Start-up firms and smaller companies are especially vulnerable to potentially devastating financial risk because they often lack big company sophistication and in-house risk-control expertise. We will help you gain control of your financial risk.
Life Insurance We help business leaders provide appropriate life insurance to pay off debts and/or the mortgage, educate the kids, and/or provide income for a spouse or a disabled dependent.
Disability Income Replacement Insurance We will examine your need for income replacement insurance that can help replace your paycheque in case you get hurt or sick.
Key Person Insurance We will assess your need for an insurance policy designed to provide money to help you hire the right person if a key individual became sick or died.
Critical Illness Insurance If a business owners develop cancer, a heart attack, or a stroke, the illness can wipe out a small business. We have many plans to protect you from such concerns.
When you purchase a Universal Life policy you have certain amount of flexibility and accessibility to your money.
• Premium payments are flexible. You can pay what is referred to as a minimum premium. If you want to pre-fund the policy with more money, you may be able to increase your annual premium on a monthly, annual, or occasional lump sum basis, up to a specified maximum. A maximum premium is calculated and pre-set in order to keep your policy exempt from accrual taxation. Once your cash value increases, you may be able to reduce or skip premium payments altogether, without jeopardizing insurance coverage, while the cost of the premium (insurance, administrative charges, any additional benefits, and riders) is eventually paid from within the plan. A well-funded policy’s money reserve (cash account) can continue to grow even as it pays for the cost of insurance.
• Borrow against cash account’s reserves. The cash surrender value (CSV) is just another name for the remaining cash in the policy. For example, if you had $100,000 in a policy’s tax-exempt fund, you would be able to borrow against it or withdraw it with some potential taxation.
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.
Probate fees are paid from an estate to the provincial court. These fees are approximately .5% to 1.5% of the estate’s assets, depending on the size of the estate and the province. Provincial lawyers complete the necessary ‘letters of probate’ or ‘grant of probate document.’ In Ontario, they are now referred to as ‘the certificate of appointment of estate trustee with a will.’
Because probate is calculated on assets, regardless of liabilities, an estate with assets of $1 million and liabilities of $200,000 would pay probate on the entire million. In addition, if these same assets are transferred to your spouse, probate fees may be due again the second time around when these assets are transferred through his or her will. These fees are paid with after-tax dollars, as they are not deductible on the final income tax return. There is no law stating that a simple will and estate needs probating.
How can I minimize the need for estate probate?
There are a few tactics whereby you can reduce the need for an estate to be probated by the government:
Defer possible probate by holding assets jointly. Probate fees may be charged when that asset is transferred later through the will of the second spouse.
Establish a person as a beneficiary on your life insurance policies independent of the estate. This way, all monies pass to the heirs tax-free. If the estate needs probating, this portion of the assets will not be included in the estate, as the death benefit will flow directly to the heirs circumventing scrutiny. Life insurance strategies are excellent financial tools to circumvent probate on larger wealth transfers to heirs. Family wealth can be positioned to pass through life insurance policies, delivering tax-free benefits without probate. This method has frequently been used to transfer inter- generational estate wealth in the millions.
Name your beneficiaries on your RRSPs and RRIFs. Insurance companies’ products will allow you to sidestep probate in this way. To protect themselves, banks and trust companies will probably require probate or a letter of indemnity from the estate’s lawyer if the assets are significant. If your spouse is your beneficiary, consider a secondary beneficiary should your spouse die at the same time you do.
Consider setting up a spousal testamentary trust in your will to avoid double probate. When the second spouse dies, the assets can be distributed via the trust directives as opposed to a will.
With your spouse, set up mutually owned property as ‘joint tenants with rights of survivorship to transfer these assets automatically outside of the will.
Once the will has been probated (if necessary) and the executor confirmed, he or she could start transferring assets as directed by the will. Some assets can be transferred easily within a short period of time. Others have to wait until the estate expenses have been paid, including any final income taxes due to Canada Revenue Agency (CRA), after which they will issue a tax clearance certificate.
Note: The Estate Administration Tax (ETA) in Ontario, will replace some of the previous probate processes, and may add more complexity to the above scenarios. If your estate is large, it would be wise to seek the advice of a good tax accountant.
The expansion in the growth of using credit is partially due to lower interest rates. The paradox is that low-interest rates lessen the interest payments to reduce debt while at the same time motivate people to assume much more debt.
Beware of little expenses; a small leak will sink a great ship. Benjamin Franklin
Debt Affects Family Savings Increased spending is often supported by increasing debt loads. When debt overburdens your resources to repay what you owe, you may need debt counselling that may lead to debt consolidation.
Do Your Math If your expenses exceed your income, you will increase your debt if you rely on credit. Amassed debt can undermine otherwise healthy finances and the ability to invest for retirement. Saving indicates a stewardship that respects the fact that money is the only symbol of trade for a company’s goods and services exchanged for an individual’s energies.
Reduce Debt and Save More The amount of savings often advised is based on the age-old recommendation to save 10-20% of your disposable income.
Interest rates on borrowed money can always increase so it important to realize that low-interest rates do not last forever. Always plan to service the debts that you take on today.
Beware of the potential consequences of taking on significant debt. Life events such as loss of employment or income, a change in family status or a serious illness, can cause a huge drain on finances.
Life insurance protects your heirs It is important to insure all your household debt with life insurance as these liabilities can be paid off tax-free in the event of death. If you are one of the main breadwinners in a family, call your life insurance specialist today.
Talk to your advisor about life insurance to protect your heirs.
