Here are three resolutions that you can make for the New Year. Use them and my tips to protect your money and your family. Then you can pop that cork. Celebrate your good start to the New Year.
1. Resolve to Have a Plan to Save Taxes
How do you make sure you don’t pay more taxes than you should? By having a tax-planned and professionally prepared will.
Wills, after all, control the taxes that you will pay when you transfer your wealth. If you are like most Canadians, your largest tax bill is your terminal or final tax return.
In Canada, we have no estate tax, but our neighbors to the south worry about estate taxes. In Canada, the government deems that you sold your capital property on your death. In other words, all the capital gains become taxable on the final return. That final return is the one your executor files for you.
The tax rules treat certain assets as income. The tax liability on stocks or investment properties – not your principal residence – can cost you tens of thousands of dollars.
What is the best way to minimize your tax bite? Consult a professional to help with your tax and estate planning. Your advisor can then minimize the tax bite and help your arrange your affairs.
Merely correctly owning your assets can defer capital gains and avoid probate taxes.
Here is another tip on registered plans like RSPs and RIFs. The value of the plan is included as income for your tax return on the year of death. There are exceptions that save you almost 50% of your plan. Make the beneficiary a qualifying spouse, dependent child or grandchild.
Ensuring you have the correct beneficiaries on registered plans protects money and benefits your family.
All tax advice should come from qualified advisors. But keep reading to see why saving taxes should not be your only motivation.
2. Resolve to prevent arguments over your money
When an estate dispute occurs, everyone has to hire a lawyer. Your family can dump what seemed like truckloads of money onto lawyers’ laps.
You can’t guarantee your family won’t fight over your money. But you can lower the risks with proper estate planning. Get an experienced estate lawyer to advise you but:
- Never forget that you have moral and legal obligations to meet. Failing to provide for a married spouse, common law spouse or financial dependent can cause your estate to end up in court. The fees to settle such disputes can be significant.
- Inconsistent wording in a poorly prepared will can cause people to go to court over your intentions.
- With Powers of Attorney, someone you trust can protect your money during your lifetime.
3. Resolve to avoid money mismanagement
The executor of your estate can mismanage your money. So choose the right executor for your will. Choosing an estate trustee nobody can get along with is a big mistake.
Judges will not blame beneficiaries who must remove an incompetent or dishonest estate executor. When you fix an executor’s mistakes, it can cost tens of thousands of dollars.
What if the judge blames you for choosing the wrong person? Judges can make your estate pay for the legal battle with your own money.
If your family ends up in court fighting to remove the executor, it can cost tens of thousands of dollars. Fighting will only waste you and your family’s money.
Happy New Year to All!
See My Related posts and ebook
- Estate Planning Resolutions
- Target Your Estate Planning Resolutions
- Choosing Executors: Your Formula for Success (my ebook)
About Edward Olkovich
Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven books. Visit his website, mrwills.com, for more free valuable information.
© Edward Olkovich 2012