As the year wraps up, now is a prime time to review your estate plan. Estate planning is not "set-it-and-forget-it"; especially in Canada, tax laws and personal situations can change, impacting your plan. By completing these key steps before year-end, you can optimize tax efficiency, secure your assets, and ensure your family’s well-being.
1. Review Your Will2. Update Beneficiary Designations
Certain assets, like life insurance policies, RRSPs, RRIFs, and TFSAs, transfer directly to designated beneficiaries outside probate. Update these designations, particularly after major life changes, to ensure they align with your wishes.
3. Address Capital Gains and Losses
In Canada, capital gains taxes are a notable estate planning concern, as unrealized gains on assets like real estate are deemed realized at death. Planning for these can reduce the tax impact on your estate.
4. Review Trusts
If you have trusts, ensure they are functioning as intended. Trusts can safeguard assets for beneficiaries, reduce probate fees, and help minimize potential family disputes.
5. Consider Year-End Charitable Giving
Charitable donations can offer valuable tax benefits. Contributions to registered charities provide a tax credit that can offset income taxes. Estate-based charitable giving also reduces the taxable estate portion, benefiting your overall estate plan.
6. Assess Life Insurance Coverage
Life insurance offers liquidity for taxes, probate fees, and other estate expenses. It can also be used to equalize your estate if you wish to provide different beneficiaries with specific types of support
7. Plan for Tax-Efficient Wealth Transfer
While Canada does not impose estate or inheritance taxes, tax obligations arise upon death, including capital gains taxes. Effective tax planning can reduce these liabilities, preserving more wealth for your heirs.
8. Minimize Probate Costs
Probate, the legal process of verifying a will, incurs fees that vary by province, with Ontario and British Columbia having higher rates. Strategies to minimize probate can reduce these costs, benefitting your beneficiaries.
9. Prepare or Update Powers of Attorney
Powers of attorney for both property and personal care are critical documents that empower someone to act on your behalf if you’re incapacitated, ensuring your affairs are managed as you intended.
10. Plan for Business Succession
If you own a business, a succession plan is vital to secure a smooth transition. Without a solid plan, your business may face tax liabilities or operational disruptions after your passing.
11. Review Retirement Accounts
RRSPs and RRIFs can incur significant taxes upon death, as the account balance is added to your final tax return unless transferred to a spouse or dependent. Planning for these accounts can prevent unexpected tax burdens on your estate.
Conclusion
A year-end review of your estate plan is a proactive step toward safeguarding your financial legacy and your family’s future. By updating key elements like your will, beneficiary designations, trusts, and tax strategies, you minimize the tax impact on your estate and ensure your wealth is distributed according to your wishes. Preparing now will bring peace of mind and security for 2025 and beyond.
Contact MacMillan Estate Planning at 403-266-6464 to schedule your complimentary consultation and ensure your estate plan is ready for 2025.