While wills are important, you still can start your estate planning while working on the official document
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In an increasingly complex world, the Financial Post should be the first place you look for answers. Our FP Answers initiative puts readers in the driver’s seat: you submit questions and our reporters find answers not just for you, but for all our readers. Today, we answer a question from Austin and Romina.
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Q. I’m 30 years old, just married and don’t have many assets yet. But my wife and I have two good jobs and make about $150,000 annually. My wife and I are planning to have children soon. Can you give me a basic primer on what I should include in my will? I’m hoping I can keep it simple. — Austin and Romina
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FP Answers: Austin and Romina, first let me congratulate you on your recent marriage. You ask about a basic primer for your will and estate plan, so here are some key points.
You need wills in case you and your spouse both die in a common catastrophe. You can name separate executors/estate trustees to distribute your estates to beneficiaries and sign tax returns.
You do not mention having a prenuptial agreement or cohabitation contract. Marriage brings new property and support rights for spouses. If you are blessed with children, you would need to support them and modify your estate plan.
Wills can include trusts to manage money for minors. You can appoint persons to have decision-making responsibility for minors.
Without making your wills, you still can start your estate planning. Your assets may consist of jointly owned property, such as your home and joint bank or investment accounts. Jointly owning these assets with your married spouse raises presumptions (in Ontario) that you intended to gift this property to your spouse.
You did not mention that you jointly own a home, but if so, it may be ideally suited to joint ownership. Joint ownership with spouses is beneficial because surviving joint owners inherit the asset without the need for wills or payment of provincial probate tax (Estate Administration Tax, or EAT, in Ontario).
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Another way of controlling your assets is by designating them to pass on to named beneficiaries. These assets allow you to name specific persons as designated beneficiaries. These designated persons inherit, as beneficiaries, without your will. Designated assets can include registered investment plans, tax-free savings accounts (TFSAs), pensions and life insurance. TFSAs, in some provinces, allow you to also designate beneficiaries. If no individual is named, the designated asset is payable to your estate. Assets payable to your estate are controlled by your will. Will assets are subject to provincial probate tax, as well as delay and the costs of probating your will. In Ontario, EAT can be as high as 1.5 per cent of will assets.
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How does I ensure my estate is not heavily taxed at death?
Regarding tax planning, if you have a Registered Retirement Savings Plan (RRSP) of $100,000, you can designate your spouse as beneficiary of this investment. The Income Tax Act then allows the transfer of this registered asset on a tax deferral basis to spouses. Otherwise, the $100,000 would be included in your final tax return. This income may be taxed at the highest possible tax rate. Tax savings are estate planning bonuses.
Edward Olkovich is an Ontario lawyer at MrWills.com. He is certified by the Law Society of Ontario as a specialist in estates and trusts law. This information does not substitute for legal advice.
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