Three Step Strategy
For Your Estate Planning
What is a Proper Strategy for your Estate Plan?
Estate Planning allows you to plan for yourself and your loved ones without giving up control of your affairs. Your Estate Plan should provide for saving taxes and costs and the possibility of your or your spouse’s disability or requiring an extraordinary expenditure.
You want to give “What you own to Whom you want, When you want to, and the Way you want”.
Your Estate Plan should include fully disclosed and controlled costs and taxes for you and for those you love.
Two Problems with Estate Planning with "Ordinary" Wills
The Importance of Title
The Pitfalls of Jointly-Owned Property
The Pitfalls of Planning with Beneficiary Designations
The Pitfalls of a Non-Trust Will
How does the Family Will Plan work?
The Family Will Plan Solution: The Three Step Strategy
Step 1: Work with a counselling-oriented lawyer
Step 2: Establish and maintain an updating program
Step 3: Assure fully-disclosed and controlled settlement costs after your death
The Importance of the Team Approach
|Two Problems with Estate Planning with “Ordinary” Wills
The first problem is that most Estate Plans are upside down.
Patrick Murphy sees the planning process as a pyramid. The pyramid’s foundation is the thorough understanding of your needs, goals, dreams and aspirations. Most people want to be sure that they (and their spouse or partner if married or cohabiting) are taken care of now, and throughout their retirement years.
Next, we need to have a thorough understanding of family members and family dynamics – those people who you care about and who will someday receive the benefits of your success. For some people, family includes children and grandchildren. For others, it may be step-children, nieces and nephews, friends, and charities.
You are the expert on your family matters. We depend on you to teach us about your family. We’ll teach you about the law.
The final building block of the pyramid is made up of strategies and tools to save taxes, Probate and other costs, delays and avoid Family Law claims against your loved ones. Like the last piece of a jigsaw puzzle, this fits in if all of the proper groundwork has been laid.
When we say that most Estate Plans are upside down, we mean that most are built on planning strategies including Probate avoidance instead of tax and cost saving inspired Wills, delays and claims avoiding planning for your family! Personal family concerns and goals are relegated to a lower priority instead of being the very foundation of the plan.
Patrick Murphy believes that by planning according to the pyramid, we can better focus on your goals and create solutions that will ultimately make your planning easier and more effective.
The second problem with “Ordinary” Wills is that most Estate Plans just don’t work!
We know that an Estate Plan works when every expectation that you had in mind when you began planning is completely met. Of course, it’s really the family members who will see the results. That’s why Patrick Murphy recommends a "Family Will" Plan instead of an “Ordinary” Will.
Why don’t most plans work? We believe it’s because many clients and professional advisors see Estate Planning as being transactional. They say, “I did my Estate Plan.” “I made my Will.” In reality, Estate Planning is an ongoing process, not a transaction. Because everything constantly changes, your Estate Plan must change too. Patrick Murphy provides a complimentary maintenance program (including your advisors) for your plan as well as education of your family members and Estate helpers.
Everything in Estate Planning comes down to title. Personal protections depend on title. Tax savings depend on title. In other words, you and your family only receive the benefits of your planning if your planning controls your wealth. Control comes from title.
There are basically three types of title: Individual Name, Joint Name and Contract. Joint Name property includes tenancy in common and joint tenancy with right of survivorship. Contracts include beneficiary designations (such as on insurance, registered retirement plans and TFSA) and trusts.
Assets owned in individual names alone are the only assets that are controlled by a Will. Jointly owned accounts and beneficiary designations are controlled by operation of law. Only assets owned by a trust are controlled by the instructions contained in that trust and can reap tax and cost saving benefits.
Patrick Murphy recommends planning so that your assets end up in your tax and cost saving inspired Family Will to ensure that the benefits of your success are enjoyed by your loved ones who you want to benefit.
|The Pitfalls of Jointly-Owned Property
- Your joint tenancy property can pass to unintended heirs.
- Joint tenancy does not avoid Probate, it only delays it.
- There maybe unintended taxes if joint tenancy is used between non-spouses or with children.
- The joint tenancy property may be subject to your joint tenant’s creditors or Family Law claims.
- Joint tenancy makes no provisions for saving taxes on inherited income, costs and delays.
- Joint tenancy doesn’t allow you to give your property to whom you want, the way you want, and when you want.
|The Pitfalls of Planning with a Beneficiary Designation
- Designating your beneficiaries on a standard insurance “beneficiary designation” often means losing control of a major part of your estate. It does not enable you to leave instructions or provide guidance to your loved ones.
- A beneficiary designation won’t protect your spouse and children from creditors or unscrupulous people.
- Equal distributions from a beneficiary designation can cause unequal results that won’t meet your family’s special needs.
- Beneficiary designations make no provision for tax planning (except for spousal beneficiary designations for RRSP/RRIF proceeds).
|The Pitfalls of a Non-Trust Will
- “Ordinary” Wills are sterile legal forms that do not contain instructions for loved ones. They only accomplish limited objectives.
- “Ordinary” Wills actually add tax and costs --- not to mention delays and exposure to Family Law claims and creditors.
- With a professional "Family" Will Plan you can save your loved ones thousands of dollars each year by reducing income taxes and estate administration costs by as much as 50% to 100% --- not only when loved ones inherit, but every year for 10, 20 or 50 years to come.
|How does Family Will Planning Work?
The real tax grab from your estate arises not from the inheritances but from the income that inheritances earn year after year. From the moment your loved ones get their inheritance they will be taxed on every dollar it earns on top of their regular income --- at the highest tax rate possible!
"Family Will" Planning splits income from inheritances so that you
- Slash the taxes by 50% to 100% every year.
- Provide for each named grandchild, niece or nephew $10,000 tax free (for their educational and other costs) every year .
- Save executor's fees and half of the Probate costs.
- Powerful, 'Legally Valid' and 'Wallet' Powers of Attorney, Living Wills, Advance Care Directives and Letters of Wishes to enhance your control.
- Control what happens to your Estate now and after you’re gone.
- Organize your affairs to make things easier for your loved ones and family executors.
- Gain the comfort, confidence and Peace of Mind of knowing your family is taken care of.
- Protect your loved ones from Family Law Claims and lawsuits.
- Much, much more!
For your family
- Thousands of dollars less in taxes, Probate and legal costs using income splitting Testamentary Trusts.
- Fewer hassles, family fights, delays and costs in settling your Estate.
- More money for college, travel, a down payment on a home and enhanced quality of life for your loved ones.
|The "Family Will" Planning Solution:
The Three Step Strategy
It’s not about documents – It’s about results! The key to proper Estate Planning is clear, comprehensive, customized instructions for your own care and that of your loved ones. These instructions can be included in your tax-saving inspired Family Will, your Letters of Wishes, Powers of Attorney, Living Wills, Advance Care Directives and in several other related documents contained in your "Comfort Book".
We find that most of our clients are best served with a combination of these asset transfer strategies, backed up by the Three Step Strategy.
(as opposed to a word processing lawyer who prepares “Ordinary” Wills)
Work with a Counselling-Oriented Lawyer
We fear that much of what passes for Estate Planning is little more than word processing! We don’t believe you should pay a licensed professional to do word processing. A lawyer's value is in his/her counsel and advice, based on knowledge, wisdom and experience.
If word processing is all you want for your loved ones, you may as well do it yourself. But if you want an Estate Plan that works, seek good counselling from a lawyer who focuses on Estate Planning --- not just for the affluent (worth + $5M), but for comfortable, semi-affluent persons (worth $.5M to $5M), like yourself.
If you’re comfortable and semi-affluent, you probably need more than a lawyer who does Wills merely as a sideline --- and less than a downtown lawyer whose pratice is focused on the affluent and will pass you off to a legal assistant. You need a lawyer who has taken additional courses and programs to gain expertise in this area of law. A lawyer whose practice focuses on Estate Planning, including special studies related to planning for comfortable, semi-affluent persons. A lawyer who will prepare your comprehensive "Family Will" Plan for you.
Establish and maintain an updating program
Your Estate Plan faces a myriad of changes. First, there is constant change in your personal, family and financial situation. Secondly, there is constant change in both tax laws and non-tax laws that impacts your Estate plan. Third, there is constant change in Patrick Murphy’s experience and expertise. He’s continually improving through ongoing education, collaboration, monitoring statutes and case load, and collecting experience.
Since everything constantly changes, you cannot expect your Estate Plan to accomplish what it was intended to accomplish if it is never updated.
Therefore we recommend that your Estate Plan be maintained by regular review --- and that your family members and Estate helpers attend a meeting to learn how your planning works so that savings and organization can be maximized.
Your "Family Will" Plan includes an indefinite number of complimentary maintenance meetings and updates with Patrick Murphy or other members of the "Family Will" Planning team: Bernie Dueck and Jennifer Stiell who are also lawyers in Counsellor Law Offices.
Assure fully-disclosed and controlled Estate settlement costs after your death
The cost of any Estate plan has three parts: the part you pay for counselling, design and updating up front, and the part your loved ones pay after death. Regardless of documents, there are always after-death costs and most importantly, taxes to be paid by your loved ones on inheritance income — every year.
Wills usually go through Probate which is required to transfer your assets to your beneficiaries or to your testamentary trusts and to verify your Last Will. Tax returns must be prepared by your heirs for their inheritance income (which is added to their other income).
Be sure that you have discussed all of the parts of the costs with your lawyer during your planing. Understand what all of the costs will be in advance, and ask how they can be controlled. The work to be done your 'Family' executor can be demanding, stressful and family fight provoking. Your "Family Will" Plan makes being an executor very easy, quick and less costly because you will have pre-organized your assets in your "Comfort Book" and your family exectutor is required only to fund your testamentary trust, and not have to deal with many beneficiaries.
The cost of not planning properly (particularly Estate Settlement costs and taxes on inheritence income) can be enormous for your family.
|The Importance of a Team Approach
Creating an Estate Plan is not difficult, but it should involve all of your professional advisors: your lawyer, your financial investment and insurance advisors and your accountant, if any. If all of your professional advisors are included in your planning, you are much more likely to have a plan that works. If not, you may receive conflicting advice that leads to confusion and inaction.
We suggest that you allow us to involve your advisors in your planning from the start, and to keep them apprised of the steps that you are taking. That way everyone is fully informed and has a chance to offer their particular expertise to enhance your planning process.
A Proper Estate Plan Meets Your Goals
And Keeps You in Control
Of the Process and the Results!
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