TAXATION - ESTATE & SUCCESSION PLANNING

An estate plan is an integral part of achieving one's overall financial and family goals.

Nordahl, Craig, Cummings & Gares has extensive experience in establishing comprehensive estate and succession plans. We review both the family and tax aspects of the plan with you in detail. We also provide full accounting and taxation services to the estate after death.

Some of the important planning considerations include:

Business Succession

As part of the estate planning process, one must provide for the orderly transfer of the business to the next generation if the children are expected to continue to operate the business.

Many issues need to be addressed including:

• fairness to other family members not involved in business;
• estate freezing;
• compensation (if any) for parents; and
• operational control.

Capital Gains Tax

Generally, on the death of an individual, all of the assets are subject to a "deemed disposition" at fair market value unless the assets are transferred to a surviving spouse or a spousal trust. Although one's principal residence is exempt from tax, the deemed disposition of other assets may trigger a significant tax liability when the assets are passed down to the next generation. This can create severe cash flow problems for the estate and its beneficiaries.

In order to minimize the tax arising on death, an "estate freeze" is often implemented. The estate freeze involves freezing one's interest in the assets at today's value such that the future growth accrues to the children. Therefore, the capital gain tax is capped at today's values while control is maintained over the assets.

To provide some creditor protection, the children's growth shares are often held by a discretionary family trust (see separate heading "family trusts").

Wills

Wills should be reviewed periodically. As family or business circumstances change, the current will may become out of date.

Life Insurance

Life insurance can be an effective estate planning tool providing tax-free cash to fund the liabilities that arise on death.

In some circumstances corporate owned life insurance can also significantly reduce the tax that would otherwise arise on death.

Estate Planning

Subsequent to death there are several planning opportunities available to reduce income and capital gains tax payable by the deceased and the estate.

Steps may also be undertaken to reduce or eliminate the “double taxation” that can arise where family corporations are part of the estate. Without proper tax planning, the same assets may be taxed twice: once upon death and then again when the beneficiaries sell the assets in the family corporation.

If you wish to have your circumstances reviewed for possible estate planning opportunities please contact our estate planning specialist, Ron W. Batty, C.A.