# Estate Planning Issues



## dogleg1 (Jul 4, 2016)

I am not up to speed on these matters but I need to bertter educate myself. My wife and I are in our eighties and we have two children to leave assets to. We own a home and have a number of 100k investments. Some folks in our category keep recommending segregated funds as a tax relief instrument but I am not sure about it. I guess there are several options like direct transfer of funds to kids...annuities etc. Our TFSA are full or nearly so. I guess my question is what is my best move to limit my taxes owed to CRA and where to start?


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## Spudd (Oct 11, 2011)

Not sure exactly what you mean by "a number of 100k investments". If they are in unregistered, then they'll be taxed on your death for capital gains between the time of purchase and the time of death. If they are in RRIF, they'll be taxed as income. TFSA will not be taxed on your death, nor will your home. 

I'm no expert in tax limitation on death since I have no kids so I'm happy to let the govt have it once I die. The strategies I'm aware of are: 
1. crystallizing capital gains while alive to reduce the burden on death 
2. withdrawing from RRIF while alive so that you're in a lower tax bracket than you would be on death
3. gifting to children while alive to avoid probate fees if you're in a probate province (but to me, these fees are so low, I wouldn't worry about them)
4. buying life insurance on yourselves so that it will pay out to cover the taxes on death (this is a gamble since life insurance at your age is very expensive)

Here's an article from an advisor discussing this topic.




__





Pay probate or income tax? | Advisor's Edge


Don’t let your client be pound foolish




www.advisor.ca


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## AltaRed (Jun 8, 2009)

Firstly, be careful of the tax tail wagging the dog. I regularly read, hear and see 'costly' (or potentially costly) mistakes being made to reduce potential income taxes in the future.

You will find segregated funds come with high commissions and/or high MERs which almost always will cost one more money in the long run. Segregated funds are issued by lifecos and they are in it to make money off of all who invest in these. You can google a number of articles which caution or denigrate these funds which are sold (not bought) to those who generally have an unhealthy attachment to future fears of taxes. I'd run, not walk, from these things.

It would be a lot more productive to continue to invest in low MER products, and/or buy a 10 year term annuity with some of the proceeds, reserve TFSA funds for yourself and gift non-registered to beneficiaries/children while alive. IOW, manage your tax bill by depleting your RRIF and non-registered funds first over, for example, 5-7 years (personal spend plus gifting). Your TFSA is not subject to income taxes upon death and passes outside of probate if you have surviving spouse as successor annuitant, and children as contingent beneficiaries. It is the last funds to tap.

Added after seeing Spudd's post: Buying insurance to cover potential taxes in one's 80s is highly unproductive. One's actuarial age at that point will be 5-10 years of longevity. That means the insurance premiums will almost have to be high enough to cover the policy face value within that time frame plus provide the lifeco with a profit. You can't win unless you intend to die earlier than the rest of your cohort. I also agree with Spudd that far too much is made of probate fees. It is indeed pennywise and pound foolish.


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## Beaver101 (Nov 14, 2011)

> ... You can't win unless you intend to die earlier than the rest of your cohort ...


 ..how about donating to charit(ies)?


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## ian (Jun 18, 2016)

I would not touch segregated funds. I would never bother with life insurance at your age.

I would seek some investment advice on low MER balanced funds, TFSA's etc. Put them on autopilot. Don't let tax issues rule your investment decisions.

I would also seek some professional advice on wills and how to structure you financial affairs in order to make it easier for your children/spouse should you pass AND how to avoid probate taxes (depending on your province of residence).

Probate is not just about probate fees. It can also be about the process IF your affairs are not in order, not properly organized or there is some disagreement between family members. It can be a one month process or a multi year process. We have friends who went through a nightmare because of this.

These are all very straightforward things to accomplish. The challenge for many people is actually getting down to it and making it happen in a timely fashion.


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## OptsyEagle (Nov 29, 2009)

All Seg Funds can do is avoid probate fees by allowing for the designation of a beneficiary on non-registered investments. As AltaRed indicated, by using them you will undoubtedly pay far more in management fees then you ever would have paid in probate fees, unless you die within the year. All capital gains at death are fully taxable to the estate and of course annual interest and dividends are taxable to you each year, just like any other type of non-registered investment. They don't really offer much for estate planning. Even the guarantees have negative issues and high costs, but since they all vary depending on the insurance company and the person investing in them I can't comment on those but to say most should be avoided.


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> ..how about donating to charit(ies)?


I didn't mention that earlier since the OP didn't mention it but that is another way to reduce the tax burden. Donate securities in kind from non-registered accounts, and especially the ones with the maximum percentage of capital gains to best leverage the neutralization of the capital gain effect. You get a tax credit for the full value of the security, including the unrealized capital gain. It's a phenomenal way to work the system in one's favour. 

This is something one can do on an ongoing* basis, or failing that and/or in addition, in one's Will or in a 'Letter of Direction' or 'Letter of Instruction' to one's executor. Meaning instructions to donate such securities and take the tax credit in your Final T1 Return. The former (in a Will) will force that to happen, while the latter is an indication of your wishes that your Executor should honor but does not have too. There could be reasons near end of life where such donations may not be in the best interest so I have deferred to put that in my 'guidance' letter to my Executor.

* My plans include funding an endowment on an ongoing basis with guidance to my Executor to top that up to manage the tax bill upon my death.


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## kcowan (Jul 1, 2010)

Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.


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## dogleg1 (Jul 4, 2016)

kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your mon
> 
> 
> kcowan said:
> ...





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.





kcowan said:


> Aside from TFSAs and charities, taxes will be paid on death of the final survivor. Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees. Most of the noise comes from people trying to get a piece of your money.


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## Eclectic21 (Jun 25, 2021)

kcowan said:


> ... Yes you may gift amounts prior to death but such need have already had the tax paid so you only avoid probate fees ...


Could be ... though AFAICT this means assuming the estate taxable income is pretty close to what was happending while living.

I'm pretty sure the gifts my parents made to us kids after retiring made little difference to taxable income versus the estate taxable income.

Or am I missing something?

Cheers


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## AltaRed (Jun 8, 2009)

I have no real idea where Keith is coming from. Non-registered accounts could have $1M of unrealized cap gains that are suddenly crystallized. That is a pretty hefty marginal tax bracket.

Gifting over a period of 10 or more years would mitigate that tax bill.


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## kcowan (Jul 1, 2010)

My point is that gifting is always non-registered (or tax-paid) money so the only tax avoidance is eventual probate.


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## agent99 (Sep 11, 2013)

kcowan said:


> My point is that gifting is always non-registered (or tax-paid) money so the only tax avoidance is eventual probate.


 I think Alta's point is that in many cases, in order to make the gift, long held securities may need to be sold. This can result in capital gains taxes earlier, rather than later. They will be deemed to be sold anyway anyway (and will be taxed). The tax rate could be higher at that time because the estate could be in a higher bracket. Probate fees will be partly saved. This may or may not be worth doing. I don't know - just trying to follow the discussion 

Ask the beneficiaries whether they would like a gift now or a slightly smaller one later. I know what our kids would say


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## Eclectic21 (Jun 25, 2021)

kcowan said:


> My point is that gifting is always non-registered (or tax-paid) money so the only tax avoidance is eventual probate.


Completely avoided ... sure.

But if one knows one has to pay taxes and has the luxury of scheduling the taxes - wouldn't a low income year be the better choice?

I'll have to confirm but off the top of my head, the range for me would be about:
retirement income (0.4) < employment income (1.0) << estate income (9.0).


Cheers


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## AltaRed (Jun 8, 2009)

Or donate that 5 banger or 10 banger in kind to charity and get rid of any cap gains tax that might be payable due to that gift to adult children.

Example: Stock X purchased for $10k and now worth $50k. Stock Y purchased for $40k and now worth $90k. Sell Stock Y and give proceeds to children. Cap gain of $50k is totally offset by donating Stock X to charity.


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## Eclectic21 (Jun 25, 2021)

agent99 said:


> ... Ask the beneficiaries whether they would like a gift now or a slightly smaller one later. I know what our kids would say


I'm pretty sure all of us kids would say now.

From the gifts that were given, three used them wisely where they were a substantial help. Two others blew through the gifts without making much of a difference to them.


Cheers


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## agent99 (Sep 11, 2013)

RBC cover the benefits of donating in kind (and other aspect of donations:



https://ca.rbcwealthmanagement.com/documents/697783/697799/Charitable+donations+of+securities+%28Nov+2017%29.pdf/929e1e29-3556-428e-9b90-14f139b8b5af



Donating assets held in an RRSP or RRIF is another possibility that could reduce taxes:



https://www.queensu.ca/alumni/sites/default/files/another_way_to_donate_from_an_rrsp_or_rrif.pdf



Posting this here so I can find it again if and when I need it


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## ian (Jun 18, 2016)

My parents each gave us the same last thoughtful gift that we appreciate to this day.

The gift? A pre-arranged cremation/funeral with explicit instructions etc. The only decision we had to make was the type of acknowledgement card. And arrange for the piper for my father's funeral.

The second was each had an up to date notorized will. Directions and intent were crystal clear. Financial affairs organized and noted.

It made both challenging situations much easier on us. I processed the Probate release. It was straightforward and fast. Very little had to go to probate-the rest was set up as joint.

We plan to do the exactly the same for our children and grandchildren. I did not realize what a kindness it truly was until it was too late to say thank you for doing this.


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## agent99 (Sep 11, 2013)

ian said:


> My parents each gave us the same last thoughtful gift that we appreciate to this day.
> 
> The gift? A pre-arranged cremation/funeral with explicit instructions etc. The only decision we had to make was the type of acknowledgement card. And arrange for the piper for my father's funeral.
> 
> ...


That was very thoughtful of your parents. 

I am trying to learn as much as possible so we can do something similar.

I have a question about the highlighted sentence above. Presumably the joint set ups were when both parents were alive. We have ours set up that way. But, how about when there was just one survivor? Were accounts changed to joint with the children?


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## AltaRed (Jun 8, 2009)

The last-to-die having JTWROS accounts with adult children saves probate fees but comes with their own risks which have been discussed many times. I wouldn't do it due to risks associated with marital property on relationship breakdown. If an adult child is one of the JTWROS owners, that child might* have an undivided interest in the assets and those assets then become family property of that child and his/her spouse. That might prompt a spouse sue for divorce to potentially get half of the assets in those JTWROS accounts. Many will pooh-pooh the risk due to the good character of he individuals but it is very real when the financial amounts are big enough, e.g. $1M. Imagine your DIL suing for divorce to get her hands on $500k. 

JTWROS assets could also potentially become an asset in the estate of that deceased adult child if s/he departs first.

* If someone is contemplating putting an adult child as a JTWROS owner, especially if that person is in a marriage or common law relationship, be sure there are agreements in place that do NOT make that child a beneficial owner of the accounts.


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## ian (Jun 18, 2016)

agent99 said:


> That was very thoughtful of your parents.
> 
> I am trying to learn as much as possible so we can do something similar.
> 
> I have a question about the highlighted sentence above. Presumably the joint set ups were when both parents were alive. We have ours set up that way. But, how about when there was just one survivor? Were accounts changed to joint with the children?


Just about everything ended up joint. The only item that went to Probate as one term deposit and one very small HISA. My mother was developing Alzheimers. A friend of my father advised him to get the wills, POA's updated etc. Their home was in both names. My father passed first. My mother was in a home by that time. I had POA. Sold the house, placed the funds in joint (with my sister). When my father passed my sister immediately moved any joint monies to her own accounts. I looked in the safe deposit box. The bank only froze the accounts/box after they were given the death certificate.

I had occasion to speak with a family lawyer shortly afterwards. He was interested in the whys and the motivations. He told me that he deals with this situation often. It is a huge issue and psych. burden for families when nothing is set up. He said, in BC at least, he often sees 2 year before an estate is finished....especially if tax returns are not up to date or there is disagreement among the survivors about how the estate should be divided. The person that I dealt with at my mothers bank branch said this was not uncommon.


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## kcowan (Jul 1, 2010)

In my case, substantial gifts to each heir enabled them to buy cottages at the perfect stage of their lives 12 years ago.

We have talked about the tax liability of the reamaining estate and they agree that holding equities is more important than the tax liablility in the long run.


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## AltaRed (Jun 8, 2009)

Don't underestimate the wolf in sheep's clothing that can rear its ugly head as regards joint accounts before the body is even cold. It happens enough times to be more than an extreme, or isolated, example. The beneficiaries then start to fight but remember that the one who was bold enough to 'make off' with funds surrepticioiusly doesn't care in the first place. There is no love lost when considerable money is at stake. Use inter-generational JTWROS accounts judiciously and cautiously.

Those who pooh-pooh such warnings, and there is some of that in this forum, have either not experienced it themselves or have close friends/relatives who have not experienced the 'rifling' of JTWROS accounts.


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## agent99 (Sep 11, 2013)

kcowan said:


> We have talked about the tax liability of the reamaining estate and they agree that holding equities is more important than the tax liablility in the long run.


Never thought about that for our case with life expectancy of surviving spouse of say 15 years. If portfolio and other assets have to be liquidated at death of survivor, tax rate could be at maximum. Probate fees on top of that. ( Is the probate fee only 1.5% in Ontario?  ($14,250 per $million) I somehow thought it was much higher.)

Assume $1million invested of which $340k is in RRIF and $660k in unregistered account with 3x capital gains ($440k)

Other income in year of death from pensions, dividends, interest etc say $100k

Home appraised at $1million at time of death. Presumably no capital gains, but proceeds of sale subject to probate fees?

Income in year of death for tax purposes: $100k (other) + $440 (CGs) + $340k (RRIF) =$880k Taxes $440k
Estate value for probate $1million investments + $1million (home) =$2million :- Probate fees $28.5k.

IF my rough math is close, that would mean tax liability would be $468.5k

Unless other measures are taken, a portfolio today valued at $531,500 ($1M - $468.5k) would have to grow to $1Million in 15 years after withdrawals for ongoing living expenses and taxes (4.3% pa) Lets say those are 4%. Portfolio Total return would need to be about 8.3%.

8.3% would be a bit optimistic, I would think. But maybe at least in range of possible returns. Of course different numbers could come up with a different result.

Is above off the cuff analysis anywhere near the way things would work out?


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## kcowan (Jul 1, 2010)

Eclectic21 said:


> Completely avoided ... sure.
> 
> But if one knows one has to pay taxes and has the luxury of scheduling the taxes - wouldn't a low income year be the better choice?...


Sure a low income year would be a great choice. I have been retired for 19 years and have not exprienced one yet.


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## Eclectic21 (Jun 25, 2021)

So essentially - the "only tax avoided is probate" assumes the OP has a similar retirement income to yours.

The OP will know for sure whether the assumption holds. My parents had many low income years in retirement and unless something dramatically changes for me, I'm going to be similar.


Cheers


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## Retired Peasant (Apr 22, 2013)

agent99 said:


> Income in year of death for tax purposes: $100k (other) + $440 (CGs) + $340k (RRIF) =$880k Taxes $440k
> Estate value for probate $1million investments + $1million (home) =$2million :- Probate fees $28.5k.
> 
> Is above off the cuff analysis anywhere near the way things would work out?


Maybe. If will includes in-kind donation of the stock subject to CG...1. no cap gains on the $440 and 2. donation tax credit will reduce other taxes owing.
Also the commission on selling the home is going to be far more than probate fee.


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## AltaRed (Jun 8, 2009)

I've never had a low income year in 15 years of retirement either.


agent99 said:


> Never thought about that for our case with life expectancy of surviving spouse of say 15 years. If portfolio and other assets have to be liquidated at death of survivor, tax rate could be at maximum. Probate fees on top of that. ( Is the probate fee only 1.5% in Ontario?  ($14,250 per $million) I somehow thought it was much higher.)
> 
> Assume $1million invested of which $340k is in RRIF and $660k in unregistered account with 3x capital gains ($440k)
> 
> ...


Probate fees are highest in ON and BC at about 1.4% or thereabouts. Yes, all assets of last-to-die are subject to probate including principal residence.

Your tax estimate is too high, i.e. cap gains are taxed at 50% rate ($220k), and it can be mitigated completely with a charitable donation of securities in kind of $220k (not costing you one penny). Donate even more to mitigate even more taxes. IOW, give it to charity rather than the government.

Working the system to mitigate probate fees is often counter-productive, or at least carry substantial risk. Accountants et al love to put the 'fear of probate' into people to extract fees of their own.

Added: Probate fees in ON - 1.5%, BC - 1.4%, NS - 1.695%, AB - $525


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## agent99 (Sep 11, 2013)

Yes, my tax estimate is too high. The "other income" would likely be 50% dividends, so maybe taxes might as a guess be 40% or $353k. The point I was trying to determine, was that probate fees would be small compared with the taxes due.

With respect to donations, from what I have read, these can be specified in the will or can be left to the discretion of the executors. The donations would be deemed to have been made immediately prior to death.

It seems to get a bit complicated. Assuming the donation would be made using stocks in-kind, right after death, the will would need to be adjusted regularly based on the value of the stocks held and the value of the registered accounts that will collapsed. As time goes by RRIFs get smaller and taxable accounts may increase in value. Some way of optimizing donations with time would be useful! Donations need to be coordinated with the charity ahead of time, but may only take place many years in future.

*Turning this into a question:* How do you write future charitable donations into a will in a way that they will reduce the final tax bill, perhaps10-20 years hence, in an optimal way?

PS: Our retirement income continues to increase. Only lower years could have been between retirement age and 72, but even then we boosted income by making early RRIF withdrawals.


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## AltaRed (Jun 8, 2009)

You don't need to (should) get too specific in a will.

Your lawyer can draft a clause that essentially requests the Executor to "donate the most highly appreciated securities in kind to one or more of x y and z charitable organizations that will mostly offset the cap gains tax bill upon death" and if that is too open ended to you, add a condition like "subject to the value of the donation not exceeding 20% of the value of the aggregate of the investment account assets of the estate."

I have a few clauses in my own Will that have 'subject to' percentage limitations.


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## Retiredguy (Jul 24, 2013)

canadahelps.org. 

Itself a charity makes this all very easy.


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## agent99 (Sep 11, 2013)

Retiredguy said:


> canadahelps.org.
> 
> Itself a charity makes this all very easy.


I had a look at that. Looks convenient for donations prior to death. Didn't see anything about estate planning donations. 

By the way, I am sure we donated through them in the past.


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## agent99 (Sep 11, 2013)

AltaRed said:


> You don't need to (should) get too specific in a will.
> 
> Your lawyer can draft a clause that essentially requests the Executor to "donate the most highly appreciated securities in kind to one or more of x y and z charitable organizations that will mostly offset the cap gains tax bill upon death" and if that is too open ended to you, add a condition like "subject to the value of the donation not exceeding 20% of the value of the aggregate of the investment account assets of the estate."
> 
> I have a few clauses in my own Will that have 'subject to' percentage limitations.


I do need to review our wills. I seem to recall our lawyer recommending that we involve an estate planner who would assist with the future tax issues. 
As a couple, our will would initially be quite simple with the survivor receiving everything. The survivor's will would be more complex if it is to reduce final estate taxes. 
I suppose the wills could cover all eventualities. But as mentioned, the situation 10-20 years ahead could be quite different. 
Anyway, I do need to talk to the experts, starting with the lawyer (who I haven't seen for years!)


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## AltaRed (Jun 8, 2009)

It is not hard to handle surviving spouse vs last-to-die. It is one clause in a Will which is effectively.... 'everything goes to spouse but in the event my spouse pre-deceases me,........(and away one goes the broad structure of estate proceeds). Any competent lawyer would have magic clauses that covers these things. 

Trust me. It is not difficult to structure a Will for 20 years hence, with or without a surviving spouse.


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## Retiredguy (Jul 24, 2013)

agent99 said:


> I had a look at that. Looks convenient for donations prior to death. Didn't see anything about estate planning donations.
> 
> By the way, I am sure we donated through them in the past.


Sorry. Didnt mean to mislead about post death contributions.


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## Eclectic21 (Jun 25, 2021)

AltaRed said:


> I've never had a low income year in 15 years of retirement either ...


Congrats.

As I say, that's not my relatives experience and it looks like a long shot for me.
Bottom line is YMMV depending on one's situation as opposed to the blanket statement.


Cheers


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## Retiredguy (Jul 24, 2013)

To Dogleg1, going back to ur op you reported having little knowledge of estate and taxation issues and implied your estate objective was to leave everything to your kids. I think for you and anyone reading this thread or whose interest is piqued, it's important understand that gifting securities optimizes taxation, and estate planning, ONLY IF your objective is to give to charities. With gifting to charities you or your estate will always have less money remaining than just paying the capital gain tax.
This can be demonstrated by
a 100000 securities donation with a ACB cost of 20000 and then the 100000 charitible receipt claimed against income in the highest tax bracket. (I've used BC 53.5 %.)

Paying the cg tax on the same 100k with ACB of 20k would leave your kids 78,600. Gifting securities to a charity(s) would leave them 53,500.

So if your objective is to leave max $$ to your kids/heirs gifting securities won't help.


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## AltaRed (Jun 8, 2009)

@Eclectic21: A retirement plan should never result in a low income year post-retirement. There may be years of 'high' income when unrealized cap gains are crystallized but it is hard to imagine low income years, what with a portfolio withdrawal plan such as VPW or 4%SWR, pension income, and recurring investment income. Folks are not doing it right if they have a low income year.


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## AltaRed (Jun 8, 2009)

Retiredguy said:


> To Dogleg1, going back to ur op you reported having little knowledge of estate and taxation issues and implied your estate objective was to leave everything to your kids. I think for you and anyone reading this thread or whose interest is piqued, it's important understand that gifting securities optimizes taxation, and estate planning, ONLY IF your objective is to give to charities. With gifting to charities you or your estate will always have less money remaining than just paying the capital gain tax.
> This can be demonstrated by
> a 100000 securities donation with a ACB cost of 20000 and then the 100000 charitible receipt claimed against income in the highest tax bracket. (I've used BC 53.5 %.)
> 
> ...


You make the securities in kind donation an offset to the cap gains taxable amount @ 50% of the gains. Not the full amount. Run some examples through your tax software.


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## Retiredguy (Jul 24, 2013)

AltaRed said:


> You make the securities in kind donation an offset to the cap gains taxable amount @ 50% of the gains. Not the full amount. Run some examples through your tax software.


I did... Before l posted but you obviously didn't. Check my numbers in the example. They are correct. Of course cg tax is effectively half of the marginal rate. The 80k gain in my example becomes 40 k taxable at 53.5. %. resulting in tax of 21400 payable off the 100,000 leaving 78600. Then if gifting the cg tax is ignored and the gifter gets to claim 100000 charity deduction resulting in 53500 tax saving.

If you still think I'm wrong please reply after doing your own whatifs using BC and the highest tax bracket.


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## AltaRed (Jun 8, 2009)

The key is not to gift $100k to charity in the Final T1. It is to gift just enough to cover the $21,400 cap gains tax that would have been paid on the $100k non-registered stock sale triggered on date of death. That is what an Executor (or the Accountant on behalf of the Executor) would do.

Added: It takes a bit of 'what if' analysis to pick the right securities in the portfolio to donate-in-kind to offset the cap gains realized in the rest of the portfolio.


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## Retiredguy (Jul 24, 2013)

AltaRed said:


> The key is not to gift $100k to charity in the Final T1. It is to gift just enough to cover the $21,400 cap gains tax that would have been paid on the $100k non-registered stock sale triggered on date of death. That is what an Executor (or the Accountant on behalf of the Executor) would do.
> 
> Added: It takes a bit of 'what if' analysis to pick the right securities in the portfolio to donate-in-kind to offset the cap gains realized in the rest of the portfolio.


Example? I'm OK if you cherry pick to make the point. I'd be pleased to learn (seriously) and so would my kids (LOL) that me donating some long held securities when I die gives them more $. 

From my study of the issue and whatif's in taxtips calculator, I'm not seeing it. I have never donated securities but have read up in the issue over the past several years.

For my example I used taxtips.ca BC, 2021 single

500,000 RRSP/RRIF
80,000 Total actual CG (40K taxable) (100K securities with 20K ACB)
100,000 Donation

(Removed 80,000 CG after calculating 21400 CG tax, then added in 100,000 Donation to calculate tax reduction.)


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## AltaRed (Jun 8, 2009)

I have not followed up on your example because I don't know why you would arbitrarily use a $100k donation to offset a $21.4k cap gains tax. The donation should be back-calculated.

That all said, I don't believe I suggested anything about leaving kids more (or the same) upon death. My apologies if my posts did not clarify that.

In my view, it is about getting that money to charitable causes instead of to government in the form of cap gains taxes. If that means slightly less to family beneficiaries, so be it. They should be pleased that Mom or Dad optimized their estate, particularly a substantial estate. Whether a beneficiary gets, for a made up example, $450k instead of $500k is a moot point if a charity gets a 6 figure sum too. Even less important if the numbers are larger, e.g. a beneficiary getting $1M instead of $1.1M.

Added: I think the original point of the thread was about mitigating taxes, and to a lesser degree, probate fees. The primary mechanisms are ongoing giving while alive to mitigate tax bracket creep on a Final T1, albeit at some cost of loss of tax deferment, and/or through charitable giving, either ongoing or via the Final T1.


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## Retiredguy (Jul 24, 2013)

AltaRed said:


> I have not followed up on your example because I don't know why you would arbitrarily use a $100k donation to offset a $21.4k cap gains tax. The donation should be back-calculated.
> 
> That all said, I don't believe I suggested anything about leaving kids more (or the same) upon death. My apologies if my posts did not clarify that.
> 
> In my view, it is about getting that money to charitable causes instead of to government in the form of cap gains taxes. If that means slightly less to family beneficiaries, so be it. They should be pleased that Mom or Dad optimized their estate, particularly a substantial estate. Whether a beneficiary gets, for a made up example, $450k instead of $500k is a moot point if a charity gets a 6 figure sum too. Even less important if the numbers are larger, e.g. a beneficiary getting $1M instead of $1.1M.




My original post and example was because Dogleg1 was asking for tax saving ideas as he was leaving his estate to his kids (after spouse). Others including yourself suggested donating securities in their responses which clearly would have implied to Dogleg1 (who acknowledged being uninformed) and others reading that doing so would have increased the money ending with his kids. Donating securities won't help Dogleg1 (and others with similar estate plans who may be reading) was the thrust of my post and you now acknowledge this.

I have looked at many examples posted online by foundations and tax accounting firms and see nothing unusual about my posted example. Most of them compare donating after paying the CG tax versus donating securities directly and avoiding the CG tax.

I used 100k as a round number of sold securities with a CG of 80k and a ACB of 20K as a 5 x gain is reasonable for a long held stock. It is the gain of course in my example that results in the notional tax owing 21400. I don't understand " The donation should be back calculated" Could you expand/clarify. If you mean I should have done the comparative example as other online posts do, I simply saw no need as I agree IF one wants to donate, donating securities is optimal.

If you would like to clarify, that point, that would be helpful and then we can move on. Thanks.


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## AltaRed (Jun 8, 2009)

My point is that on a Final T1, all non-reg assets will be deemed sold and that implies a certain amount of cap gains taxes. Example: $1M in non-reg assets which happen to have $700k in cap gains in aggregate ($350k in taxable cap gains). Some of them might have a 10% cap gain while others have 300% cap gain. Instead of paying cap gains taxes on that $350k to the gov't, back calculate how much in securities-in-kind out of that $1M needs to be donated to essentially erase the cap gains tax bill. It is iterative until the balance is found. One would preferentially donate the securities with the largest gains (e.g. the one with the 300% cap gain) so as not to subject that one to the cap gains tax calculation.

It is a tax saving concept but does not mean the beneficiaries get more. That is all I can say on the subject based on previous situations I am familiar with.


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## Retiredguy (Jul 24, 2013)

AltaRed said:


> My point is that on a Final T1, all non-reg assets will be deemed sold and that implies a certain amount of cap gains taxes. Example: $1M in non-reg assets which happen to have $700k in cap gains in aggregate ($350k in taxable cap gains). Some of them might have a 10% cap gain while others have 300% cap gain. Instead of paying cap gains taxes on that $350k to the gov't, back calculate how much in securities-in-kind out of that $1M needs to be donated to essentially erase the cap gains tax bill. It is iterative until the balance is found. One would preferentially donate the securities with the largest gains (e.g. the one with the 300% cap gain) so as not to subject that one to the cap gains tax calculation.
> 
> It is a tax saving concept but does not mean the beneficiaries get more. That is all I can say on the subject based on previous situations I am familiar with.


Agree if wanting to donate securities, use securities with low ACB. Of course the objective might not be to eliminate all CG on all securities but rather donate a random amount say 100,000 (of a 1m estate). In which case pick 100000 in a security(s) with a low acb may be all that is required, no many whatifs for the accountants and executors!

Thanks for the discussion.


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## agent99 (Sep 11, 2013)

Retiredguy said:


> no many whatifs for the accountants and executors!
> 
> Thanks for the discussion.


I have a question about those 'accountants and executors'.

At the moment, our wills name our two adult children as co-executors. The wills were written a long time ago. Our wills need updating as our estates will now be somewhat more complex. I don't think it is reasonable to expect our kids to be executors. It is not something they know anything about. 

What do others do? Is it reasonable to still name both kids as co- executors, but specify in will who they should get help from to handle the actual work? 

If so, who would that best be? Lawyer, trust company, bank?


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## Spudd (Oct 11, 2011)

agent99 said:


> I have a question about those 'accountants and executors'.
> 
> At the moment, our wills name our two adult children as co-executors. The wills were written a long time ago. Our wills need updating as our estates will now be somewhat more complex. I don't think it is reasonable to expect our kids to be executors. It is not something they know anything about.
> 
> ...


You definitely don't want co-executors. That would mean that both of them have to sign off on every decision. Unless they are located in the same town/neighbourhood, logistics become an issue. Even if they are, it's still a hassle. They would need to decide which of them is the "main" executor who does the work and then gets signoff from the co-executor.

My dad's will currently has me and my brother as co-executors and I am trying to get him to change it, because my brother lives in Thunder Bay and I live near Toronto. The logistics are mind-boggling. 

If you don't think that they are capable of being executors, then I would suggest appointing a third party as executor directly rather than appointing the kids and then specifying who they need to hire. I believe the most common third party executors are the estate division of banks. 

As an example here's TD's page:





Estate Planning and Settlement Advice | TD Canada Trust


Learn how to plan or settle an estate with easy to understand advice. We’ll walk you through some of the key steps to help make the process clear and less stressful.




www.td.com


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## kcowan (Jul 1, 2010)

I have appointed my oldest son as executor and the other heir is in the same area at the moment. Also he can decide to hire an Executor if need be. I figure it is not my job to decide everything in advance. My brother and I were joint executors, I took over electronic payments of all utilities on his properties and he looked after dealing with the lawyer and dealing with other local GTA issues. It worked fine.

Nowadays, remote authorizations are easy and cheap.


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## AltaRed (Jun 8, 2009)

agent99 said:


> At the moment, our wills name our two adult children as co-executors. The wills were written a long time ago. Our wills need updating as our estates will now be somewhat more complex. I don't think it is reasonable to expect our kids to be executors. It is not something they know anything about.
> 
> What do others do? Is it reasonable to still name both kids as co- executors, but specify in will who they should get help from to handle the actual work?
> 
> If so, who would that best be? Lawyer, trust company, bank?


My view is NOT to have co-executors. Perhaps name one as Executor and the other as 'alternate' in event the named Executor pre-deceases you OR is in a situation where s/he cannot act. The Executor can then resign (renounce) in favour of the alternate. In Spudd's case, the easiest way to handle of co-executors is to decide among the co-executors who will resign in favour of the other. I did that in the case of my father's estate. Bro and I were co-executors but I was an ex-pat in the USA at the time. I resigned, allowing my bro to proceed on his own.

An Executor does not have to be that knowledgeable in legal and accounting affairs as that expertise can be hired as and when necessary. A good executor is simply a good planner and coordinator, and has the conscientiousness to conduct estate affairs methodically and on a timely basis.


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## agent99 (Sep 11, 2013)

We didn't want it to look like we favoured one kid over the other, so we originally named both as co-executors. Location isn't a problem because they live quite close to each other, although a few hours from where we are. Realistically, I think a 3rd party would be a better choice. Who that would be, would have to wait until the time which could be in 15-25 years. That is why our thought was to state in will who (which company) the named executor(s) should hire to handle the wind up of the estate. Possibly our bank.

With taxes, bills and donations handled mostly on-line these days, presumably we should make a list of all accounts along with the passwords needed to access them. Keeping the passwords updated would be another ongoing chore. Even the ones used to access our computers. Perhaps when there is just one survivor, he/she should start to train one heir to handle the household and other finances?

My mind spins when thinking about these things, That usually results in nothing being done


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## AltaRed (Jun 8, 2009)

An Executor has many other duties than just the tax returns and probate. Any one of a dozen links will provide a list of duties that include funeral preparations, disposal of personal belongings, family heirlooms, etc. I think you will find it is better to have a General Contractor (family friend or family member) who can manage the project including hiring sub-contractors such as lawyers and accountants as necessary.

The online world is real and this is where a 'digital will' comes into play. A list of accounts plus a Password Manager that is the 'login' for all these accounts. All the executor will need is the password for the password manager. It is actually relatively simple. My LastPass password manager has the login credentials for over 100 accounts, including this forum. The Executor has to eventually be able to access almost all these accounts and cancel/delete them over time. Example of Digital Will


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## agent99 (Sep 11, 2013)

Just an aside - I abandoned LastPass when they limited the free version use to just one device. Now using Bitwarden which is free and works on multiple devices. 

I do not include critical accounts on password managers. Things like bank and investment accounts. As we know, password managers have been compromised at times. Those passwords are still kept in a little black book or just in our heads. They are also theoretically in a small home safe, but we have been lax about keeping those updated. 
I do like the idea of a digital will. Maybe a winter project.


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## OneSeat (Apr 15, 2020)

AltaRed said:


> The online world is real and this is where a 'digital will' comes into play. A list of accounts plus a Password Manager that is the 'login' for all these accounts. All the executor will need is the password for the password manager. It is actually relatively simple. My LastPass password manager has the login credentials for over 100 accounts, including this forum. The Executor has to eventually be able to access almost all these accounts and cancel/delete them over time. Example of Digital Will


I have had two advisors recommend not to "over-digitalise" wills etc. Their reasoning being that the digital world will change significantly between now and whenever the vast majority of wills are actioned. One actually said, in a humorous way, "If you know you are going to die tomorrow then it is a good idea".

They both recommended being very clear what bank and investment accounts etc are involved then one's executor can approach those organisations under whatever system applies at that time.

Alta - I really appreciate all the useful information that you post on many subjects - so much so that I hate to take an alternative view on this one.


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## AltaRed (Jun 8, 2009)

A digital Will is not necessarily a formal Will and should not be in my opinion.

It can simply be a document you provide to/for your Executor that lists your entire online presence so that your Executor can methodically de-activate/delete/cancel all one's online accounts. Someone needs to be able to unwind your online presence after your death, including for example, membership in CMF, one's entire footprint on Facebook et al. 

We are not in disagreement.


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## OneSeat (Apr 15, 2020)

AltaRed said:


> We are not in disagreement.


Good.


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## kcowan (Jul 1, 2010)

My brother had a holographic will in his bed side table. Since I was the only heir, it was no problem. The only surprise was that he wanted his ashes interned with Mom and Dad. That took three months to get approved. See we had the Celebration of Life and then had a separate interment ceremony with those that has missd the orignal.


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## Eclectic21 (Jun 25, 2021)

agent99 said:


> ... I don't think it is reasonable to expect our kids to be executors. It is not something they know anything about.
> 
> What do others do? Is it reasonable to still name both kids as co- executors, but specify in will who they should get help from to handle the actual work?


For my parents - it depended on which kids. 

The older three would have been a disaster. The younger two were more thorough, interested and financially aware so they were named co-executors.

What they ran into was by the time the first parent passed on, the co-executors were about 800 km apart. There were lots of delays as documents had to be faxed, signed and faxed back. In person help had to be scheduled around vacation times.

The surviving parent was convinced to change it to the local executor as a sole executor and the far away one as a backup, if the first executor was incapacitated or unwilling.

The second round was far speedier.


Relatives and friends have had friends or a FI that they have a relationship with to be the executor.


Cheers


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## Eclectic21 (Jun 25, 2021)

Spudd said:


> You definitely don't want co-executors. That would mean that both of them have to sign off on every decision. Unless they are located in the same town/neighbourhood, logistics become an issue. Even if they are, it's still a hassle ...


Agreed.




Spudd said:


> ... They would need to decide which of them is the "main" executor who does the work and then gets signoff from the co-executor ...


Depends on the co-executors with a heavy influence on the logistics. 

For the most recent co-executors in our family, one was local so they did all the leg work, had the documents faxed and the other helped as they could, as vacation allowed.

The co-executors before that split up the work. They met regularly to plan, arrange mutually agreeable times to sign paperwork, clean out the safety deposit box, get updates on the status and discuss any differences of opinion on next steps to proceed. 'Course the travel distance for this situation was about an hour versus about eight hours for more recent co-executors.


Cheers


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## Retiredguy (Jul 24, 2013)

agent99 said:


> I have a question about those 'accountants and executors'.
> 
> At the moment, our wills name our two adult children as co-executors. The wills were written a long time ago. Our wills need updating as our estates will now be somewhat more complex. I don't think it is reasonable to expect our kids to be executors. It is not something they know anything about.
> 
> ...


I was co-executor with a Trust Company, but the Trust Company was the prevailing executor meaning if we disagreed their decision prevailed. B/C the Trust company held all the assets I suggested we could, with the agreement of all (7) beneficiaries, avoid probate (I was not a beneficiary). There was unanimous agreement among the beneficiaries as to the terms of the will and the deceased's children signed off waivers of their rights to apply to have will varied, and the Trust Company agreed not to probate the will. Frankly, absent my imput, the company would have followed routine procedure and probated the will. So costs and time to resolve the estate was reduced but even then it took a long time. One surprizing expense was the actual cost of ads - Notice to Creditors in the papers.

I have my children named co-executors but one child named as the prevailing executor in the event of disagreement. Fact is one kid will be a better fit fulfuling all that is required than the other. To the extent possible this conveys to both that we're not favouring, but there needs to be a way of moving ahead in a business like manor. It also indicates that they need to fully share all information each step of the way. Our kids are named equal beneficiaries so we think that gives the best chance of keeping disagreements at bay... but you can only do so much. They can of course seek professional help with accountants, lawyers etc of their choosing if need be.

Our wills are 13 yrs old but remain mostly appropriate. Everything to wife if I die and visa versa with each of us named sole executors. As it stands if either dies our wills won't even be required.- JWROS etc. If both of us are dead then everything goes to the kids as above. No plans to change that but it is the third level that requires some thought as we now have "in law spouses" and g/kids. So the whatifs come into play.


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## kcowan (Jul 1, 2010)

One thing your should be aware of is that everyone named in the will has to be contacted, so DWs estranged brother was specifically excluded from the will. A skip tracer was hired and he was found in a seniors home in Nanaimo. We had a tearful reunion and provided him with anything he wanted.

He passed on 2 years later from kidney failure! We asked why they did not try to find a donor. They said he had been on chemicals to balance his behaviour and they don't try to extend his life! It was sad.

I wanted to punch someone! There are so many thing we don't know about.


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## Retiredguy (Jul 24, 2013)

kcowan said:


> One thing your should be aware of is that everyone named in the will has to be contacted, so DWs estranged brother was specifically excluded from the will. A skip tracer was hired and he was found in a seniors home in Nanaimo. We had a tearful reunion and provided him with anything he wanted.
> 
> He passed on 2 years later from kidney failure! We asked why they did not try to find a donor. They said he had been on chemicals to balance his behaviour and they don't try to extend his life! It was sad.
> 
> I wanted to punch someone! There are so many thing we don't know about.


Yes, In BC at least, all intestate first level beneficiaries must be notified when probating a will. Example a elderly lady with no kids or spouse, leaving everything in her will to her nephews and nieces. Her parents if alive must be notified. If not, any siblings must be notified, if none, then any other N&N not named in the will must be notified. The intestate beneficaries must be mailed a copy of the will and appropriately reported and certified in the probate submission.

As you say estrangement's and just out of touch relatives may require tracking down.


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## agent99 (Sep 11, 2013)

I know very little about these things and assumed all wills would have to be probated. But it seems that at least when the first partner dies, that may not be required. I found this article for Ontario probates:






When is probate required? | ONTARIO ESTATE LAW


When is probate required? Often. Probate is required for most estates in Ontario. In a few, relatively rare cases, the requirement to probate is waived or avoided by pre-death planning. Probate is required when Court approval of the vesting of…



ontario-probate.ca


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## AltaRed (Jun 8, 2009)

It depends on what is left in the estate that is not JTWROS to a suvivor or a named beneficiary in the case of registered accounts. If there is nothing left of any consequence, then probate is not required because there are no assets to distribute.

Probate is simply the act of physically establishing the legitimacy of the Will (e.g. the latest and properly executed), its terms, and the Executor of the Will and thus Executor authority. 

Howeve, regardless of no probate, the Executor still has a number of duties including disbursements, tax returns, etc.


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