Our estate planning experience
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Thread: Our estate planning experience

  1. #1
    Senior Member atrp2biz's Avatar
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    Our estate planning experience

    With our third (and more likely than not) our last child about weeks away, we’ve kicked up our estate planning. I thought I would chronicle some of the conversations we’ve had along the way.

    Our primary objective is to maximize our post-tax estate to our children. Going into this process, things on our radar include:

    -Corporate structure
    -Should children own shares directly or through a family trust?
    -Estate freezing
    -Assets
    -Permanent life insurance vs. investing
    -Other
    -Updating wills and power of attorneys

    Corporate structure

    Our current thought on corporate structure is to have our children directly own shares of our corporations. The benefit of this structure is that our death would not trigger a taxable event on their allocation, thus maximizing our post-tax estate. The drawbacks are if the children run into matrimonial/credit issues as adults and the kiddie tax. However, on the latter point, we have no intention of flowing dividends to the kids while they are minors.

    In furtherance of our primary objective, estate freezing allows our children to participate directly in the growth of our corporations. We’ll do this by converting our common shares into preferred shares and re-issuing common shares to the whole family. We envision a 20% allocation of common shares to the two of us and our three children.

    Assets

    We are strongly considering permanent both-to-die life insurance, but as a blue/red, I need to create my own models to determine the point of life expectancy indifference to justify this route. The tough part has been getting input assumptions from insurance sales people in their projections. I’ll get into this a bit later.

    Other

    This the boring stuff. But one thing that we recently learned is that the residence of the executor must be considered as there are tax consequences to this. This eliminates the option to use my wife’s brother (who lives in Boston) as an executor.

    Meetings

    On Friday, we had separate sessions with MD Management and Unbiased Financial Services, a fee-only wealth manager. We outlined our balance sheet and discussed our objectives. We had a good experience with MDM and have a follow-up with an estate advisor in a week.

    What I wanted from UFS was to establish a front-loaded ‘project’ to ensure we set up our estate correctly from the start. However, they seemed to be more interested in an ongoing relationship where they would charge 0.4-1% per annum of their clients’ net worth. I asked what ongoing services they would provide and they responded by ensuring we stay in line with our investment policy. I think we’re fairly disciplined investors so I don’t see the value of paying their fees for this service. Both parties left the meeting tasked to think about potential value in a future relationship.

    This week I’m meeting with Investors Group to talk about permanent life insurance. I already had a brief meeting with them on this, but I wanted to speak with an insurance expert to walk me through their assumptions and how they flow into the death benefit calculations. I’ll add another post as a follow-up to that session.

    Last edited by atrp2biz; 2017-03-19 at 11:37 AM.

  2. #2
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    This the boring stuff. But one thing that we recently learned is that the residence of the executor must be considered as there are tax consequences to this. This eliminates the option to use my wife’s brother as an executor.
    Because the tax treatment of an estate depends on its value and other circumstances, the residency of the executor may not make a practical difference in all cases.
    A good estate lawyer can take care of any issues regarding the residency of the executor.

  3. #3
    Senior Member atrp2biz's Avatar
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    ^ Definitely. We'll be sitting down with an estate lawyer soon to help us with wills, PoA and hopefully corporate restructuring. Currently looking at Field Law and may leverage our existing relationship with Bennett Jones (although BJs would likely still be pricier).

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  5. #4
    Senior Member humble_pie's Avatar
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    doc i think you might be leaving out one important possibility in your estate planning, especially pertinent since your children are so very young.

    if both you & your wife should perish in a common accident, whom do you wish to name as tutor or guardian for your minor children? how shall the funds that will be necessary to raise the children be conveyed to the tutor? assuming you would not want to bequeath all the capital, in one huge lump sum, to the tutor upon your & your spouse's accidental deaths ... since the tutor might splurge all the monies but not necessarily upon your offspring, if you get my drift.

    the fees charged by professional trustees are shockingly high. The situation is all the more unbearable because the "prudent man rule" requires professional trustees to invest in conservative securities only. These are yielding about the same as trustees' fees, ie there would be no income left over to pay for your orphaned children's food & clothing, let alone for their schools, orthodontists, sports equipment, music lessons, summer camps, etc.

    cmf forum went through all this in another thread a while ago. There's no easy solution. For parents of minor children, the conclusion went like this: do-not-die-until-all-your-children-have-reached-the-age-of-majority.

    PS perhaps we should ask mukhang for wise suggestions re how to provide for minor children if they are suddenly orphaned.


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  6. #5
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    I'm wondering about the permanent life insurance decision in your case, is this too lower taxes?

    I don't know much about your personal situation, but I'm guessing you are fairly young if you are still having children. The thing with insurance over investing is it doesn't transfer hands until you die. Since it sounds like you are already planning on your children taking on your company after you pass, you may want to consider, that it may be 40-50 years that you have until you pass. (Which is great).

    But helping out your children more when they are younger (ie: education, buying a first home) may have a lot more value for them, than inheriting money when they are already middle aged themselves.

  7. #6
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    Assuming you want to keep managing your own investments (which sounds like the case) it sounds to me like you'd benefit from meeting with a fee for service Financial Planner. Someone who will put together a comprehensive plan for a fee and doesn't sell/manage money so you won't run into what you did with Unbiased Financial Services.


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