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Planning for tomorrow with a LifeBook

July 20, 2021

Planning for tomorrow with a LifeBook

Synopsis
6 Minute Read

These three questions will help you get started on formalizing your long-term plans for wealth.

Your family’s future is too important to leave anything up to chance. But making plans can be an uncomfortable and confusing experience, and you may put it off, assuming you can figure it out later.

As we’ve learned from the pandemic, change can happen very fast. Building a plan now helps to ensure you protect what you’ve built and set your family up for future success. To make it easier to start planning, we’ve created three questions that will give you a sense of where you are in the process.

Where are you right now?

This question is here to determine what steps you’ve already taken. Some people have already created a will with a lawyer or have discussed their long-term retirement goals with their partner and children. These are moves in the right direction and provide a foundation for your overall plan.

For others, these goals are not formalized and have never been written down or shared with their family. Getting started can feel overwhelming and it’s possible to get stuck because there are pieces that don’t have immediate answers. In these cases, it is good to lock in what you do know and then look for people that can help present options to solve the rest.

Whether you have started the process or are just beginning to think about it, building a plan is one of the most valuable things you can do to ensure piece of mind for you and your loved ones. A comprehensive plan goes beyond a will and a discussion over family meals. There are more complex issues to consider to create an effective plan. For example, a tax professional should also look at your will, especially for situations with complex assets, to ensure your affairs are set up in an efficient manner.

You also need to consider the next generation. Are you children prepared for the responsibilities that come with stewarding significant amounts of wealth? If they may not be ready, there are solutions available to support them, and you can arrange for those to be in place now instead of suffering the consequences down the line.

Finally, an important but overlooked detail is life insurance. Oftentimes, life insurance can have specific expiry timelines that individuals may or may not be aware of. This can cause issues if the insurance was intended to support loved ones and is especially problematic if the proceeds were being used to balance the estate between beneficiaries. It is also very common to see life insurance funds go unclaimed because executors and family members were unaware of its existence.

By identifying where you are right now, you can start to identify the areas you need to address and build a plan that will achieve your goals.

What do you have?

This question is all about determining what assets you have, where those assets are held, and what you need to do to get set up appropriately.

When you’re creating a list of your assets, you need to identify where they are held geographically or structurally, such as held in a corporation or trust. Assets, executors, and beneficiaries in other provinces or out-of-country may require specific planning approaches to mitigate taxes.

Your will may require updating as well. We often see assets identified in personal wills that are held in a corporation or other structure. By looking at what you have and where it is held, you’ll be able to verify that your allocation strategy can be followed.

For example, land and buildings are often moved into corporations, but families will allocate those assets in their wills. In practice, you can only allocate shares of that corporation.

The cost of these small errors is significant. For unplanned estates that hold significant or complex assets, it is not uncommon to see 10-30 percent of the estate lost to legal and other professional fees, not to mention inefficient tax costs and most importantly, family relationships. As a recent unfortunate example, we became aware of an estate valued at $5 million which had already incurred over $1 million in legal fees and was still not settled.

This extreme cost was a result of plans not being formalized when the individual was able to communicate their intentions and goals. Unfortunately, the cost of family relations was also significant in this case. Getting your asset strategy sorted ahead of time can reduce pressure on your family and save you money in the long term.

Where do you want to go?

Your long-term plans are critical to creating an effective strategy. Many people have an idea of what they want to do in retirement, but they don’t take the necessary steps to turn that idea into a reality. Without a plan, you run the risk of not knowing your options and potentially paying taxes that could have been mitigated.

Think about where you see yourself in five years and where you see yourself in retirement. If you’re planning on moving to a different province or retiring to another country, you can start adjusting your assets to prepare for the move now.

This is also the stage where you can evaluate how you plan on sharing your wealth with your family. Many people have a focus on sharing wealth equally and fairly, and the definition of equal and fair differs for each family. Now is the time to determine what that looks like for your family and work through the issues with advisors that have a wealth of experience to provide options and coaching to ensure long-term harmony.

Some people may focus on using their wealth for charitable work or legacy projects, which may also have significant tax saving opportunities. Having conversations about this now, can ensure that you’ve set up the proper plans, foundations, or organizations to ensure follow through on your vision and to maximize the value being transferred.

A LifeBook from MNP can help you answer all of these questions and gather your important documents into one secure place. Whether you’ve started answering these questions or you’ve already created a will, there is no wrong time to reach out and plan for your future.

To learn more about LifeBook, contact Tracy Noullett, CPA, CA, Partner, Business Advisory Services, at 403.525.3336 or [email protected] or contact Tina Di Vito, CPA, CA, CFP, TEP, FEA, Partner and National Leader, Family Office Services, at 416.515.5071 or [email protected].

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