamentary) and it can be used to tax plan, manage assets for underage children, maintain privacy, provide creditor protection, reduce probate, and numerous other potential strategies.

Charitable Giving:  When people pass away, they often have an organization that is special to them that they’d like to leave some money to.  That organization might be a cherished charity, a hospital, or perhaps their religious faith.  The CRA allows a tax deduction for charitable giving and during one’s lifetime, the amount you can claim on your tax return is up to 75% of net income.  In your year of death, and the year prior, the limit is 100% of net income.  You don’t just have to donate cash either.  You can also donate assets like investments, business inventory, and cultural property (i.e. paintings), as well as others.

US Assets:  If you have significant assets in the United States, such as rental property, or a sizeable portfolio of US investments, you may have a US Estate Tax issue at the time of your passing.  For most Canadians, this is not an issue; however, if the value of all of your “worldwide assets” exceeds $5.45 million, then you’ll want to do some additional planning and speak with your accountant.

Powers of Attorney

Often times, prior to our passing away, we go through a period where our ability to manage our affairs diminishes.  This can be for any number of reasons (ex. Alzheimer’s Disease).

Given this, it is advisable to create Powers of Attorney (for both property and personal care) that will allow someone else to act on your behalf when you are no longer able to do so.  We did a podcast in May of 2017 discussing Powers of Attorney that you can find here.

In Conclusion

As discussed, the word estate carries with it a connotation of vast amounts of wealth; however, it doesn’t have to be that way.  Very simply, planning for your estate involves understanding what you have now, anticipating what you’ll have when you pass away, and ultimately looking for ways to ensure that you achieve your wishes for the transfer of your estate with the maximum amount of benefit for the people and institutions you care about.

Thank you for reading our six step investment planning process.  If you’ve missed any of the articles, please go back and read them.  All are important elements in ensuring that you achieve your personal and financial goals.  Here at LGK Wealth Management, we’re always happy to answer any questions you have, and to help you along with any one of these components.

Call 1-780-426-2400