Estate Planning - Will Substitutes This article focuses on the various components of estate planning used to minimize taxes and prevent a plan from going awry By: Susan Mallin, Certified Financial Planner With guest author Jane Martin, Estate Lawyer

Contact [email protected] 416- 485-0303 or 1-866-876-9888 Susan Mallin is a Certified Financial Planner and Chartered Investment Manager with over 17 years of experience. She is also knowledgeable in cross border issues for US citizens living in Canada, as well as Estate Planning for Canadians.

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Estate Planning - Will Substitutes This article focuses on the various components of estate planning used to minimize taxes and prevent a plan from going awry. It is authored by Susan Mallin, Vice-President Financial Planning, and Associate Portfolio Manager, Jane Martin, Estate Lawyer at Dickson Macgregor Appell LLP is our guest co-author who provides a legal perspective. The article is for information purposes and should not be relied on as legal or tax advice. The article is written with Ontario law in mind. Estate law varies from province to province, so if you reside outside of Ontario, please note that although the law has many similarities, it may operate differently in your jurisdiction. It should be mentioned that we use the familiar term “probate” in this article however, since Jan 2013, the name has been changed to “Estate Administration Tax” or EAT for short. Creating a complete estate plan involves more than signing a Will and tucking it away in a filing cabinet for years. A Will is the central component of estate planning, but there are other components to consider depending on the nature of your assets and the composition and needs of your family. Often referred to as “Will substitutes” – there are a variety of steps that can be taken and plans that can be put in place to ensure that your estate plan meets your wishes to look after your loved ones, minimize the tax consequences of your death and to protect your estate against unwanted claims or disputes. Using Will substitutes in addition to a Will provides a greater degree of privacy. Tax savings are often a key concern when beginning the estate planning process. To make good tax driven decisions, it helps to understand what happens on death and to differentiate between income tax arising on death and estate administration fees payable on death. INCOME TAX When we die we are deemed to have disposed of our property as of the date of our death. Property for which taxes have been deferred (such as registered savings) become taxable and gains on capital property (such as real estate) have to be taken into account. For many deceased persons, the final income tax submission often puts them in the highest marginal tax bracket that they have ever been in during their lifetime. The Will substitutes reviewed in this article can minimize or delay the tax hit experienced by your estate, leaving more for your beneficiaries. ESTATE ADMINISTRATION TAX (EAT) Estate administration tax, often referred to as “Probate Fees” is the amount payable to the provincial government when an application is made by an estate trustee to prove or ‘probate’ a Will. A primary Will is used to authorize a specified representative (executor) to follow the directions stated in the Will, paying debts, collecting assets and distributing the estate to intended beneficiaries. That representative is also responsible for filing the final tax returns of the deceased.

In order to get their authorization formalized, an application for a certificate of appointment of estate trustee with (or without) a Will is filed with the local court and must be accompanied by payment of probate fees. Probate fees are roughly 1.5% of the value of assets in an estate (see chart at the end of article which breaks it down by province). When Will substitutes are used as part of a plan, some assets can be kept separate from the probate process and their value need not be included for the purpose of calculating probate fees. For those who have substantial assets, the more assets that can be passed along outside the Will, the savings are significant. When a probate application is filed, the Will in question becomes a public document and it can be accessed by any member of the public who travels to the appropriate court house to search for it. If assets are passed to beneficiaries by way of a Will substitute, there may be greater protection of privacy about the nature and value of those assets. A simple example of an asset which can be transferred to a beneficiary directly is a jointly owned house. If Husband and Wife own their house as joint tenants, and Wife dies, Husband can complete a ‘survivorship application’ and the title of the house will be passed to Husband as sole owner. In this sense joint ownership is a sort of ‘Will substitute’. WILL SUBSTITUTES Many assets can be passed along to beneficiaries using Will substitutes. The following chart shows various assets that can be distributed outside of a main will, known as Will Substitutes. This article will provide a brief overview, from both a financial planning and legal perspective of the most commonly used Will substitutes.

Substitutes

JOINT ASSETS Generally speaking a joint asset is one owned by two or more people – the type of joint ownership and the type of asset are relevant to the tax obligations and probate fees payable on death of a joint owner.

Joint Assets – with right of survivorship When property is owned in ‘joint tenancy’ – whether it is real estate or a bank account – and one joint tenant dies, the survivor of the two owns the property entirely. Gifts subsequently made by Will by the first-to-die tenant of their interest in the property are ineffective. However, some courts have ruled that in some cases joint property, especially bank accounts with adult children are not always meant as a true “gift” to the surviving joint holder. Financial Planner Perspective – Holding assets such bank accounts and investment accounts jointly is a convenient way to pass along assets quickly and efficiently after death. Joint ownership between parent and adult child is also convenient for administration purposes while an elderly parent is still alive, but unable to fully manage their affairs without help.

Joint Investment Accounts The main concern with joint investment assets is to whom the taxes such as interest or capital gains are attributable to, and whether or not a deemed disposition for tax purposes will occur on the 50% interest given to the new joint holder. In a joint account of “convenience” the government typically will attribute any ongoing tax liabilities, such as dividend income to the person who originally funded the account. However, often an older parent will add an adult child to an account for ease of administration. This can cause problems if the estate owes taxes, or there are other siblings that the money was “meant” to be split with. Some courts have ruled that the primary intention was for convenience for the elderly person, and not intended as a true gift of survivorship. Elderly people, who are adding joint ownership for ease of administration but not necessarily intending survivor rights, should do so if a separate agreement is drawn explicitly stating the intention is for convenience purposes. This is not considered iron clad, and the other intended beneficiaries may have to contest if the transfer of assets does not go as originally planned. Legal Perspective – holding assets such as bank accounts and investment accounts jointly is appropriate if the intention of both joint owners is that the survivor of the two is meant to keep the entire account upon the death of the first. Often between spouses this is not a contentious issue, however, the joint registration of investments and savings between parents and children is fraught with difficult. Whether registering property in joint names is the right choice depends in part on who you wish to benefit from the property after your death, who contributed to the acquisition of the property in the first place, and the family context of the joint owners. If the intention is to have the surviving joint owner own the property without qualification then joint ownership provides a simple way of passing property after death. For example, if a bank account or investment is held jointly between a parent and one of their three children, for the purpose of avoiding probate fees at the death of the parent, but the parent wishes all three of her children to share equally in her estate, proper documentation about the reason for the registration of the property and the division of the estate must be put in place to ensure that the children benefit equally.

Joint Fixed Assets – Primary residence Financial Planner Perspective - Since the primary residence is already one of the most tax efficient assets, and often is a very valuable asset, keeping it out of probate will save the estate taxes, and pass quite quickly to the survivor. Most common is for spouses to have joint ownership. It is also possible to have joint ownership with adult children or business partners. A non-spouse surviving joint owner receives the property in full without any immediate tax consequences. Caution is warranted for those with multiple heirs who desire to ensure estate equalization among their children when passing fixed assets. Since the primary residence is one of the few major assets not subject to tax, most other types of assets are subject to tax, and can erode the net value of distribution. A simple example of this can be explained with a widow with 3 children. One gets the house via joint ownership, and the other gets the RRSP’s via designated beneficiary, the other gets the cottage and residual of the estate via Will. The house and the RRSP pass quickly and with full value to the individuals – however the cottage is subject to capital gains tax to the estate and the RRSP’s are deemed disposed and the full amount is included as income in the final tax return once the widow dies. House – Value $1,000,000 goes to Child #1 (via joint ownership) RRSP’s – Value $1,000,000 goes to Child #2 (via beneficiary designation) Cottage – Value $700,000 goes to Child #3 (via Will) Investment Accounts – Value $500,000 goes to estate for tax purposes and to equalize the estate distribution for child #3. The balance, if any, will be divided equally. At first glance it seems that Child #3 is getting a $200,000 larger share of the estate, however an after tax basis tells a different story. Tax bill for RRSP is approximately $450,000 (paid by estate, not by beneficiary, as many assume) Tax bill for Cottage is approximately $112,500 (paid by estate, assume ACB $200,000) Tax bill for investment account is approximately $160,000 (assume ACB $340,000) The above scenario shows a tax hit of $722,500, completely using up the entire liquid investment accounts, plus leaving a liquid deficit of $222,500. Child # 3 receives an approximate net inheritance of $477,500 and may have to sell the cottage to pay the taxes, and this does not even include other taxes and the probate fees of approximately $18,000. This child in fact receives less than 50% of the value of his siblings received. At first glance, this split of assets seemed quite even among the children, however the end result is a much larger than anticipated inequity that cannot be mitigated by the estate residual unless the other siblings were amicable and decided to share. Legal Perspective - Joint registration of a primary residence is the most common way for spouses to hold their family home. Spouses generally intend to have the survivor of the two of them stay in the family home after one spouse dies and joint registration is effective and simple: a simple legal document called a “Survivorship Application” is filed with the government and title passes to the surviving spouse for a very modest fee. Joint registration of a primary residence with a person to whom you do not wish to be the sole owner of that property after your death, however, is a minefield. The transfer of a house to joint ownership with one child may exclude your other children from equal benefits in your estate. It may create a great deal of discord amongst your children after death, including litigation, harming the value of the estate to a greater extent than the amount of probate fees that might have been saved. If that child owns their own real estate, transferring real estate to him as joint tenant may cause tax consequences for him. All of this to say is that while this type of transfer has its uses, it is not without pitfalls.

Tenancy in Common The distinction between a “joint tenancy” and “tenancy in common” – is that under a tenancy in common the owners have specific portion of the asset in question. Whereas on the death of a joint tenant the survivor becomes the owner of the whole, on the death of a tenant in common, the percentage of the property owned by that tenant falls into his or her estate and is dealt with according to their Will. Financial Planner Perspective - This can be viable on family vacation properties for passing ownership to adult children. Usually only suggested where the family dynamics are extremely cohesive and where the adult children have the finances to support their portion of the ownership going forward. If one sibling dies, their portion is passed to their beneficiary (not the surviving siblings), unless explicitly agreed upon otherwise. In some cases it may be beneficial to set funds aside in a trust for the financial maintenance of the property over X number of years. This type of property transfer becomes a deemed disposition for tax purposes on the day of transfer. It is not the suggested method, if the wishes are for the property to be passed down for the use of several generations. Legal Perspective - Whether the use of tenancy in common for the registration of property makes sense is driven by the unique needs of each family. If it is your hope, for example, that on your death ½ of the value of the cottage pass directly to your spouse and half to your children under your will, this form of registration can be used to ensure that the desired outcome is met. The use of tenancy in common is less a reflection of tax planning than ensuring the property in question passes to the appropriate beneficiary.

Inter Vivos Trusts & Testamentary Trusts An Inter Vivos trust is a trust set up by a ‘settlor’ for the benefit of another while the settlor is still alive. A testamentary trust is one established under the terms of a Will. Creating a trust involves the transfer of assets to a trustee for the benefit of a specified individual, such as a spouse, or class of people, such as grandchildren. Unlike an outright gift of property, assets transferred into trusts allow the settlor to control the manner of distribution of the property – timing, conditions for payments, amounts of payments can all be controlled through the trust document. The transfer of assets into a trust is likely to have tax consequences which depend on the nature of the assets and the timing of the transfer. Inter Vivos trusts are particularly useful for splitting income – income paid to beneficiaries will be subjected to the beneficiary’s marginal rate. Lower marginal rates may apply and considerable tax savings may be available through a trust. For minor beneficiaries, income attribution will apply to the original owner of the assets, but not for capital gains. Testamentary trust simply refers to a trust set up under the terms of a Will. Whether Inter Vivos or testamentary, trusts offer a great deal of flexibility for both tax purposes and other family needs.

Financial Planner Perspective - Set-up and active while still alive, Inter Vivos trusts are common. It’s like gifting assets early, while having a trustee follow your rules in relation to how the assets in the trust are treated. For example, when gifting money to a son, who may not be very good with money, this Trust may be the alternative. Or if you are worried about him getting a divorce, this could be a way to keep the marital assets separate from the Trust assets. Wealthy families usually have several trusts set up for specific purposes. Any asset passed into the trust, such as a cottage would be deemed disposed of for tax purposes at the time of transfer, and then deemed disposed every 21 years. Trusts are usually the best way to keep property in the family for many generations. The beneficiaries enjoy the use of the property, but the Trust dictates the rules of dispositions etc. Financial planning to keep a non-income producing asset for many generations requires planning for future capital gain tax obligations within the trust. These types of trusts are also used for providing for dependants with special needs. They are also used as a means for income splitting potential when the trust assets derive income. Alternatively, a cash loan to the trust can be done at the Government of Canada’s prescribed rate (which is quite low at the moment) and the rate is fixed for the term of the loan, making it quite attractive to fund trusts using personal loans today. For clients who like privacy, trusts are a great option, as they by-pass the Will. Legal Perspective - Whether a trust is set up before death or through a Will, a trust is a very flexible tool. The settlor can determine the distribution scheme, restrictions around investment powers, identify philanthropic goals, leave the trustees complete discretion around distributions – the tool is as adaptable as the imagination permits. The tax consequences of establishing a trust during life or on death vary and specific information and advice about the taxation of a trust should be obtained. The marginal rates applicable to Inter Vivos trusts and testamentary trusts are not the same: income in an Inter Vivos trust is taxed at the top personal marginal rate. A trust is a separate individual for income tax purposes. Under Canadian law a deemed disposition of trust property occurs every 21 years – the trust can continue for much longer but taxes will have to be paid on accrued capital gains Key considerations in deciding whether trusts will make sense in your estate plan include:
Minor beneficiaries: creating a trust for beneficiaries who may become entitled to significant amounts at a young age is particularly appealing. If no trust is set up, at age 18 a beneficiary is entitled to the whole of an inheritance. Through a testamentary trust, for example, you can ensure that funds are available for housing, support and education of a young beneficiary but delay or stage the distribution of the bulk of an inheritance until a later age.
Special needs beneficiaries: transferring property into a trust for the benefit of a disabled beneficiary may allow the settlor to provide financial support to that beneficiary without disentitling the beneficiary to income tested government assistance and supports.


Spendthrifts: transferring property to a trust has the possibility of protecting an inheritance from creditors, including creditors in bankruptcies. The protection is not absolute; however, the tool may have great benefits for beneficiaries who have difficulty managing their finances.
Administrative costs: A trust is an ongoing relationship which can last for decades. Trustees are entitled to be paid for their management of a trust, fees such as accounting fees, legal fees and banking charges can be considerable and should be kept in mind when considering the use of a trust.


Government oversight: depending upon who the beneficiaries of a trust are there may be scrutiny of a trust by one of two government bodies: the Public Guardian and Trustee (on behalf of certain charitable interests and mentally incapable adults) and the Office of the Children’s Lawyer (on behalf of minor, unborn and unascertained beneficiaries). The courts retain jurisdiction to review the conduct of trustees and accounting for the management of an ongoing trust can cause considerable expense.
Residence: residence of trustees, of beneficiaries and location of trust assets can have complicated and unpredictable income tax consequences.
Choosing a trustee: a trustee can have a complicated and long-lasting set of responsibilities. Where assets and family relationships are complicated, particular care must be given to finding a reliable, trustworthy, sophisticated trustee or group of trustees who will be able to fulfill the obligation to manage a trust for the benefit of the beneficiaries.

Alter – Ego Trusts This type of trust is also set up while still alive, similar to an Inter-Vivos Trust. The primary difference is that the person (settlor) setting up the Trust is also the beneficiary. The settlor must be at least 65 years of age. Financial Planner Perspective - There really is not much in the way of immediate tax advantages to this type of trust, but a long deferral of taxes is possible as well as other benefits that are worth knowing about. A spousal couple could transfer their assets into a joint spousal trust using their original cost base thereby not incurring a deemed disposition on the transfer. In fact, the assets are not deemed disposed until the last spouse dies. While the spouses are still alive, they have full benefit and control of the assets in the Trust. The Trust assets by-pass the Will because the Trust is formed and funded prior to death and do not need to be mentioned in the Will. Yet after death, assets can remain in Trust form (if desired) to benefit other contingent beneficiaries. At this time the 21 year rule begins, where the Trust assets are deemed disposed for tax purposes at last spouse death, and then again every 21 years. However, there is a possible election that the Trust can elect to have the taxes 21 years after it was originally created instead of upon last death. The advantage of this type of Trust is that it provides privacy and flexibility on how the Trust will be administered and who will benefit from the Trust in the future when the last spouse dies. One can dispose of the Trust altogether after last to die and gift the assets outright to the contingent beneficiaries. These Trusts are used for families with difficult dynamics between heirs, wide age differences, split families, step families, heirs with specific financial dependencies and needs, families that have a dis-inherited child, or with estates where properties in are in various jurisdictions. Gifts to beneficiaries done via a Trust are much harder to contest then a Will. All income from the Trust is taxed at the tax rates of the beneficiaries (or settlor in this case of Alter Ego Trusts). There are different ways to set up the Trust – such as having access to income only, or income and capital. Also the Trust must be in Canada (as well as the settlors) but can be in different provinces where tax rates are lower. Legal Perspective - Alter ego trusts are a subspecies of Inter Vivos trusts. Transfer of assets to an alter ego trust separates those assets from the probated estate, and saves the payment of probate fees. The transferor(s) must be the sole person(s) entitled to the use of the trust capital during his or her lifetime. The transferor can specify the beneficiaries of the assets upon his or her death. The assets will be subject to tax on accrued capital gains on death of the transferor.

Insurance Trusts Insurance can be used as a Will substitute when a named beneficiary, such as a spouse or child is directly named, in this situation you can name a Trust (and Trustee) instead to hold and administer the proceeds for the benefit of the beneficiaries. Similar to a testamentary Trust (it doesn’t start until death) it is particularly useful if one has small children, if one wants privacy, protects against estate creditors, is quick to fund, and gives a large degree of control of the use of the proceeds through the trust instructions. From a tax perspective, it is treated more favorably than Inter Vivos or Alter Ego Trusts. The tax rate is “graduated” based on actual level of income. However, discussions are taking place to remove graduated tax rates from all testamentary type of trusts starting in a few years. Therefore, most trusts should not be used with the intention of tax saving purposes alone, the important features are privacy and control of assets.

RRSP, RRIFs, and Life Insurance Financial Planner Perspective - RRSP’s and similar retirement savings vehicles offer an easy transfer to a named beneficiary upon death, thus by-passing the Will. A spouse beneficiary would simply merge their deceased spouse’s RRSP into their own and the tax deferral continues. However, in the case of a beneficiary where the deferral of taxes is not allowed, some issues can arise resulting from a tax hit to the estate. Despite the assets rolling at full value to the beneficiaries, the estate will have to pay the taxes on the deemed disposition of the RRSP assets and it is included and taxed as income - not dividends or capital gains where the tax treatment is preferred. Most financial institutions will allow for multiple beneficiaries to be named on a RRIF or RRSP and a person could name their children as beneficiaries such as 1/3 percentage each in the case of 3 children. Often, taxes can be estimated during the financial planning process and mitigated with a life insurance policy payable to the estate for liquidity needs to pay for taxes. The downside of course, is that if the beneficiary of the life insurance policy is the estate, the policy amount is included in the overall estate value and subject to probate taxes. If there are not enough assets in the estate to pay the taxes, the Government can go after the beneficiaries of the RRSP. In some situations, it may be better for the last to die spouse to leave the RRSP assets to the estate (since the estate will have to pay the taxes anyway, and the value becomes smaller as the years pass and it turns into a RRIF to provide income), and use insurance proceeds to gift to their named beneficiaries instead. Insurance provides for an immediate tax free cash pay-out to named beneficiaries. It is also possible to structure insurance proceeds into a Trust for various special purposes. Life insurance is one of the cornerstones of tax and estate planning. There are many types of policies that can be used for specific and different purposes that go beyond the scope of this article. However, unless the policy specifically names the estate as a beneficiary, the insurance policy value bypasses the estate and is tax free for both the beneficiary and the estate. Legal Perspective - A common element amongst these savings tools, which include a diverse range of products, is that an owner can designate a beneficiary. For example, if I own an RRSP I can designate Susan as my beneficiary. The balance of the plan will be paid directly to Susan on my death and its value does not need to be included as an estate asset for the purpose of calculating probate fees. Plans including RRSPs and RRIFs are where many of us hold significant savings. In planning with these sorts of savings consider whether your death will trigger significant income taxes, and if so, where should the burden of those taxes fall? Can the tax be deferred until the death of the beneficiary (such as a spouse)? If the likely beneficiary is under 18, do you hope to have the proceeds of the product or plan available for that beneficiaries use and benefit prior to their adulthood? Do you want them to receive the proceeds outright at 18 or in stages? With respect to pension benefits, much of the rights

triggered on the death of a pension plan holder depend on the language of the specific contract or plan and the language and beneficiary designations should be reviewed with your legal advisor to ensure that your wishes and obligations are properly reflected.

DUAL WILLS In Ontario it is possible to have more than one Will, each Will specifically drafted to address different assets. Dual Wills are most commonly used by people with multi-jurisdictional assets or with significant assets (such as private corporate shares) which can be transferred without probate. Financial Planner Perspective - Unfortunately dual Wills are only available in Ontario. They can be great tool for wealthy individuals and/or business owners to distribute certain assets, minimize probate fees, and keep finances private. A person in Ontario can have many Wills all dealing with different and specific assets. The primary Will is the only one that needs to go through probate. They are sometimes recommended for those with ownership of shares in a private corporation of significant value, or various properties in other jurisdictions. Although this option is available, I don’t often recommend it unless the client has ownership in a valuable private corporation and works with an Estate Lawyer who has experience in structuring dual Wills. Legal Perspective – Dual wills are not useful tools for everyone. If you own significant property which does not need probate in order to be transferred to beneficiaries, then the tool may be useful to you. Ontario law and practice regarding whether an asset needs probate, and is therefore subject to 1.5% probate fees, is in a state of flux right now and it may be that in the future, assets which previously could be kept out of the probate calculation will be captured. Banks certainly require probate in order to cash out savings and accounts. In order to be able to transfer title of real estate to a purchaser, an estate trustee will almost always need probate. But private company shares, household goods, artwork, collections, mementos do not need to be subjected to probate at present. For the time being dual Wills can be of particular use to authorize an estate trustee to distribute a non-probate estate without paying part of the probate fees which would otherwise be payable.

TFSAs AND RESPs Tax Free Savings Accounts (TFSA’s) and Registered Education Savings Plans (RESP’s) are both a type of saving vehicle with tax deferral opportunities especially when it comes to investment income and withdrawals. Both can by-pass the Will in estate planning. The TFSA can have a named beneficiary, and the RESP can have a successor subscriber (a person named in the Will that will continue with the original purpose of the RESP for the child) Financial Planner Perspective - TFSA’s are an easy Will substitute where assets are passed efficiently to a named beneficiary without tax implications to either the estate or the beneficiary. If a spouse is named the beneficiary, the TFSA account can be merged into the survivor’s existing TFSA account. RESP’s are clearly set-up with a child beneficiary(s) in mind. They can be held jointly by spouses (known as joint subscribers) where if one spouse dies, it leaves the RESP intact and the remaining spouse continues with the RESP as is. However, in the case of single subscriber dying, it is important to have named a successor subscriber to avoid the RESP becoming dissolved. Often designating a successor subscriber can be done directly with the financial institution, or by naming someone in your Will. Legal Perspective -Whether using TFSA or RESPs as an estate planning tool makes sense for you, versus using other investment products, varies greatly from family to family. On death an RESP does not become the property of the intended beneficiary and it may fall into the estate if plans are not put in place.

You can use a Will to designate a successor subscriber for an RESP, including designating your estate trustee as the successor subscriber, and this will make it more likely that the preservation and continuation of the RESP will be maintained. TFSAs also allow for the designation of a ‘successor holder’ – so naming a successor through the product itself or through your will, will allow the successor holder to replace you as holder of your TFSA, with all rights passing to the successor without being subject to probate fees. This is true even if that successor has no unused contribution space. Without a successor holder designation in place, the income earned in a TFSA after death is subjected to income tax.

Segregated Funds Segregated Fund (Seg Fund) is an insurance product with growth (or loss) potential. Typically they are a basket of Mutual Funds with an insurance wrapper around them. One can name a beneficiary, thus bypassing the Will and probate process. They can be held in an RRSP or regular account. Financial Planner Perspective - Seg funds were better when they were issued before the 2000 tech market bubble bursting. Insurance companies structured these products quite nicely for the Seg fund owner and subsequent beneficiaries; however, as the market lost significant value, the funds had built-in generous market value guarantees which of course, made them less profitable for the insurance companies. The features today are not as generous but the cost has stayed the same, or in some cases higher. They can still be good value for those who are self-employed due to the nature of the relatively strong creditor protection of the policies. However, to be creditor proof, they must have been bought before any known creditor issues arise and keep in mind that different laws could apply depending on who the beneficiary is. Most Seg Funds have different features, and most offer a certain death benefit based on the value of the Mutual Funds at death. If the market value of the Mutual Funds happens to be lower, many offer certain guarantees such as 75%-85% minimizing the negative impact if the actual loss is greater. The funds grow tax free inside the plan and the owner can add money to the fund anytime, or redeem it entirely after paying commission costs. Only Insurance licensed professionals can sell Segregated Funds.

Conclusion from Susan Mallin: Estate planning can seem like an overwhelming task and is a commonly neglected area for many. Perhaps due to the perceived complexity of it all, or a personal aversion to thinking about death, many people put off estate planning. It is not a formulaic “one size fits all” issue and the process needs to be customized for each family. The process should begin with a comprehensive financial plan, to discover financial and estate planning areas that need to be addressed. From there, other appropriate professionals such as accountants, lawyers, and insurance representatives are introduced to offer additional advice and help with the execution of the estate plan. I hope you have enjoyed this article, and although the subject may be somewhat dry, it is important. Remember that tax rules are always subject to change – and often do so without warning. If you would like more information please contact either Jane or myself. Susan Mallin, CIM, CFP Vice-President Financial Planning, Associate Portfolio Manager 416-485-0303 Jane Martin LL.B, Partner at Dickson MacGregor Appell LLP 416- 927-0891

Provincial Probate/Verification Fees and Tax Chart Updated April 2013 Value of Estates

British Columbia

Alberta

Saskatchewan

$0 to $25,000 $25,001 to $50,000 $50,001 or more $0 to $10,000 $10,001 to $25,000 $25,001 to $125,000 $125,001 to $250,000 $250,001 or more Any amount

Manitoba

$0 to $10,000 $10,001 or more

*Ontario

$0 to $50,000 $50,001 or more

Quebec

Non-notarial will Notarial will

*New Brunswick

$0 to $5,000 $5,001 to $10,000 $10,001 to $15,000 $15,001 to $20,000 $20,001 or more

Prince Edward Island

$0 to $10,000 $10,001 to $25,000 $25,001 to $50,000 $50,001 to $100,000 $100,001 or more

*Nova Scotia (as of March 6, 2013)

$0 to $10,000 $10,001 to $25,000 $25,001 to $50,000 $50,001 to $100,000 over $100,000

Newfoundland & Labrador

$0 to $1,000 $1,001 and up

Northwest Territories

$0 to $10,000 $10,001 to $25,000 $25,001 to $125,000 $125,001 to $250,000 $250,001 or more

Fees/Tax $0 $208 + $6 per $1,000 in excess of $25,000 $358 + $14 per $1,000 in excess of 50,000 $25 $100 $200 $300 $400 Maximum $7 per $1,000 or portion thereof $70 $70 plus $7 per $1,000 or fraction thereof in excess of $10,000 $5 per $1,000 $250 + $15 per $1,000 in excess of $50,000 Not Applicable (Court verification fee only)Not Applicable $25 $50 $75 $100 $5 per $1,000 or portion thereof (0.5%) $50 $100 $200 $400 $400 + $4 per $1,000 or fraction thereof in excess of $100,000 $78.54 $197.48 $328.65 $920.07 $920.07 + $15.53 per 1,000 or portion 1.553% $60 $60 + $0.50 per $100 in excess of $1,000 (0.5%) $25 $100 $200 $300 $400

Yukon

Nunavut

$0 to $25,000 $25,001 or more $0 to $10,000 $10,001 to $25,000 $25,001 to $125,00 $125,001 to $250,000 $250,001 or more

$0 $140 flat fee $25 $100 $200 $300 $400

*Fees are a tax Important Notes: Some provinces may also charge filing fees and other administrative costs. Provincial legislation must be reviewed to understand all applicable fees and costs. The value of estate is calculated according to the rules of each province which may or may not allow deductions for such things as specific debts or property (real or personal) located outside the province. Fees may be payable in more than one province. Chart valid as of April 2013 – subject to change where amendments to provincial legislation and regulations occurs.

Those who want to explore new and better options for their investing and retirement needs can start with a complimentary financial plan, simply by contacting me. Financial plans can be done in person or by telephone using a virtual meeting format. Best Regards, Susan Contact information Email: [email protected] Phone: 416- 485-0303 or 1-866-876-9888 Susan Mallin is a Certified Financial Planner and Chartered Investment Manager with over 17 years of experience. She is also knowledgeable in cross border issues for US citizens living in Canada, as well as Estate Planning for Canadians.

This document is prepared for general circulation to clients of Lorne Steinberg Wealth Management (LSWM) and is provided for information purposes only. It is not intended to convey investment, legal, tax or individually tailored investment advice. All data, facts and opinions presented in this document are based on sources believed to be reliable but is not guaranteed to be accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the report. This is not a solicitation for business. Past performance is not a guide to future performance. Future returns are not guaranteed. No use of the LSWM name or any information contained in this report may be copied or redistributed without the prior written approval of LSWM.

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