8 mistakes not to make in your estate plan

What is estate planning? The nature and extent of the rights to asset ownership with respect to land, property, and financial assets and/or life insurance benefits can be given over to heirs using documents referred to as the Last Will and Testament, drawn up by a lawyer.

shutterstock_69171412 MEDIUM SIZE

It is important to plan the most efficient manner of leaving hard-earned assets to heirs. Try to avoid the following mistakes:

  1. The testamentary trust (the will) is not updated. There are many phases in life, and each brings change that can definitely necessitate a change in a will. Without an updated will, deceased heirs may be named, or monies in trust may conflict with your current situation. Make sure your will is updated.
    • If there is no will, the government will decide who gets what and the estate may be subject to increased probate fees. Your estate may be deemed intestate, and your provincial government can appoint trustees who may then divide the estate according to legislation, not your wishes.
  2. There is no guardian directive. If there are young children, and no will, who will take care of the children if both parents die? It is very important that a directive in the will establishes who will be the children’s prearranged guardian.
  3. Specific assets for the heirs are not articulated. Even in a simple estate, it may be unwise to generalize—such as “I leave all my household items to my children”—not selecting specific heirs for certain assets. In this case, a dominant child-executor may rummage alone through the house pre-selecting, removing, and even selling heirlooms other siblings may be attached to.
  4. Proper beneficiaries have not been named. You will also need to assure that your beneficiaries are updated on your various investment accounts (such as segregated funds) to allow passing these assets directly to named beneficiaries. Life insurance can also state specific beneficiaries helping you to achieve estate equalization.  The proceeds from life insurance can be divided proportionately as you chose. Beneficiaries of your assets may need to be changed over time to coincide with your wishes.
  5. The estate is not equalized. In situations where one child inherits the family cottage or business, consider leaving equivalent cash assets to other siblings. If there will not be enough cash in the estate, life insurance can be purchased to create proceeds to divide up among siblings not inheriting a significant family asset. Also, life insurance benefits can be assigned to beneficiaries outside of the will.
  6. Allowing the estate to be eroded by taxation.
    • RRSPs and estate taxation Where there is a surviving spouse, RRSPs/RRIFs can rollover free of taxation. If not, registered money will be taxed as income in the final tax return of your estate.
    • Capital gains taxation Taxation on capital gains can erode bequeathed assets such as a cottage, home, or business shares left to adult children. Such assets are deemed to be disposed of at death where there is no spouse or dependent, in most cases creating taxable capital gains on the difference of the current asset value minus the purchase price. Life insurance can help pay capital gains taxes, for example, to keep a cottage or business in the family.
  7. Debts may not be addressed. Many people miss covering all personal and business debts with life insurance. Thus, they can saddle their heirs with the estate debt if there is a lien on business or personal assets. By paying off some or all of these debts tied to assets with life insurance, you can free up much more of your estate value.
  8. The immediate family’s provision was unaccounted for. Some people never chose to provide a nest egg (upon their decease) from which the family can invest to create an income for dependents such as a spouse, children, and/or ageing parents who may need long-term care. In these cases, there may be no savings set aside for a rainy day—for emergency or retirement. Life insurance may be the easiest solution to this problem.

Who is best suited to use Universal Life for the investment benefits?


The individuals who may gain the most from Universal Life are those who:

• plan to carry life insurance all your life;
• have considerable extra cash flow after you contribute to your Registered Retirement Savings Plan (RRSP) and (Tax Free Savings Accounts) TFSAs;
• have a tax bracket approaching the highest level;
• have a desire to earn interest without taxation;
• may have a future tax liability in your estate;
• have a consistently good cash flow with excess money to invest;
• have good future business prospects for large profits, increasing business valuation and capital gains;
• desire to enhance RRIF income in retirement;
• desire to pass wealth to the next generation or to a charity; and
• have large loans that reduce your potential net worth.

What are the administrative fees? First, you make deposits, similar to deposits made to a bank account. Then, just as your bank charges service fees to your account each month, the insurer subtracts charges to cover the various expenses in the policy associated with the cost of insurance, administration fees, policy fees, rider fees, etc. The account is then credited with any interest earned. This interest is without taxation while remaining in the plan. If you keep the policy long enough, some companies add a bonus percentile to the interest earned factor.

Why is Universal Life Insurance an excellent Estate Planning tool?

There are several reasons why people use Universal Life (UL) for estate planning.

  • The death benefit is adjustable. The amount of life insurance can be increased or decreased to reflect your changing needs. If the death benefit remains level, eventually the major portion of the benefit, over a long period of time, can consist of the cash reserve (CSV). As the need for the insurance shrinks, the cash can increase, providing the insurance cost doesn’t reduce the cash value and its growth. If the death benefit grows, the cost of insurance will increase with age, and continues to be paid from the cash value.
  • You can insure more than one life in the plan. You have the option of insuring yourself, your spouse, both of you, your children, or business associates using one or more of these policies. In some cases, the ownership can be transferred or lives added and the premiums paid from the original tax advantaged funds. Your death benefit can be payable after the first spouse’s death to provide an income for the surviving spouse. Alternatively, you can arrange to have the benefit paid after the second spouse’s death to maximize the value of your family’s inheritance or meet your estate’s tax liabilities.
  • UL works to protect you from the potential tax liability of your estate. Discuss your estate use of UL with a good tax advisor, CA, or financial advisor specializing in estate taxation. You may also want to seek counsel from an estate-planning lawyer. Make sure you, along with your financial representative, assess the estate’s need for life insurance and the various solutions. The best estate-planning solutions are most often insurance related because life insurance is designed to pay a large capital benefit at precisely the time it is needed.
  • Mitigate tax erosion of the value of a significant estate. If you own stocks and bonds, equity investment funds, a family cottage, a second residence, or business assets you may face capital gains taxation in your estate. Upon death, taxes will also be due on funds remaining in an RRSP/RRIF (after the death of both spouses in the case of a married couple). One policy can replace or pre-fund such taxes due. With a joint last-to-die policy, the insurance proceeds can be used to cover the estimated estate taxes. The advantage is that one’s entire pre-tax estate valuation can pass, as desired, to the family heirs.
  • Circumvent probate and/or estate administration tax (EAT). When the tax-free benefit is paid directly to beneficiaries, there is no need to probate this money or have it reviewed by the government. In fact, other beneficiaries have no recourse to complain about monies paid to heirs in this manner. Depending on the province, such legislation may be under review or currently changing.
  • Business owners can protect their asset value. The death benefit of a UL policy can create immediate capital to take a business through the transition of losing one of its leaders, or key employees, while allowing surviving partners to buy out the outstanding interests via a payout of the share ownership of the deceased partner. This is commonly done within the framework of a well structured buy-sell agreement.
  • Other tax advantages. A UL policy owner can earn and accumulate tax deferred interest to potentially increase the after-tax yield of your investments and policy cash value over the long term. The UL deposits are protected from secondary annual taxation on interest earnings until withdrawn.

EN 3.13



Fund your Emergency Plan to care for loved ones

Emergencies happen when we least expect them.  Depending on the severity of the emergency, it can equate to a massive financial loss, including the expense of connecting with loved ones, travel expenses, and lodging expenses etc.


Emergencies often occur when families are not together. When the 911 incident occurred parents (the most financially able and responsible) thought about the safety of their kids at school or elderly parents across town.

During times like these, if phones don’t work, or some neighbourhoods aren’t accessible, what plans do your family members resort to? Having a plan, and previously discussing it with loved ones, will save time and real-time stress.

Know how to connect in case of an emergency  In a catastrophic emergency such as one that can occur during a hurricane, you’ll need a simple way to contact and/or meet one another if going home isn’t a possibility. Consider a safe place to meet like a community centre, library, or school.

The phone or mobile is usually the first method of connection. Establish a plan that includes contacts that can help your family communicate and find each other. Young school children, if they’re in class or day care will need to be picked-up. Know the emergency policies, and designate someone to pick them up. If your children are in university or living away from home, include them in your emergency plan. Teach them how they can identify themselves if they become separated from you and who to call, like 9-1-1 or your local emergency numbers, to get help.

Get updates from the radio, television or Internet  Listen to the radio or television for information from local authorities and follow their instructions. Call 911 if appropriate. They may advise of dangerous areas or evacuations. You may need to turn utilities off such as electricity, water or gas valves. Ensure that everyone also knows the location of your family emergency kit and fire extinguisher.

Everyone should know your home’s safe exits and best places to go. And remember your pets, who may not be allowed in shelters or hotels. Identify kennels or friends’ homes where they can go in an emergency.

Elderly family members and/or those with special needs should also be a part of your plan. List the medications and supplies they may need and have them ready to transport with your luggage, in the event of an evacuation. Know any information caregivers will require. If they live alone, ask a friend or neighbour to check in on them or help them evacuate.

Have your personal documents ready  In addition to your plan, documents will help you stay organized. Make copies of birth certificates, passports, wills, and insurance info. These documents, along with photos of your family members, should be kept at work, or other safe locations.

Having a plan is also part of being a responsible family leader and citizen. Local authorities will react swiftly, but they can’t reach everyone at once. Being prepared allows these responders to help those in urgent need first. So, do your part! Learn about the specific emergencies that can happen where you live.

How do you fund emergencies?  Make sure you have put aside enough money to respond to urgencies such as flying a family member (or the entire family) out of a location. You may need money for lodging, clothing and or food.

By reviewing what occurred in Japan when nuclear reactors were damaged, we are humbled to acknowledge our dependence on one another and need of financial independence to be able to act swiftly, or make expenditure when the need arises.

Source Excerpts: Environment Canada

How can Universal Life help business-related estate planning?

Universal Life strategies can help business related estate planning in these ways:

  • Protect your business assets.

If you own a business and die, will your partners be able to pay for your share of the company? Why not insure your life, and the lives of the other partners and key employees?


The death benefit of the policy can create immediate capital to take the business through the transition of losing one of its leaders, while allowing surviving partners to buy out the outstanding interests (payout share ownership of the deceased partner, using a buy-sell agreement), pay off creditors or in the case of the key person, provide head-hunting monies to replace him or her.

  • Business owners can protect spouses.

If a spouse who was not active in your company survives, chances are he or she would rather be paid cash for the value of their shares and leave the running of the business to the surviving children or partners. It is difficult for executors to make sure that a wife, for example, is paid enough money to live on if she continues to share ownership.

In some cases, surviving spouses constantly need to be updated on the business’s finances, and performance and all too often have issues getting their due income. An insurance policy could rid the executors of the responsibility of ensuring that the company’s remaining owners pay the spouse. The insurance benefit could be paid directly to the spouse or flow through the business or the business partners as per a pre-established buy-sell agreement.

  • Who is the tax-advantaged plan designed for?

As with any life insurance policy, it is designed to pay beneficiaries a tax-free benefit upon the policy owner’s death. That is the main reason to buy such a life insurance policy.

The taxation scenario is a great secondary benefit, but the main purpose should be to ensure that needs are covered by the life insurance component.

How can I find more cash to invest?


One thing is true about building wealth. The discipline of spending less money is the surest path to saving more. But you may have to reform your way of thinking—we do not deserve to buy something now if we can’t afford it today. Here are a few suggested ways to help you spend less:

• Shop with cash. If you carry a debit or credit card, it is too easy to escalate your buying when out at the mall. Better to put a budgeted amount of money in your pocket and spend no more—make sure you include enough for a treat at the café.

• Clean your clothes at home. Try to buy clothing that can be washed at home, using caution not to shrink your fabrics.

• Don’t fire up a temptation. Don’t bother browsing the catalogs, the clothing racks, or the car lot if you don’t have an honest need.

• Look for freebies. Use your own bank’s ATM to save the $1.50 service charge. Try to avoid all the little service charges that hotel chains are starting to slip onto your invoice. Try to include extras with your vacation packages. Buy vacations in domestic dollars if you can. Plan to attend one of the numerous festivities that municipalities pay for and provide in the summer holidays. Consider that many entertainment venues offer discounts just prior to the show.

• Borrow DVDs and CDs at the library. Try your library for movies or music—you may be surprised at the free access they provide.

• Take portable picnic coolers to avoid eating out. This can save you hundreds of dollars per month. Picnics are great getaways in the summer and can be carried in coolers in your car.

• Learn the skill of cooking. It is easy to rack up over $50 with a tip when two eat out one meal per day. By learning to cook, you can add the artistry and relaxation to your own fine dining experience. When you do go out on the town, consider splitting larger meals with your partner. Avoid supersizing fast-food which may cost more and add calories.

• Limit prepaying your taxes. Adjust your income tax deductions at work, to make sure you aren’t pre-paying too much.

• Do a “needs analysis” by asking, “Do we need it?” This is where your partner can help you be honest and accountable by simply discussing every purchase, at say over $50—set your own dollar figure, at a point where you involve the other’s advice. Make lists and discuss your real needs.

• Don’t prepay phone charges. Some long distance residential plans and/or cell plans are priced so high that the average caller will not benefit by a higher pre-paid monthly plan. Long distance and cell phone minutes are better paid by a flat rate, per second, for restrained use as needed. However, some good plans allow you to use VOIP online where prepaid amounts stay on the books, and more minutes can be added as needed. Note: LINKSYS by Cisco Systems offers inexpensive hardware under one hundred dollars at computer stores, which allows two lines to regular phones.

• Liquidate if you have too much stuff. Space costs money so consider what is essential. Go over your furniture, books, general stuff, to determine what you don’t or won’t use in the next five years. If you don’t love it, sell it, or give it away.

• Invest your raise. Avoid spending up to any increase in your income. Rather plan to invest it.

• Assess the unit price and buy in bulk. Most everything is sold in quantity and can be compared with a competing brand—either by ounce kilo, or serving, etc.

• Buy depreciated cars. Avoid the biggest depreciation that occurs among assets. Buy vehicles used after a year or two, with the factory warranty still on it.

• Reduce your vehicle’s weight. Unload excess vehicle weight that can cost in gas consumption. Similarly having your tires carry the correct PSI will offer better gas mileage.

• Know that it all eventually goes on sale. It makes sense to wait it out for the seasonal sales. Stores begin to sell their seasonal stock, including clothing, often prior to the need. So if you are savvy, mark in your calendar the best times to buy. This is true also of travel bargains.

• Pay cash only for groceries. Have you ever spent double what you intended on items that can be eaten? If you pay cash you are forced to budget regardless of how hungry you are, sticking to the necessary items.

• Know where the quality brands are. Don’t purchase items that will wear out prematurely and will have to be replaced; instead buy quality, but shop around for the best prices.

• Buy more when it is really cheap. If you can buy tuna, salmon or spaghetti at 30% less than usual, why not stock up on it? But don’t make the mistake of buying multiple “on sale” items if you don’t need higher quantities.

• Make fun fast food. In many ways, you can make your own fast food, such as fruit or vegetable trays for drives, hikes, or stay-overs.

• Use public transit. By not driving all the time you may save some money. Many municipalities offer cheap bus transportation. Some prefer not to drive if they live in a large city such as Vancouver or Toronto. They can unload insurance, fuel, and repair costs on top of any lease or loan payment (along with the interest). There are car-sharing co-operatives in larger cities. Car rentals can be cheaper in the winter and on weekends.

• Cut your hair between main cuts. Sometimes a minor home trim will add another week before you’ll need to visit the barber or hairdresser.

• Utilize the secondary market. If you are a bookworm, Amazon.com or Abebooks.com may help you find the book for less than a dollar, or perhaps find a camera on eBay at 25% off the cost. Most of the world literature is available online for under $5 for the entire life-work of an author, sold on Amazon Kindle.

• Make the park your gym. Why not walk around the park’s pond and get outside as a bonus.

• Adjust your thermostat. By juggling temperatures by one to two degrees on your thermostat (wear sweaters or shed clothing) you can save a few hundred dollars per year.

• Know how and when to return merchandise. Many admit mistakes or displeasure with a product and promptly return it according to policy—in the free market that is more than fair! Ask about return policies when shopping. Often it is wise to reassess a purchase in a day or two.

• Pre-pay certain vacation costs. Prepaying for a resort food plan in domestic dollars to avoid paying later for dollar-exchange loss, can make budgeting sense because you’ve got to eat anyway. Likewise prepaying museum ticket passes can save money and side-step long line ups.

• Just stop—don’t shop! Tell yourself to stop shopping when you have no imminent need. Try walking, sitting in a café or reading instead.

Why is it necessary to probate an estate?

Careful estate planning can untangle an estate from costly government inspections or the application of their administrative taxes and/or fees. Probate fees are calculated on assets, regardless of liabilities, at predetermined rates by the government. Methods of reducing the need for probate can save you money.


 ‘Estate’ is the legal term. When used in connection with probate proceedings, the term encompasses the total property that is owned by a deceased person prior to the distribution of that property in accordance with the terms of a will, or when there is no will, by the laws of inheritance in the jurisdiction of residence.

When an individual dies, his or her last will and testament is read. Because financial matters need tending to, your will should outline how you want your assets divided, your debts paid, and where applicable, define the management of these assets using established trusts for your heirs.

Family members may read a will if it is in their possession. Next, the will must go to the executor, who then assesses it, to see if it needs to be probated. Probate is a court assessment that may require government approval to settle your estate and transfer the ownership of your assets.

Probate is generally necessary in cases when:
• A bank, trust company or financial institution insists on the will being  probated to prove that the executor has the authority to act.
• The assets include shares owned in a private company.
• The executor needs to sue an individual owing the estate money.
• Creditors are owed money from the estate.
• A will’s terminology is unclear, ambiguous or certain provisions are not stated. (For example, if there is no provision to pass assets to another heir where a spouse has predeceased you).
• A will is improperly witnessed.

Is probating an estate expensive?

It is a significant job for the executor to probate a will. The original will must be submitted with an inventory listing the estate’s assets recorded at their fair market value to the court in the jurisdiction where the deceased last lived. There may be increased fees if a lawyer is retained to cross-examine the asset list or if the executor charges a percentage of the asset base to do the work.

Life Insurance can solve estate tax problems.  If you have not paid taxes on your capital gains which have accrued in a business or on an investment asset, or on a cottage, you may face estate taxes that are not affordable for the estate which may minimize the heirs assets or make it impossible to retain an asset such as a cottage. By planning for probate, you can use life insurance to pay off potential estate taxes due in the estate.

Note: In Ontario, the Estate Administrative Tax (EAT) will assume the process of probate. In Quebec, probate is not needed when a notary under seal prepared the will.

8 reasons to invest in Segregated Funds


There are many reasons that make investing in segregated (seg) funds a significant strategy when creating wealth. See if these reasons appeal to you and discuss seg funds with your advisor:

  1. Simplified investing  You can select an industry or sector, for example, without having to hand-pick each security. The segregated fund manager does this selection process for you. You don’t have to be assessing which stock or bond may or may not be a winner. A fund manager is trained to weigh out all the market contingencies which can affect investor performance.
  2. Diversification A small monthly purchase plan can have you moving forward in your strategic fund investments in a day. Your money can buy a piece of many different investments held within one or more funds.
  3. Dollar-cost averaging Dollar-cost averaging allows you to buy more fund units when the unit values are down, less when they are high, giving you some benefit from downward volatility.
  4. Flexible access to your money You can sell your fund shares in one day. Your proceeds are available the next day if your money is needed in the short term.
  5. Portfolio balancing Choices include the full range of fund types and strategies are available to use, such as strategic balancing of your segregated fund holdings.
  6. Capital guarantees Segregated funds may offer certain principal guarantees at maturity and/or at death. In some cases, market gains can be locked in and guaranteed after a period of time. Some segregated funds have options to lock in a portion or all of the gains to date which resets a guarantee at a higher level after a defined period.
  7. Avoidance of Probate The proceeds of a segregated fund policy flows to the beneficiaries without going through probate which can avoid significant estate fees. It can also prevent these funds from being contested by disgruntled beneficiaries if the funds passed through a will.
  8. Potential Creditor Protection Creditor protection is offered because it is an insurance product, insofar as the investment is made before any creditor issues are apparent. Keep abreast of legislation with regard to creditor protection by discussing this with your advisor.

Potential pitfalls of Succession Planning

Ten Business Succession Pitfalls 

Various circumstances can make succession planning either difficult or impossible:

The suitable successor quits. A son or daughter may decide to leave the firm after having worked in the family business for years without a commitment to a concrete succession plan.

Business succession isn’t viable. Perhaps there is no child-successor or executive available or willing to take on the responsibilities of your firm. There may be changing circumstances such as a new competitor, loss of massive contracts, or the product or service is becoming obsolete.

You might want to sell. The success of the business is not necessarily based on flourishing over successive generations. It might even be achieved by selling the company at the right time to create investment wealth. Or unexpectedly, a competing business or a group of executives may offer to buy it.

The owner’s inability to relinquish control. One may hold on to a company because it has provided income for years, offering a means to control one’s destiny. Much of the owner’s self-identity may have evolved out of the business.

Power struggles with partners. Some situations incite resentment among co-owning siblings or partners, preventing a succession process.

No retirement goals. Many founder-owners have no interests outside the business. If their work is their life, they may have no intention of retiring.

Can’t face mortality. Many owners (including sensitive children) find it hard to discuss the issues associated with ageing, loss of health or death. Entrepreneurs, who have carved out their destiny, may believe they are somewhat immortal, even if facing real health risks.

No trust of successor’s skill. It is often problematic for parents to see their children as capable successors. They may criticize even their reasonable efforts. 

The owner dies. Even before considering succession planning, the owner may die, leaving the responsibility to a spouse or child to conclude or abandon.

There is no life insurance solution in place. Talk to your advisor about how to use life insurance planning for maximizing your estate as you create a strategy for your business succession. There are ways to fund taxes and buy out partners and equalize an estate fairly among heirs. The real risk is doing nothing.


An Estate Plan for the business and the family


A comprehensive estate plan includes a will, a plan to minimize the capital gains liability and provide for any family income needs. This often involves life insurance which is an effective tool to maximize the size of your estate and pay any tax liability cost effectively. I will design an estate plan tailored specifically for your situation because every person is a unique individual.

We provide both personal and business insurance solutions for your financial security.

Business Insurance solutions:

• Partnership insurance
• Buy/Sell agreements
• Key Person insurance
• Business Disability insurance
• Business/Office Overhead
• Collateral Loan insurance
• Group Health Benefits

Personal Insurance solutions to protect you and your family:

• Life Insurance
• Critical Illness insurance
• Long-Term Care insurance
• Estate Preservation
• Individual Health and Dental Plans