Crafting The MemoryA brief look at estate planning…

Welcome to Dave’s presentation on the wise use of your assets later in life

Dave Sharp, B.Sc.; CFP; EPCCertified Financial PlannerElder Planning Counsellor

So… now that we have accumulated these assets during our lifetimes, what do we do with them?

As you might have heard, you can spend it, save it or give it away!

You have the option to distribute the majority of your assets to two of the following three groups.

Don’t Rule Out Charitable Giving

Why planned giving?

1. Long Term Commitment to Charity• It is our opinion and experience, there is no other single factor

more important to the success of a planned giving program than committed donors.

2. Intergenerational Transfer of Wealth• Another indirect reason or "trigger" for making a planned gift is the

enormous accumulation of wealth in the hands of Canadians over the age of 55. In many cases, these individuals are being told by their financial advisors to consider making charitable gifts to help offset the tax "bite" on their estate

3. Desire to leave a Legacy• Planned gifts are natural endowment fund builders. Why? In many

cases, there is no requirement for the charity to spend a defined amount of the gift in the next fiscal period. Therefore, the charity can invest the gift and earn income which is tax free to it, yet can be used to fund the donor's wishes, or the institutions priorities forever

Here is one example of someone who did not pay much attention to her financial planning in terms of long term planning. Here is her scenario:

• At age 70, she had $450,000 in her RRIF but only took out the annual CRA minimums

• Upon her death at age 80, she had the following assets:• Her home valued at $300,000• Her RRIF balance valued at $373,272• A TFSA balance valued at $35,000• Some non-registered assets valued at $150,000 with a ACB of

$100,000• And, her annual income of $25,000 plus her minimum RRIF

payment• She had 6 heirs that she wanted to distribute her remaining assets

to equally.• She was a strong contributor to her favourite Charity but did not

plan to make a donation to such in her Will or beneficiary designations as no one ever talked to her about it before.

Registered Assets are Fully Taxable at Death

(Rollovers to surviving spouse permitted)

*Assuming 48% Marginal Tax

Rate

Registered Assets$450,000*

Estate

Revenue Canada

$234,000

$216,000

70 71 72 73 74 75 76 77 78 79 80 Death$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Pre-TaxAfter Tax

Value of Her RRIF Assets

After her death at age 80, and after paying the final estate taxes for all applicable assets; each heir would have rec’d $111,136

But, fortunately, at her age 70; she met with Dave and made some changes to her financial plan!

She opted to accelerate her minimum RRIF payments to $55,000 per year which should deplete her RRIF balance by age 80

– This freed up over $10,000 in after-tax dollars per year to do as she wished for.

Here is what happened to her tax situation:

Ages 70 71 72 73 74 75 76 77 78 79 80 Death0

50000

100000

150000

200000

250000

300000

350000

Total Tax Losses

Option #1 Option #2• Under her initial plan, her total tax payments over the 10 years

would have been $289,832• Under the revised plan, the tax bill would have been $237,912 - a

savings of over $51,920

With the additional $10,000 of “freed up money”, she opted to work with Dave to increase her Estate value with the use of Life Insurance (Option #2).

Ages 70 71 72 73 74 75 76 77 78 79 80 Death$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Option #1Option #2

After-Tax Estate Value of RRIF & Insurance

After final estate taxes (at age 80) for all applicable assets, each heir would have rec’d $121,878 – an increase of ~10%.

Financial Concept – Use Of Life Insurance

Unlike many investments that result in taxable growth each year, permanent life insurance provides the opportunity to accumulate cash value without paying tax on it until you withdraw it from the policy (if you ever need to – otherwise, passes on tax-free to the heirs). This tax-advantaged growth may substantially increase the amount ultimately available for your beneficiaries.

Insured Asset Transfer

And, last but not least, she wanted to remember her Charity

Series1$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Option #1Option #2

Donate $100k

Donate $200k

No Donation

The difference between no financial plan with no donation and with a financial plan with a $200k donation was less than $7,000 per heir

Financial Concept – Remembering Charity

Your net worth cycle

Consider this• You may not use all your net worth during your lifetime. • Does it make sense to pay income tax on the growth each year?

Conclusion

Estate Planning takes time, effort, and expertise…

… But done properly, it yields more than dollars and cents....

It yields Peace, Love, and a Lasting Legacy…

Let someone help you build the legacy of your life today!

Dave and his associates would like to know they have the expertise to get the job done properly and effectively for you and your loved ones.

Thank you!