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Resources

For some, planned giving is an integral component of philanthropy, tax and estate planning. As part of an overall strategic plan, Zenith Private Wealth Counsel can develop a planned gift strategy that maximizes tax relief while allowing you to support your favourite charities. Examples of planned giving approaches include…

Bequests
Leaving a bequest in a will is the most popular and easiest way to make a planned gift. Many donors feel that they can’t afford to make a significant gift to their favourite charities during their lifetime. However, a bequest enables a donor to accomplish this in the future with little or no effect on current finances, while significantly reducing the taxes payable by an estate.

Securities
Donating publicly-traded stock, mutual funds and options that have appreciated in value can be very tax advantageous. A donor can avoid having to pay expensive tax on capital gains when the securities are donated directly to the charity instead of selling the securities first.

Life Insurance
Life insurance provides an effective way of making a powerful gift with big benefits. Small annual payments can mean a substantial gift. A new or existing policy can be donated. A gift of life insurance can be an affordable way of making a significant donation to supporting a charity while preserving assets intended for family and loved ones.

Retirement Plans (RRSPs/RRIFs)
It is now possible to make a significant future gift to a charity, while greatly reducing taxes, by naming the charity as a direct beneficiary of RRSP or RRIF proceeds, outside of an estate. Recently, the federal government has made it very easy and convenient to make a future contribution of retirement fund proceeds, including RRSPs and RRIFs. Contributing the proceeds of a retirement fund provides a donor with an opportunity to make a significant gift to a charity, receive a donation receipt for the full value of the proceeds and use the resulting tax credits to offset taxes payable by the estate.

Residual Interest Gifts
A gift of residual interest can produce tax benefits now while allowing a donor to retain the rights to enjoy the assets during your lifetime. Examples include gifts of a personal residence, or valued artwork settled under a charitable remainder trust agreement. In each case, the donor will receive a donation receipt for the present value of the remainder interest.

Gifts of Property
Outright gifts of property such as real estate, artwork and jewellery are accepted ‘in kind’ based on suitability. For these gifts, donation receipts are issued for the fair market value of the gift.

Gift of a Charitable Remainder Trust
A donor can receive a steady income and save on taxes right away while supporting their favourite charity by establishing a charitable remainder trust. This type of trust is set up in a way that assigns the future value of assets in the trust to a charity, but allows the donor or a loved one to receive the income generated from the assets for life or a specified period of time.

1. Not Updating your Will. Many people do up a will and forget about updating it. So much can change in terms of your circumstances, assets, beneficiaries and wishes that you need to review your will on an annual basis at a set time, eg. your birthday, the first of the new year or some other memorable time. Also review your will when any major change occurs in your life, eg. divorce; death of a spouse, executor or beneficiaries, etc

2. Not Selecting the Right Executor. Being an executor of a will can be very time consuming, stressful and complex. Many people are inappropriate choices for that responsibility. Some people don’t even ask the executor if they are prepared to assume that role, they just name them in the will, or the executor predeceases them or moves to another province or country. Consider the benefits of using a trust company as an executor or co-executor and having an alternate executor. You want to avoid hassles that will leave negative memories.

3. Not Having Sufficient Financial Resources to Cover Taxes, Expenses and Debts. Poor estate planning could result in the estate being drained at death, leaving little, if any, assets left for distribution to beneficiaries. There are ways of minimizing this risk by advance planning. For example, holding assets in joint names, gifting before death, having designated beneficiaries of life insurance policies or RRSP/RRIF’s, and having sufficient life insurance. Premiums for insurance, to cover anticipated capital gains tax for example, could be paid for by yourself, or by those who will be the major beneficiaries of an asset triggering capital gains tax, eg. family cottage or shares in a business.

4. Not Taking a Strategic Approach to Estate Planning if you Own a Small Business. If you are operating a small business and die, there are many negative implications that could result, unless proper planning is done. For example, if your business goes under, your estate could be depleted due to claims by business creditors, or because you signed personal guarantees to lenders, suppliers or landlord. You should consider a buy/sell agreement secured by insurance, so that the company has sufficient resources to pay your estate out. There are many other strategic options to separate your personal assets from business exposure. In addition, you should consider estate freezes.

5. Not Taking the Necessary Steps to Protect Your Estate from US Taxes. If you own any US real estate, US publicly-traded stocks and bonds, or certain other kinds of US assets, you need special tax planning strategies. Properly done you can save most if not any taxes applicable. Otherwise, you could end up paying US estate tax at the time of your death that could be as much as 50% of the market value of your US assets, with little or no tax relief against the Canadian taxes payable upon your death.

6. Not Adopting an investment strategy for your RRSP’s and other investment portfolios that is consistent with your estate planning goals. Without proper investment planning and implementation, there might not be enough assets in your Estate to accomplish all of the bequests that are set out in your will.

7. Not Understanding and Utilizing the Benefits of Trusts. There are many types of trusts that go into effect during your life or on your death which serve a variety of different purposes all related to saving taxes or providing for others; e.g. Trusts for minors (children) are set up to look after the needs of your children until they are adults.

8. Not taking full advantage of second property tax strategies. If you own a cottage or other second property, you want to set up tax planning strategies to minimize or eliminate the tax consequences of leaving the cottage to other family members.

9. Not Preparing and Updating a Personal Inventory and Information List. This step is very important. Many executors do not have any information available, which results in frustration and delay. You need to prepare a current, complete and accurate outline with details, of your financial and personal information and update it as circumstances change. For example: assets, liabilities, income sources, personal and family information, names of key contact people and advisors, funeral wishes, business information and special instructions or guidelines for the executor. You don’t want to leave unanswered questions.

10. Not Obtaining Professional Tax and Legal Advice. With customized strategic tax and estate planning techniques, you can definitely maximize the net assets available for those you want to remember. You can also avoid potential legal problems, eg. someone challenging your estate to obtain a financial benefit or increased benefit. Skilled advice is cheap money for peace of mind and prudent planning. Otherwise, the government coffers will be significant and happy beneficiaries.