Your Will and Estate Planning Guide

Your Will and
Estate Planning Guide
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Your Will and
Estate Planning Guide
1-800-772-3257
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Your Will and Estate Planning Guide
Copyright © 2011 Mennonite Foundation of Canada. All rights reserved.
Contents of this book may be used freely by individuals and in study sessions,
workshops and seminars of the Foundation’s sustaining conferences. For all other
uses, written permission must be obtained from Mennonite Foundation of Canada.
ISBN: 978-0-9868567-0-9
Published in Canada by Mennonite Foundation of Canada
12-1325 Markham Road
Winnipeg, Manitoba R3T 4J6
Design by Helen Dimitrijevic
Printed and bound in Canada by (to be determined when we get print quotes)
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Contents
Introducing Mennonite Foundation of Canada
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Introducing Your Will and Estate Planning Guide
5
Chapter 1: Getting started on estate planning
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Chapter 2: Your will
11
Chapter 3: Dying without a will
15
Chapter 4: Role of an executor or trustee
19
Chapter 5: Role of guardians
23
Chapter 6: Tax considerations in estate planning
27
Chapter 7: Records of assets and liabilities
31
Chapter 8: Leaving a legacy
33
Chapter 9: Incapacity documents
39
Chapter 10: Trusts
43
Chapter 11: Personal effects
45
Chapter 12: Your family and your estate
47
Chapter 13: Succession planning
53
Chapter 14: Probate
55
Chapter 15: Final tax returns
57
Chapter 16: Implementing your estate plan
61
Glossary
63
Appendix 1
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Appendix 2
71
Appendix 3
72
Appendix 4
73
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Introducing
Mennonite Foundation of Canada
Giving you the financial stewardship tools you need
People often ask why Mennonite Foundation of Canada (MFC) gives away books like
Your Will and Estate Planning Guide and why it provides free counselling on charitable
gift and estate planning.
We provide these services as part of our stewardship ministry of promoting faithful,
joyful giving. In 1974, several Mennonite groups started MFC as a national public
charitable foundation that uses dollars pooled by like-minded individuals, churches,
and charities to help support a variety of charitable causes. They did it with a vision
to support a ministry of teaching, preaching, and counselling related to Christian
stewardship of finances. Since its inception, MFC has been helping people understand
that having their affairs in order is an act of good stewardship.
Over time, MFC has grown to an organization with five offices across Canada that
serves many more groups and individuals from a variety of denominations. In the past
decade, MFC has distributed $50 million on behalf of its clients, to help them support
registered Canadian charities that matter to them.
Today, MFC’s trained consultants can provide you with the following financial
stewardship services:
• counselling about will and estate planning
• helping give gifts to charities in the most effective way
• simplifying the distribution of charitable gifts from a will
• setting up gifting accounts
• providing educational resources such as seminars, sermons, and books
• creating and administering foundations for individuals and families
• managing funds for charities.
For additional information, visit our website, www.mennofoundation.ca,
call 1-800-772-3257, or email [email protected]
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Introducing
Your Will and Estate Planning Guide
A step-by-step guide for estate planning and
record keeping
Thoughtful, informed, and prayerful planning for how your estate will be handled and
disbursed after you have passed away is fundamentally an act of good stewardship.
Whether your estate is large or small, careful planning serves your loved ones and
the institutions you care about. It also allows you to consider the tax implications of
various alternatives, so you can make the most of what you leave behind.
Yet, even if you agree that estate planning is a good thing to do, you may be tempted
to put it off. Some people avoid making a will because they feel uncomfortable
thinking about death or find it difficult to decide how to distribute their assets. Others
want to wait until they have the assurance that they understand what’s involved.
If you don’t write a will, you are leaving the responsibility of dealing with your assets
and belongings to your children, relatives, or the government, when the time comes.
Studies suggest
that close to half
of Canadian adults
don’t have a will.
To help make writing a will and estate planning easier for you, Mennonite Foundation
of Canada has developed Your Will and Estate Planning Guide as a valuable resource.
This guide draws not only on our experience in assisting people from many walks of
life understand will and estate planning issues, but on our wealth of knowledge about
Christian stewardship of finances and related legal issues as well.
Your Will and Estate Planning Guide takes away some of the mystery of the estate
planning process by providing you with practical information and tools. It can help
you consider how to provide for your family and leave gifts for charities. It gives you
guidance on how to ease the burden of settling your estate and reduce expenses to
the estate, including taxes.
Using this guide will help you understand how to develop an estate plan that carries
out your wishes. By planning now, you give yourself and your family peace of mind.
MFC is here to help you. If you have any questions about the contents of this guide,
contact an MFC Stewardship Consultant to find out more. Call 1-800-772-3257 or
email [email protected]
The purpose of this guide is to provide general information only and users are recommended
to seek qualified professional advice in relation to both legal and tax matters, as Mennonite
Foundation of Canada does not provide tax or legal advice in relation to specific matters.
If you have assets outside of Canada, it is important to get specialized advice from someone
experienced in international law.
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Chapter 1
Getting started on estate planning
Where do I begin?
Simply put, estate planning is a thoughtful, caring act. Putting your plans in place is
an intentional act of stewardship that expresses your faith and values and shows what
is important to you. It allows you to care for those you love in the way you want to.
Estate planning also lets you express generosity through charitable giving and show
your commitment to being generous, just as God has been generous to you.
For Christians, estate planning can be an expression of gratitude to God. In the words
of Psalm 24, “The earth is the Lord’s and everything in it.” The Apostle Paul affirms
this when he writes to Timothy that God “richly provides us with everything for our
enjoyment” (1 Timothy 6:17). It is by God’s grace and mercy you have gathered
what you now have.
What is an estate plan?
The components of an estate plan are as follows:
• a will, which is the cornerstone of your estate plan and would include instructions:
- to an executor, who is someone you trust and is capable of carrying
out your wishes
- to guardians for any minor children or dependants
- regarding the distribution of your assets
- regarding trusts, if any
- regarding your charitable giving plan
- regarding the distribution of your personal effects.
• a document naming the person(s) authorized to carry out your financial affairs if you are not able to do so
• a document naming the person(s) authorized to carry out your wishes if you are incapable of making those decisions due to serious health issues
• instructions for the executor and family on where your important documents are stored.
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Will
A written document that
lays out the wishes of
the deceased with regard
to the distribution of
his or her assets and
personal property.
Executor
A person named in a will
to administer the estate
of a deceased person
(executrix, if female);
referred to as an estate
trustee in some provinces.
See also “Personal
representative” in the
glossary.
Guardian
A person who has the legal
authority to oversee the
affairs of a minor and has
the legal responsibility to
care for that minor until
he or she attains the age
of majority. Also a person
who has the legal authority
to oversee the affairs of
an adult dependant.
Trust
A legal relationship
whereby a person or
persons holds title to an
asset (including money),
but the benefit of the asset
belongs to someone else.
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How do I develop an estate plan?
Step 1: Set goals
Before you decide on any details of your estate plan, identify what you want to
achieve through the process. Establishing a clear set of personal and family goals for
the outcome of your estate planning will help you focus on what’s really important
to you. Your goals might include the following:
•to provide for your family, particularly your spouse, children, or anyone else who is dependent on you
•to be a good steward (manager) of what God has given you
•to ensure that your assets are distributed according to your wishes and beliefs
•to reduce stress for your family
•to reduce the cost and time required to settle your estate
Putting your plans in
•to arrange your assets so as to reduce taxes and make the most of what
you will pass on to your chosen beneficiaries
place is an intentional
•to make charitable gifts, now and/or through your estate.
act of stewardship
that expresses your
faith and values
and shows what is
important to you.
Step 2: Read Your Will and Estate Planning Guide
Your Will and Estate Planning Guide is designed to provide an overview of the
basic issues in estate planning and to walk you through the planning steps.
To get the most out of it, read this guide carefully and, as you do:
•make notes and a list of your questions
•ask yourself questions such as:
- Will my spouse have enough to live on if I pass away?
- Who should make financial and medical decisions for me if I am not able to myself?
- How much is enough, or too much, to leave my children and grandchildren?
- What kind of legacy do I want to leave?
- How much tax will have to be paid when I die?
Step 3: Fill in the Planning Your Will worksheet
The Planning Your Will worksheet, located in the pocket of this guide, is another
practical tool in your estate planning. Filling it in will help you consider the key
decisions you need to make. It will also provide you with most of the details that a
legal professional requires to draft your will, making your meeting with that person
more productive.
•Complete as much of the Planning Your Will worksheet as you can.
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•If you want a reminder of what a term or question means, review the
appropriate section of the guide or the glossary. Each section of the form refers to a section in the guide, where you will find more background information.
•Keep notes and a list of your questions.
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Step 4: Meet with an MFC Stewardship Consultant
Meet with an MFC Stewardship Consultant to review and finalize your will instructions
for your lawyer. A consultant will meet with you at a time and place that works best
for everyone. Based on the information you provide, the consultant will prepare notes
and questions you will need when you meet with your lawyer and will give you that
information. Our consultants do not charge for assisting you.
•To find the MFC office closest to you, go online at www.mennofoundation.ca, call 1-800-772-3257, or email [email protected]
•Have this guide, including your filled-in Planning Your Will worksheet, and
any other notes at the meeting.
Step 5: Meet with a lawyer
Having a lawyer offer advice, and prepare your will and other estate planning documents
is wise and will reduce the risk that your will might be challenged. If you do not have a
lawyer in mind, an MFC Stewardship Consultant may be able to suggest a few names.
•When you make the appointment with the lawyer, ask about the cost of having a will prepared. Ask what the process involves.
•Take the will memo an MFC Stewardship Consultant has prepared for you
to your meeting with the lawyer.
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Chapter 2
Your will
The cornerstone of your estate plan
A proper will is the basis of a good estate plan because it is the main tool you have to
ensure that your wishes will be carried out with the least possible expense and delay.
A will is a written document that lays out your wishes with regard to the distribution of
your assets and personal property after you die. Your will does not come into effect or
become public until your death. Provided you are mentally competent, you can change
the terms of your will or revoke it completely up to the time of your death.
You should review your will every three to five years to ensure that changes in your
family situation or in government legislation have not made it out of date. In some
situations, a badly outdated will may be worse than no will at all.
Types of wills
Formal
Formal wills are drawn up by lawyers who are trained to draft documents that are
complete, meet your needs, and accommodate family births and deaths without
becoming obsolete.
Sign only one copy, as only the original, signed document is valid. For a will to be
legally valid, a number of technical requirements must be satisfied. Each province
has different requirements. These may include execution of the document in the
presence of two proper witnesses. To ensure your will is legally valid, you should
obtain the assistance of a legal professional.
Usually a lawyer will require the two witnesses to sign additional documents known as
affidavits. Affidavits establish the identity of the witnesses and may be useful if there is
any question later about the will’s validity. People who are named to receive gifts from
your will (often known as beneficiaries) or their spouses should not sign as witnesses.
Doing so may disqualify them from receiving an inheritance from your estate.
Holograph
A holograph will is one that you write entirely in your own handwriting and sign
without any witnesses. This type of will is valid in all provinces and territories
except for British Columbia and Prince Edward Island. Writing a holograph will is not
advisable, because you may not have the information you need to make it clear or
complete. If your instructions are not clear or are incomplete, the will may be partly
or entirely ineffective, which could result in much higher costs in wrapping up your
estate, and result in assets not being distributed as you wish.
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Kits
Will kits are packages of information and forms that allow you to draw up your own
will. They are available in many bookstores, on websites, and as computer software
packages. Self-help will kits do not usually explain differences in provincial laws
concerning estates — information you need to write a proper will.
Some people use will kits because they want to save on legal fees. However, using
a will kit might leave your wishes open to misunderstanding; a challenge by your
beneficiaries might result in costs to the estate that are much greater than the legal
fees for drafting a will.
A poorly drafted or incomplete will may be legal, but if its provisions are challenged,
a court may not interpret them as you intended.
Review your will
every three to five
years to ensure that
it’s up to date.
Special situations
Wills for couples
Since wills are personal documents, you and your spouse must each have your
own. Some spouses have reciprocal (or mirror) wills. Some write wills that are quite
different from that of their spouse. In the latter case, both you and your spouse
should be aware of this and agree to the differences.
International wills
If you own assets such as a vacation property or investments outside of Canada,
consult with your lawyer about making an international will. Whether an international
will is effective depends on the laws of the country in which the will is made, the laws
of the country where assets are located, and whether the countries are parties to
international treaties dealing with wills and succession.
Changing a will
You can update your will either by replacing it with another, or by changing it with
a codicil. A will may be revoked by destroying it, but that can lead to confusion if
executors are uncertain as to whether you intended to revoke it or whether the will
was lost or accidentally destroyed. If you wish to revoke your will without replacing
it, you should obtain legal advice.
Adding codicils
A codicil is a formal document that makes specific (and limited) changes to your
existing will. Do not write the changes on your existing will, as it may cancel part of
your will. Given the ease of modifying an electronically stored version of a will, some
lawyers prefer not to do codicils, but to revise the provisions of the will.
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Cancelling
You may cancel a will by destroying it or by replacing it with a new one. Your new
will should contain a clause cancelling any previous wills you have made. When you
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make a new will, destroy the old one or clearly record that it has been replaced
with a new one.
When you get married, your marriage may automatically revoke your existing
will, unless the will contains specific information indicating that it was made in
contemplation of marriage. It is recommended that you review your will with a legal
adviser before you get married in case any changes are required. The interpretation
of a will may also be affected by a separation or divorce, so in those events, you
should also obtain legal advice.
Storing your will
You should store your will in a safe place that is easily accessible, because only the
signed original will be accepted after your death. You may choose to store the original
(signed) copy at your lawyer’s office (some will provide this service for free), in your
home or office, or in a safety deposit box at a credit union, bank, or trust company.
Make sure your executor knows where the original will is located and has access to it
after your death. Some provinces have central registries where a notice can be filed
about the date and location of your will.
Keep a copy of your will at home. Make a note on the copy indicating where the
original will is stored to help your family or executor find it without delay. File the
copy in a safe place along with your other important papers, including a completed
copy of MFC’s Personal Information Directory. This book can be an important
reference for you, your family, or your executor. A copy of this directory is inside
the front cover of this guide and is available online at www.mennofoundation.ca/
resources/publications.
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Chapter 3
Dying without a will
Intestacy causes problems
If you are like most people, you do not particularly enjoy thinking about the prospect
of your death. However, you should not let that keep you from writing a will. Making
plans for your estate and writing a will while you still have the health and ability to do
so is wise.
If you die without a will (or intestate, which is the legal term), the consequences can be
devastating for those you leave behind. It could result in your assets being squandered.
Your wishes may not be followed
If you die without a will, your estate will be distributed according to the laws of
your province or territory, which may not reflect your wishes. These laws cannot be
changed by a court.
Decisions on beneficiaries
You may want your spouse, partner, or children to receive much or all of your estate
upon your death. If you do not make a will, this may not happen because the laws
throughout Canada vary widely. Please refer to the chart on page 17 for a summary
of the provincial and territorial laws that outline the distribution of assets of an estate
when a person dies without a will.
Writing a will
while you still have
the health and ability
to do so is wise.
In some provinces and territories, a common-law partner is treated the same as a
married spouse for estate purposes. The relationship may have to have lasted a certain
length of time, however, for the partner to qualify. In other provinces and territories,
common-law relationships are not treated as the equivalent of a formal married
relationship for estate purposes, even though they may be treated as equivalent under
other areas of the law.
In some parts of Canada, separated spouses may still be considered spouses for estate
purposes. That may mean that a separated spouse would receive the first share of the
estate. In some situations, more than one person could be considered a spouse under
estate law.
Only biological or adopted children are able to inherit under estate law. If you wish to
leave any of your estate to stepchildren, you must state this in your will.
If you do not have a will and have no surviving spouse or children, your estate will
be given to other family members. Priority will first be given to surviving parents, then
siblings, followed by nieces and nephews. In the event that no living blood relatives are
found, the estate will go to the government.
If you want to make an end-of-life charitable gift, you need a will. (Exceptions to this
are beneficiary designations on life insurance policies, RRSPs, RRIFs, and TFSAs, as
described in Chapter 8.)
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Choice of a guardian
You may want a particular person(s) to be the guardian for any minor children or
dependants. However, if you die without a will or without indicating in your will whom
you want to be the guardian, a court will select someone for this role. That may not be
in the best interests of your children or dependants and may result in conflict among
surviving family members.
Troubled legacy
Bob and Alice were happily married with two small children. The young couple took the time to purchase
life insurance and felt good that their retirement plans were on the right track. However, they had never made
wills. They had good intentions, but the question of guardianship for their minor children always seemed to
stall the process.
On their 10th wedding anniversary, tragedy struck when their car collided head-on with a drunk driver.
Bob died instantly and Alice two days later.
With no will in place and no recommendations as to who should care for the children, many people stepped
forward and disagreements ensued. Lawyers were hired and the matter was settled by a judge at a cost of
thousands of dollars over several long and tedious months.
Distribution of assets is delayed
If you die without a will, before any estate assets can be distributed, a court has
to appoint someone to oversee your estate. Until that happens, no one can write
cheques or make withdrawals from your bank account.
If no family members or friends apply to do this job, a court may put this in the hands
of the Public Guardian and Trustee for your province or territory. Once this happens,
your estate will be distributed according to the one-size-fits-all approach of whatever
the law is where you resided.
Dying without a will results in higher costs to the estate, with the costs being paid from
money you leave behind. The value of your estate will decrease as a result of paying
higher taxes. With a will you can plan so that your estate pays less tax.
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Summary of provincial and territorial laws regarding
division of an estate for people who die without a will:
Province /
territory
Spousal
share*
Spouse and
one child**
Spouse and
children**
Can common-law
spouses inherit?
British Columbia
$65,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
Yes – minimum 2-year
cohabitation required
Saskatchewan
$100,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
Yes – minimum 2-year
cohabitation required
Manitoba
Greater of
$50,000 or
50% of estate
All to spouse (if
spouse is parent of
the child)
All to spouse (if
spouse is parent
of all the children)
Yes – minimum 3-year
cohabitation required OR 1
year with child together
Ontario
$200,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
No
Quebec
Nil
1/3 to spouse
2/3 to child
1/3 to spouse
1/3 to children
No
New Brunswick
Marital
property
½ to spouse
½ to child
1/3 to spouse
2/3 to children
Nova Scotia
$50,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
No
Prince Edward
Island
Nil
½ to spouse
½ to child
1/3 to spouse
2/3 to children
No
Newfoundland &
Labrador
Nil
½ to spouse
½ to child
1/3 to spouse
2/3 to children
No
Yukon
$75,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
Yes – minimum 1-year
cohabitation required
Northwest
Territories
$50,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
No
$50,000
½ to spouse
½ to child
1/3 to spouse
2/3 to children
Yes – minimum 2-year
cohabitation required OR
child and relationship of
some permanence
Alberta***
Nunavut
No
* A spouse receives the first portion of the estate. The size of this share varies according to province. Others inherit
only if the estate is larger than the amount of the spousal share. In some provinces and territories, a common-law
relationship is treated the same as a marriage for estate purposes. In other parts of Canada, common-law relationships, although equal under other areas of the law, are not treated as equal to a marriage for estate purposes. Also,
separated spouses may still be considered spouses for estate purposes. That may mean that a separated spouse
would receive the first share of the estate. In some situations, more than one person could be considered a spouse
under estate law.
** Only biological or adopted children are able to inherit under estate law. If you wish to leave any of your estate to
stepchildren, you must indicate this in a will.
*** Under new legislation coming into effect in January 2012, there is an “all to the spouse” rule in the case of
intestacy where a person leaves both a spouse and children of the relationship with that spouse or partner.
This change covers the cells of the chart referring to spousal share, spouse and one child, and spouse and
children, except if there are children of more than one relationship who survive. In that case, the spouse gets
a preferential share of at least 50 per cent of the net value of the intestate estate.
Because of the constantly evolving nature of the law, please verify this information with your local
MFC office or a local lawyer.
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Chapter 4
Role of an executor or trustee
Someone to carry out the terms of your will
An executor is the person who is legally authorized to carry out the terms of your will,
so choosing a suitable executor is one of the most important estate planning decisions
you will make.
An executor is responsible for ensuring that your estate and trust assets are well
managed, debts are paid, income tax returns are filed, and estate assets are distributed
according to the terms of your will. Depending on the complexity of your estate, the
job might last only a few months or might continue for years following your death.
Job description of an executor
Upon your death, your executor will:
• locate your will quickly and review it to determine whether you left any directions
regarding your funeral or burial arrangements. While your family may plan the
funeral, the executor is legally responsible for the arrangements. It would be
wise to make your wishes known to your executor as well as to your family.
Some churches keep these records for their members, as do funeral homes
• locate (and secure) all of your property and assets to make an inventory of the estate
• settle all bills and outstanding debts and collect all debts owed to your estate
• apply for insurance proceeds and other outstanding benefits and pension credits
• arrange for probate of the will, if required
• ensure that a copy of the will and an inventory of assets are sent to all
beneficiaries, if appropriate. Many people hire a lawyer to perform this task
• sell or distribute your assets and investments in a way that is consistent with the
instructions in your will
• manage any trusts created by your will
• report to all beneficiaries on how the estate administration process is progressing
• file all necessary tax returns
• distribute your estate and get releases from all your beneficiaries.
How to choose an executor
Acting as an executor is a big job. You want to be sure that the person you name to
carry out this role is willing and able to do it. Many spouses name each other, their
adult child or children, or a trusted friend.
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Pick an executor who is:
• completely trustworthy and capable of doing the job
• willing to do the job and has the time to do it
• close to your age or, preferably, younger. As you move into your senior years,
finding someone younger than you to act becomes increasingly important. A
70-year-old friend is just as likely to die before you as he is to still be living and
able to act as executor at the time of your passing
• familiar with your affairs and preferably living in the same province or territory
as you.
Consider making provisions in case the executor you have named is unable or unwilling
to serve — or predeceases you. You may appoint:
• an alternate executor. If appointed as an alternate, the person serves only if the
person of first choice cannot serve
• joint executors. If named to act jointly, the executors need to work together and
sign any documents
• several people to act together or independently of each other.
If your estate is complicated, or you have difficulty finding a suitable executor, consider
naming a professional, such as a lawyer, accountant, or trust company. Choose a
person or a company in whom you and your family have a high level of trust and with
whom you feel comfortable.
• A professional acting as an executor must meet certain legal requirements that a
friend or family member may not have to.
• You may appoint the professional to work alone or as co-executor to serve
alongside a family member or other person.
If you are thinking of appointing a professional, before you write your will, consult
several professionals to get information about their services and fees. Various trust
companies owned by banks and credit unions offer this service. Some trust companies
have a minimum fee or will act only if the estate is of a certain size.
Help your executor as much as possible by preparing the person for the task ahead:
• Give the executor a copy of your completed will so that he can review it and
ask questions.
• If you are giving your executor leeway in how he carries out the job, provide
written instructions regarding your wishes and intentions (for the distribution of
personal items, for instance) and the location of important papers.
• Include instructions regarding the guardians for minor children or other
dependants.
• Include instructions for the management and use of a trust for minor children
or other dependants.
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• Give the executor instructions on your funeral arrangements.
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Expenses
Your estate pays all costs for settling your estate. Your executor is responsible for
ensuring this happens. These costs may include fees to manage trust funds and fees
associated with any legal and tax assistance the executor requires. The estate may also
have to pay fees to a court for estate administration, which is also known as probate or
estate administration tax.
Because of the work involved, your executor is allowed by law to receive payment for
services from your estate. Although the amount paid often depends on the size of the
task and the degree of professional assistance your executor hires, the maximum fee is
established by provincial law. If your executor is a member of your family who is also a
beneficiary, or a close friend, it is unlikely that any fee will be charged.
Ask your lawyer what the law is regarding executor’s fees in your province.
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Chapter 5
Role of guardians
Someone to care for your minor children and
other dependants
If you want to influence how your minor children or dependants will be cared for when
you and your spouse die, you must make a will and name a guardian for them in it.
The term “guardian” refers to the person or persons named to care for, in the event of
the parents’ death, minor children or dependants who are mentally incapable of caring
for themselves. Persons named in your will as guardians may serve immediately in that
capacity upon your death (provided no one else has custody), but that appointment
does need to eventually be confirmed by the court.
While the court has the final say, it will give serious consideration to the wishes you
express in your will. The person(s) you recommend will likely be appointed unless
the court has good reason to believe that it is not in the best interests of your minor
child(ren) or dependants.
It is a good idea
to review your
choice of guardians
every few years.
You also need to name someone in your will to act as a trustee of any assets you leave
to a minor child because minors cannot take control of their inheritance until they
become adults (see Appendix 1, page 70). You will want to do the same for a mentally
incapacitated dependant.
Job description of a guardian and a trustee
The person you choose as a guardian must be an adult and willing to assume all the
duties guardianship entails:
• ensuring that the child is looked after properly
• providing food, clothing, shelter, transportation, health care, education,
recreation, and spiritual care.
The person you choose as a trustee must be an adult and willing to assume all the
duties that being a trustee entails:
• holding the assets of a minor child or mentally incapacitated adult in trust
• using the inheritance for the child(ren)’s or dependant’s needs, as specified in
the will. A common example of this is for educational costs
• distributing the inheritance as specified in your will. You may direct that a child
receive an inheritance when that child reaches the age of majority. Or you may
delay any distribution until, for example, age 21, 25 or even 30, or direct that the
inheritance be paid in instalments.
You may appoint the executor of your estate or another person to be the trustee.
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How old is old enough to inherit?
Even when they are legally considered adults, many young people are not mature enough to make
good financial choices. If you don’t specify otherwise in your will, your children will receive their entire
inheritance as soon as they reach the age of majority.
At one estate planning seminar, an MFC Stewardship Consultant was questioning the wisdom of letting
children inherit as soon as they become adults. Suddenly, a young woman leapt out of her seat and agreed.
She said that when her father died, she and her brother each received $60,000. Within two years, her
brother had depleted his share, wrecked vehicles, ran up debts, and left a string of unpaid bills. She did
little better in spending her portion, and is determined not to repeat the mistake with her children.
How to choose a guardian
Choosing a suitable guardian to care for your children or dependants is a serious
decision. You are, after all, entrusting your guardian with what is of greatest value
to you — your children. You want to be sure that the person you name to carry out this
role is willing and able to do it. Choose someone trustworthy who:
• is both willing and able to take on the responsibility of caring for your children
• has a faith, values, and lifestyle that are similar to yours
• lives near your children so as to minimize disruption in the children’s lives should
they live in the home of the guardian
• has a trusting and loving relationship with your children, and is someone with
whom your children would be happy to live.
You may name someone related to you to be the guardians but this is not essential.
Naming guardians who meet the above criteria is more important. In your will,
you may state reasons for naming specific guardians (or why you are not naming
someone else), or you may simply name the people you have chosen. Choosing
suitable guardians is about doing what is best for your children first and foremost,
not necessarily about satisfying the wishes of other family members.
You may name alternate guardians in the event that your first choice is unable to fulfill
the role.
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Some people name their executors to also be guardians of their minor children.
Though it is legal and may be convenient, it may remove a degree of accountability
on how money is spent. As your children get older and their financial desires and
requirements change, they may have greater leverage over their guardians. As well,
disputes with their guardians become more complex if the guardians are also the
executors of the estate. Under these circumstances, naming people other than the
executors to be guardians is a good idea.
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Because children’s needs and people’s circumstances change over time, it is a good
idea to review your choice of guardians every few years.
• It is good to review your choice of guardians as your children get older because
the guardians you name when your children are young may not be the best
choice when they are older.
• It is wise to involve your children in the discussion of who would be suitable
guardians.
• Be sure to check with your guardians every few years to ensure they are still
willing to serve. When the people you choose to be guardians go through
major life changes (marriage or remarriage, birth of children, a growing family,
relocation for school or work), it is important to ask if they are still willing and
able to act as guardians for your children.
Expenses
Being guardians is a relationship that could last for several years and will certainly
involve extra expenses. It is a good idea to give discretion to the trustee to cover
reasonable and ongoing expenses involving your minor children so your guardians do
not have to bear all the costs themselves.
If the guardians will need to add on to their house or buy a larger vehicle to care for
your minor children, it is recommended to grant the executor the right to use trust
funds for this purpose.
A guardian’s legal responsibility may end when the children reach the age of majority,
but trust funds created for the well-being of the children may last much longer.
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Chapter 6
Tax considerations in estate
planning
Making the most of your assets
You have worked hard throughout your life to increase the value of your assets, and
you want to use them to secure the well-being of your family and to help charities you
support. Since capital gains taxes can reduce the value of those assets at your death, it
is important to know how tax laws could affect your assets. It is also important to know
which financial tools you can use to reduce tax costs to your estate. Good planning
may prevent an unnecessarily large tax bill.
Capital gains taxes
Capital gains tax can significantly reduce the value of your estate because Canada’s
tax laws deem (assume) that your registered assets and capital assets are sold at fair
market value (FMV) immediately upon your death. Registered assets include Registered
Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs).
Capital assets include stocks, mutual funds, and property. The deemed sale of assets can
trigger a capital gain, 50 per cent of which is taxable. The estate pays the capital gains taxes.
Capital gains taxes could apply, for example, to shares of a private company, shares
of a public company, and real estate (other than your principal residence, normally
the house you live in).
Exemptions exist for some assets. If property is owned with someone else (held in
joint title) or willed to your spouse, it is not deemed to have been sold upon your
death. A family farm or small business assets that are rolled over to eligible family
members are not subject to capital gains taxes at your death.
Tax planning
There are a number of legal ways to reduce or defer taxes, both while you are alive
and after your death. These include gifting assets to charities, setting up RRSPs and
RRIFs, or using Tax-Free Savings Accounts (TFSAs).
Tax terms
Capital gain
The profit that results from
investing in a capital asset,
such as stocks, bonds, or
real estate, which exceeds
the purchase price. It is
the difference between
a higher selling price and
a lower purchase price,
resulting in a financial
gain for the seller.
RRSP
A plan to hold deductions
from taxable income,
within certain limits,
in a tax-deferred state
with various investment
options and a tax deferral
on investment income
and gains.
RRIF
A maturity option for
RRSP assets, to provide
a stream of income
upon retirement. The
plan holder invests the
withdrawn RRSP funds
in the RRIF, and each
year must withdraw and
pay income tax on a set
fraction of the total assets
of the fund.
Gifts of shares or mutual funds
If you have charitable intent, you could eliminate the capital gains tax that would be
payable on publicly traded shares or mutual funds by gifting them to a charity through
a will. If you decide to do this, make sure your lawyer puts special wording into your
will to allow your executors to make the gift. This will enable you to leave a charitable
legacy and reduce the taxes payable by your estate.
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Property ownership
If you and another person own property, you are considered either
• Joint tenants — If you own something as a joint tenant, your interest will
normally be transferred to the surviving tenant(s) and won’t become part of your
estate when you die;
or
• Tenants in common — If you own something as tenants in common, the portion
you own (your interest in the property) forms part of your estate at your death
and is distributed to your beneficiaries according to your will.
Most couples hold their personal property as joint tenants. When couples own
property as joint tenants, upon the death of one spouse, full ownership of the
property is given to the surviving spouse without passing through the will. Joint
bank accounts and any other assets held jointly with the right of survivorship are
treated the same way.
Though joint tenancy is a popular way for assets to be transferred, having another
name on the title can sometimes lead to problems. Think carefully before you put
property in joint title, because you will be giving up exclusive control of the asset.
• When one spouse has business interests, couples sometimes choose to have the
family home owned by the other spouse. This protects the home if the businessowning spouse is sued or suffers business failure.
• If one co-owner files for bankruptcy, separates, divorces, or is sued, creditors can
also start a lawsuit to try to get at the other named owner’s share of the asset.
It is important to obtain legal and tax advice before making joint ownership a key
component of your estate plan, because transfers to joint ownership can lead to legal
and tax complications.
Registered Retirement Savings Plans
The use of Registered Retirement Savings Plans (RRSPs) or Registered Retirement
Income Funds (RRIFs) provides good opportunities to defer taxes while you are living.
It may also help defer taxes upon your death if you have a spouse or minor child to roll
it over to.
The contributions you make to an RRSP reduce your taxable income in the year in
which you made them. The money is then allowed to grow on a tax-deferred basis
until withdrawn. RRSPs must be converted to RRIFs when you turn 71 and begin paying
out annual income in the year in which you turn 72.
When you die, in most cases, RRSPs and RRIFs are treated as income and any funds
that remain in them become taxable income in your estate in the year you die.
However, you can reduce and/or defer the tax impact by doing the following:
• If you are married and/or have minor or disabled children, you can have the
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investments transferred without tax to your spouse or to a dependent minor
child or adult child in certain circumstances, by means of direct beneficiary
designations.
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• If you are married and wish to make a charitable gift, you can name your
spouse as the first beneficiary and your estate or charity as a secondary
designation to receive part or all of the money. Any RRSP or RRIF balance that
remains after the death of the surviving spouse must be included as income in
that spouse’s final return. When a charity is designated as the beneficiary, the
charity may issue a charitable receipt to the estate of the person who owned
the fund.
• If you are single, the tax treatment of RRSPs and RRIFs means that it is usually
a good idea to name your estate or charity as the beneficiary rather than family
or friends.
Tax-Free Savings Accounts
TFSAs
If Sue Smith
Canadians 18 or older can use a Tax-Free Savings Account (TFSA) to help reduce
taxes on assets that increase in value. You can contribute up to $5,000 a year into
a TFSA.
contributes $2,000
Advantages
Using a TFSA as a vehicle for savings can help your money go further.
carry forward, and
• Your contribution limit is indexed to inflation, meaning the Canadian government
will make increases in $500 incremental changes, as inflation requires.
to a TFSA in 2010,
she has $3,000 to
would be able to
contribute up to
• Money in a TFSA can grow tax-free, and no tax is payable when it is withdrawn.
$8,000 to her
• Unused contribution room can be carried over to future years.
TFSA in 2011.
• Taking money out of a TFSA will not result in claw-back of a senior citizen’s
Old Age Security or Guaranteed Income Supplement, as is the case with
other income.
• TFSAs can be used as collateral for a loan.
Money taken out of a TFSA in a given year can be replaced the next year, on top
of that year’s $5,000 maximum annual contribution.
Using a TFSA can help you reduce the taxes the estate may pay.
• All Canadian provinces (except Quebec) allow a TFSA to be passed on tax-free
and outside of an estate to a surviving spouse, or to charity, provided the owner
of the plan completes a beneficiary designation form.
• Donating a TFSA to charity will result in your estate receiving a charitable
receipt for the value of the gift. That receipt can be used to offset or eliminate
other taxes owing.
Disadvantages
TFSAs do have some drawbacks. The most relevant one for estate planning purposes
is that capital losses on investments held inside a TFSA cannot be declared for tax
purposes. This benefit is available for people who hold stocks or mutual funds in a
regular investment account; if they suffer a loss, they can claim that loss to offset
capital gains from the sale of other stocks or mutual funds.
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Life insurance
Life insurance can be used to provide for a person or a charity without incurring tax
costs to the estate. The person(s) or charity you name as beneficiary(ies) of your life
insurance policies will receive the proceeds in a tax-free lump sum. This money is not
considered part of your estate, and as such is not subject to probate.
Think carefully about the beneficiary designations on your life insurance policies. In
some cases, it is worth naming a secondary, or backup, beneficiary who would receive
the insurance payout if your primary beneficiary (often a spouse) dies before you or at
the same time.
If thinking about naming an adult child as a beneficiary, consider whether it might be
problematic for that child to handle the lump sum payment. It may be fine for older
beneficiaries with experience in handling large sums of money; it may not be a good
idea for those who have become adults without such experience.
If the proceeds of the insurance policy go into the estate, that money becomes
vulnerable to the claims of creditors.
There are significant advantages to naming a beneficiary other than your estate. If you
designate your estate to receive the proceeds of the insurance policy, that money is subject
to the trust and distribution instructions left in your will, as well as to probate costs.
If you have paid up your insurance but no longer need insurance protection, you
may have an excellent opportunity to name your favourite charity(ies) to receive the
proceeds of your policy. The charity will then issue a charitable receipt to your estate.
In some cases, people choose to transfer ownership of an insurance policy to MFC
while they are still living, in order to benefit a number of charities after they pass away.
This often happens when it is more useful for a person to get a charitable receipt (or
receipts) while they are living than for their estate to get a large receipt after they
have passed away. If the policy is not fully paid up, MFC will also provide charitable
receipts for ongoing premium payments. For more information on the tax advantages
of charitable giving, see MFC’s First Things First publication.
Reasons to purchase life insurance
As part of your estate planning, you may find it useful to purchase life insurance to:
• provide income for your family in the event of your death
• cover your debts
• increase the size of your estate
• make a significant gift to charity
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• provide funds so your farm or business can continue to operate
• leave an inheritance to heirs who will not receive an interest in your farm
or business.
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Chapter 7
Records of assets and liabilities
Provide your executor with detailed information
You can save time and reduce the possibility of problems for your executor by making
a detailed list of everything you own in your name alone or with some other person
(assets), of what you owe (liabilities), and of the location of documents needed to
settle your estate.
Record of assets
Assets include anything you own, such as savings, TFSAs, RRSPs or RRIFS, stocks, bonds,
land, a house, a cottage, a car, farm property, a business or interest in a business, coins,
or collectibles.
Make a list of
everything you own
for your executor.
Keeping records of who owes you money, including the interest rates and terms of any
loans, can be very helpful to the person looking after your affairs.
To avoid misunderstandings, it is important to have clear records about any loans,
including money given to children or beneficiaries. If the loan was made to a child or
beneficiary, state whether the money was:
• a loan to be repaid to the estate. Leave a record of the amount, the interest rate,
and the terms of the loan
• an early inheritance with the amount to be subtracted from the inheritance at
the time of the distribution of the estate
• not to be repaid upon your passing. If the loan is to be forgiven at death, it is
important that that is reflected in your will. This is because forgiveness of the
loan at death could be interpreted as being a testamentary instrument, in which
case the document needs to comply with all the requirements for a valid will.
Some families have adult children write and sign letters acknowledging the loan and
the terms under which it is to be repaid (or not).
Record of liabilities
Liabilities include money owed on credit cards, lines of credit, loans, promissory notes,
guarantees, mortgages, reverse mortgages, and lease agreements. Keeping a list of
people or institutions to which you owe money as well as the amount, interest rates,
and terms of any loans can be very helpful to anyone who has to look after your affairs.
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Personal Information Directory
Your executor will need a number of documents to carry out his duties, and if the
executor cannot quickly find them, he may have to do detective work to locate them,
which could delay the settling of the estate. To avoid this, you can assist your executor
by leaving a list of all the documents and information needed to settle the estate or by
leaving all the documents in one file.
To help you prepare such a list, MFC has enclosed the MFC Personal Information
Directory in the front pocket of this guide. Complete the directory and give a copy
to your executor and to the person who will look after your affairs if you become
incapacitated. If you don’t want to give them a copy, at least advise these people (and
your family) where they can find the directory.
Leave your executor and family a list of the location of the following:
• personal papers, including your will and birth certificate
• information on company benefits or private benefits plans and statements for life
insurance policies
• account statements from credit unions, trust companies, banks, or other financial
institutions
• papers related to ownership of property, including vehicle registrations, property
titles, and information on assets held outside of Canada, a farm, or other
business holdings
• information related to RRSPs or RRIFs, TFSAs, annuities, GICs, term deposits,
Canada or provincial savings bonds, stock certificates, bonds, mutual fund
statements, tax-sheltered investment statements, loan or mortgage agreements
• location and number of any safety deposit boxes, the names of persons who have
the right to open the box (your executor and whoever will handle your affairs if
you are incapacitated should be on that list), and the location of the keys
• the names, addresses, and phone numbers of your accountant, lawyer, tax
preparer, financial planner, trust officer, insurance agent, and stockbroker in case
your executor has to work with them.
If you have prearranged your funeral and your cremation or burial, list the name,
contract number, and address of the funeral home and/or cemetery. Leave a receipt
or a copy of the receipt to prove that payment has been made. You may also leave
additional funeral wishes that are not part of your prearranged plan. (See Appendix 4,
page 73, for a funeral arrangements form you can use to leave a record of your wishes.)
Regularly updating your records ensures that no significant information is overlooked.
Some people like the discipline of doing it at the same time as tax filing or end-of-year
statements are done.
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Simplify banking
If you have accounts at more than one credit union or bank, stock brokerage, or
mutual fund dealer, consider putting all your accounts with the same organization or
reducing the number of accounts you use. This will make your executor’s job easier.
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Chapter 8
Leaving a legacy
Making end-of-life gifts to charity
Gift planning is an important part of estate planning. Many of us are in a position to
make a gift from our estate to help support the church and other charities we care
about. This final act of giving is also an expression of thanks to God for the gifts God
has allowed us to gather during our lifetime.
How much is enough?
Some people hesitate to make end-of-life charitable gifts because they feel an
obligation to leave their whole estate to their family and/or dependants. Often,
however, it is possible to provide for your family and dependants and to make an
end-of-life charitable gift. In some cases, family members may not need to inherit
your whole estate. For example, if your adult children are already doing well
financially, you have an excellent opportunity to make a more generous gift to your
favourite charity(ies).
Some people have found that asking themselves “How much is enough?” helps them
to decide on the size of their end-of-life charitable gifts. To come to a decision, you
could think in terms of:
• age and stage: Given the current size of your estate, what would your gift mean
for each recipient? Would it be too little, too much, or just right for them at the
age they will likely be when they inherit? An inheritance could be very useful to
a younger person with a mortgage, family to raise, and bills to pay. It may be less
important for someone nearing retirement
• current help: Helping your loved ones financially during your lifetime may ensure
you give gifts when they are most useful.
In some cases, people don’t make charitable end-of-life gifts because they don’t
know how easily it can be arranged and what help is available to them. The following
sections provide a good overview of ways to make end-of-life gifts. You can ask an MFC
Stewardship Consultant for more detailed information and assistance.
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Gifts to charity may be large or small
Whether you make a large or small charitable end-of-life gift, you will be helping
others. You can use a variety of methods to make your gift, but typically you would
designate a percentage or share of your estate to charity, rather than a specific
amount. Leaving a specific dollar amount means the value of the gift will not change
as the value of your estate grows or shrinks, so the size of the gift may not ultimately
reflect your wishes. Options include:
• choosing to leave the bulk of your estate to charity
• considering charity as an extra child that will receive the same amount or, in
some cases, more than your biological children
• leaving a tithe (10 per cent of the estate)
• leaving a smaller portion than a tithe, owing to family obligations
• dividing the estate in half — one portion for family and the other portion for
charity — particularly if you are single
• leaving everything to charity, particularly if you have no family obligations.
Tax considerations for end-of-life charitable gifts
There are considerable tax benefits to making an end-of-life charitable gift. As
discussed in Chapter 6, while there are no estate taxes in Canada, any taxes that
apply during your lifetime also apply at your death.
If you leave a gift to a registered charity, your estate can use the receipts issued
to reduce or eliminate taxes owing. During your lifetime, you can use charitable
receipts for up to 75 per cent of your net income in a year to offset taxes owing.
However, your estate can use charitable receipts for up to 100 per cent of your net
income in the year of your death. Your executor may re-file your tax return for the
year prior to your death if there are more charitable receipts than are required to
eliminate taxes in the year you passed away.
Tax laws also allow you to minimize or eliminate taxes to your estate through in-kind
donations of mutual funds or stocks, as well as direct designation of life insurance
policies, RRSPs or RRIFs, or TFSAs.
Tax credits gained through charitable donations provide a valuable and responsible
tax-planning tool during your lifetime and for your estate.
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Charitable bequests
Charitable gifts made through a will, also known as charitable bequests, are the most
common form of end-of-life gifts. Many Christians leave charitable bequests as a
testimony to their values and to make a final show of support for causes they care
about. Ways to give include the following:
• cash gifts
• life insurance
• Registered Retirement Savings Plan (RRSP)/Registered Retirement Income Fund
(RRIF)
• Tax-Free Savings Account (TFSA)
• publicly traded stocks, mutual funds, and bonds
• property.
Cash gifts
Gifts of cash are typically stated in your will in one of three ways:
• tithe — 10 per cent of your estate
• another percentage of your estate
• residue (remainder) of your estate.
The residual value of the estate is the amount remaining after payment of all
outstanding debts, expenses, income taxes, and any specific bequests.
Life insurance
If you have life insurance policies that you no longer need to protect your family or an
asset, you could use them to make end-of-life gifts. If they are whole life or universal
life policies, they may have a substantial cash surrender value.
If you make MFC the beneficiary, the Foundation will give you a form on which you
can list the names of the registered charities you wish to benefit from this gift at your
passing. You can update this form, without cost, at any time. Upon your death, MFC
will distribute the gifts as you directed. Having MFC distribute the gifts is another way
of reducing the costs of settling your estate.
You can make a gift of an insurance policy now by changing the beneficiary and
ownership of your policy to Mennonite Foundation of Canada.
If you make a charity the beneficiary and owner of a policy, the charity will issue a
charitable receipt to you when it is notified by the insurance company that it has
become the beneficiary and owner of the policy. The receipt will be for the donated
policy equal to the value of the policy (cash value plus dividends on deposit plus
interest). You, as the donor, may have to report a portion of the policy value as
ordinary income if the cash surrender value exceeds the adjusted cost base of the
policy. This information will be provided to you by the insurance company.
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When you name a charity as a beneficiary of an insurance policy, the policy is not
considered a part of your estate and so is not subject to probate. As a result, the
proceeds will be forwarded to the charity more quickly than if the money were to go
through the estate, which is another advantage of making a gift this way. Whether a
charitable gift or not, a life insurance benefit is not subject to tax.
Using insurance as a way to give
Will and Jean Stoltz found a creative way to look after their family in their estate planning, and make a significant
gift to charities they care about. “First of all, we want to provide for our children and to pass on to them what we
can,” says Will, who worked as a Mennonite pastor, then as a prison chaplain prior to his retirement.
“But we also wanted to make a provision for the church and its mission,” he says. “We were able to take out
a charitable insurance policy with MFC as the owner and beneficiary, and then designate proceeds payable
at our passing to the charities we want to support.”
The insurance policy requires them to pay annual premiums, for which they receive a charitable receipt.
For some people, it is more useful for their estate to receive a receipt when the policy is paid out rather than
getting receipts now. In that case, they retain ownership of the policy but name MFC as the beneficiary.
RRSPs, RRIFs, and TFSAs
You can direct assets such as RRSPs, RRIFs, and TFSAs to MFC. Although your estate
must still declare the registered retirement funds as income, the tax credit generated
by the charitable receipt can offset any taxes that are due on the income. As is the
case with life insurance policies, making a charity the beneficiary of a retirement fund
means that the money will usually get to the charity much more quickly than if it flows
through an estate and is not subject to probate.
Publicly traded stocks, mutual funds, and bonds
You can make a gift of publicly traded shares (stocks), mutual fund units, and bonds
through your estate. This can provide the estate with significant tax savings, if these
investments are worth more at the time of your passing than when you purchased
them. Make sure your will gives your executor the option to make donations in-kind.
Property
You can make a gift of property (for example, real estate or art) to a charity, either
while you are alive (called a life interest) or at your passing. If you make a life interest
gift of property, you are allowed to continue to use that property during your lifetime.
Gifting property, particularly in a life interest arrangement, can be a complex process
that should not be undertaken without carefully considering all the implications and
consulting various professional advisers.
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When thinking about when to make a gift of property, consider whether it would be more
useful for you to use a charitable receipt now by making a gift while you are alive or for
your estate to use the receipt after your passing. This depends on your tax situation.
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Family endowment
If you want your giving to continue to support causes you care about for years after
your passing, consider setting up a long-term family endowment fund, also known as
a family foundation. The money is invested and the annual earnings are distributed to
your chosen charities each year. MFC administers foundations for individuals, families,
and charities across Canada. Using MFC to establish an endowment provides all the
flexibility you need to achieve your charitable goals, without the costs and annual
paperwork that go along with setting up a private foundation.
Some people that set up endowments with MFC making provision for their children
or grandchildren to be involved in decisions about annual distribution of endowment
earnings after they are gone. In many cases, subsequent generations make gifts to
these funds.
Talk to the MFC office nearest to you for more information.
MFC’s role in your gift planning
MFC Stewardship Consultants are available to work with individuals, couples, and
families on their estate planning.
Planning
MFC Stewardship Consultants have detailed knowledge of charitable gifting and
tax matters, and can highlight tax issues where you may wish to obtain further
professional advice.
An MFC Stewardship Consultant can meet with you without charge and help you plan
your end-of-life charitable giving. The consultant would also prepare a memo that guides
your lawyer in developing or updating your will and other estate planning documents.
Distribution of charitable gifts
Mennonite Foundation of Canada can also distribute gifts to any registered Canadian
charity, which includes churches, on your behalf. As mentioned earlier, you would
leave instructions for MFC regarding gift distribution, using the MFC distribution form.
You can use the distribution form to:
• name the registered Canadian charities that you want to receive gifts
• designate what percentage of the amount given to MFC is to go to which charity
• designate whether MFC is to distribute the gift(s) all at once or over a specified
period
• indicate whether you want to give anonymously.
In your will, you would indicate the percentage (or share) of your estate that you
are leaving to Mennonite Foundation of Canada, to be distributed to charities. After
you die, your estate sends a cheque to MFC for the amount. The Foundation then
issues a charitable receipt for the gift and distributes the amounts to the specified
charities accordingly.
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Using MFC to distribute your end-of-life gifts has a number of benefits:
• The distribution form makes it easy to help multiple charities and reduces
work for your executor.
• You can change the distribution form at any time, without incurring fees,
as you would in redoing your will.
• Using this form enables you to make gifts anonymously, if you wish.
• If a charity you have named ceases to exist, your gift would not fail, as could
happen if it were named in your will. MFC would work with your executor to
find another suitable cause.
Check with an MFC Stewardship Consultant, your financial adviser, or a tax preparer to
get information on which method of charitable giving would be most beneficial to you.
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Chapter 9
Incapacity documents
Planning for care when you cannot take care of yourself
People often think of death as a worst-case scenario, but some suggest that losing
the ability to talk and reason due to illness or accident is even worse. When someone
suffers a crippling stroke, is in a lengthy coma, or becomes mentally incapacitated for
another reason, that person has to depend on someone else to make decisions. He or
she needs to have someone who can write cheques to cover expenses, file tax returns,
make investment decisions, and make medical decisions.
If you were to become mentally incapacitated, you would likely want someone you had
chosen ahead of time to look after your assets and your health. To ensure that is the
case, you need to make and legally document your decisions while you still have the
mental capacity to do so. The sooner you do it, the better.
As you plan for the possibility of your own mental incapacity (“mental incompetence”
is the legal term), you need to consider two separate, though related, decisions:
whom you will appoint to look after your property (money, investments, real estate,
insurance) and whom you will appoint to look after your health and medical concerns.
The person you
appoint to take care
of your assets must
act only in your best
interests.
Legal documentation
Legally, the person you name to act on your behalf is acting as your “attorney.”
Attorney in this sense does not mean a lawyer; it means an agent, someone whom you
trust to look after your interests when you cannot do so.
After you decide on the person(s), you need to prepare a legal document to record
the appointment. The best plan is to have a lawyer draw up a document in which you
name someone to act on your behalf. The name of the document varies across Canada
(see Appendix 3, page 72), as does how the document is set up and signed.
It is important to have a lawyer draw up this document for you because poorly worded
or improperly signed documents may not do what you intend them to do.
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Be prepared
You should be prepared for the possibility you could become incapacitated. If you are unable to conduct
your financial affairs and have never prepared documents giving someone the authority to act for you,
“A potential nightmare awaits the family,” suggest lawyers Barry Fish and Les Kotzer in their book
The Family Fight: Planning to Avoid It: A no nonsense guide to wills and estates.
An Ontario couple lived that nightmare. When the husband suffered a stroke, his wife was unable to complete
the sale of the family home, yet needed the money for a condominium they had agreed to purchase. His share
of the proceeds from the sale of their home was held for a time by the Public Guardian and Trustee. She had to
spend a lot of money and suffered considerable grief before getting the situation resolved.
Financial issues
If you don’t legally appoint someone to act on your behalf and are incapable of caring
for your financial affairs, your spouse and other family members will be quite limited
in what they are able to do. According to the law, if you have a joint bank account,
your co-account holder(s) can access the account to pay your bills and deposit your
cheques. But they don’t have to and no one will force them to do so.
Your spouse and other family members will not be able to tell your financial adviser
or broker how much or when to invest, or when to withdraw or sell investments.
They will not be able to file or access your tax returns or discuss your tax situation with
Canada Revenue Agency. They will not be able to sell or buy real estate for you.
They will not be able to mortgage or refinance your property.
If you appoint someone to handle your financial affairs in case you become mentally
incapacitated, that person will be able to write cheques to cover expenses, file tax
returns, and make investment decisions on your behalf.
Your choice, the court’s choice, or a government official
There are three options for someone being put in place to deal with the property of
someone who no longer has the legal capacity to handle it:
1. While still mentally able to do so, a person can appoint someone else to legally
act on his behalf if he should become mentally incapacitated.
2. A close family member of the person may go to court for an order that allows
him to manage the incapacitated person’s assets. This can be a lengthy and
expensive procedure, since the appointed person must occasionally report to
the court.
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3. A government official (in most provinces called the Public Guardian and Trustee)
will take control of all of the incapacitated person’s assets and manage them
according to the laws of that province or territory. The government official may
not properly appreciate the preferences or expectations the incapable person
may have had while capable.
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Giving someone the right to act for you for financial and personal reasons should not
be seen as something you do only when you get old. It is excellent protection for any
adult — regardless of age or health. Do the planning now and put the documents in
place to avoid possible complications later. Thinking ahead and planning for a time
when you may not be able to take care of yourself is a responsible exercise.
Appointing a person to care for your financial affairs
The person you appoint to take care of your assets must act only in your best interests.
He or she may not take advantage of your investments or assets to make money for
him- or herself. The person should have the following qualifications:
• complete trustworthiness, usually someone who shares your values
• willingness and ability to act for you — in most cases, someone who lives nearby
• able to do careful and thorough record keeping
• willing to be accountable to someone else, such as a family representative,
lawyer, or accountant.
You may appoint one or more persons to act for you. You may want your spouse or
common-law partner to perform this role. Be aware that in most provinces, there
are limits on what attorneys can do if acting on behalf of their spouse or partner. If
you appoint more than one person, you must also consider whether they should act
together, whether the second one acts only if the first one cannot, or whether to make
some other arrangement.
There are different types of powers of attorney (see Appendix 3, page 72, for terms
used for PoA in various parts of Canada), for financial affairs to cover various situations.
These include the following:
• Enduring PoA — remains valid if the person who signs it becomes incapacitated
(which is exactly when most people want a PoA).
• General PoA — covers the broadest possible scope of authority under which an
attorney may act. This is like giving a blank cheque to your attorney, along with
the right to manage all your assets, not just your bank account.
• Limited PoA — applies only to a particular asset (e.g., a bank account,
investment, or a particular piece of real estate) or for a limited period of time.
• Springing PoA — gives authority for the attorney to act only after some event
occurs. Most often, it is incapacity, in which case it is important to identify whose
job it will be to say when the signer has become incapacitated.
You can discuss whether any or all of these possibilities apply to you with an MFC
Stewardship Consultant, and if you still have questions, with your lawyer. Once you
become incapacitated, you will no longer be able to sign a valid PoA, so do it while you
can. You can usually cancel a PoA at any time, as long as you have ability to do so. A
PoA usually ends at the death of the signer, at which time that person’s will takes over.
Health and personal issues
You have the right to make decisions about your medical treatment and personal care
as long as you are healthy and of sound mind. But if you cannot give physicians your
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consent to provide or withhold medical treatment, they would likely be required to do
everything reasonably necessary to keep you alive. As medical science and technology
advances, keeping you alive may feel much more like prolonging your death.
If family members all agree with a recommended treatment, often physicians
will respect and follow the family’s wishes. When family members disagree, or if
the family’s thinking runs contrary to medical recommendations, then medical
professionals must revert to their ethical duty to keep you alive.
The best course of action is to appoint someone ahead of time to make decisions
about your health care. This person would make medical decisions regarding issues
such as treatment, end of life, and personal care on your behalf.
Using a health care document
All Canadian provinces allow you to put your wishes about treatment in writing. The
name of the document in which these issues are addressed varies from province to
province (see Appendix 3, page 72). You can usually use the health care document to
do the following:
• Appoint someone else (a third party or parties) to receive medical information
and to make treatment decisions. Leaving general instructions is a good choice
because you don’t know all the treatment possibilities to which you may be
exposed in the future. General instructions give the person you have chosen the
right to use her or his judgment to determine your treatment.
• Give specific instructions about daily-living needs, serious health situations, or types
of treatment. The person who acts on your behalf is guided by your instructions —
as long as your instructions are not contrary to what is medically reasonable.
Appointing a person to manage your health care
The person you appoint to make health care decisions on your behalf must act only in
your best interest. Keep in mind that life-and-death decisions may need to be made.
The most difficult part of thinking about future medical care is end-of-life matters.
Handing over decisions that need to be made at that time to someone you love and
trust may be the greatest expression of faith — or it may be a disaster.
To avoid a disaster, choose a person with the following qualifications:
• complete comfort with the role (the person may have to make decisions in the
face of possible family disagreement, or even family conflict)
• complete comfort with your preferences for care
• willingness and ability to act for you — in most cases, someone who lives nearby.
You may appoint one or more persons to act for you. You may want your spouse or
common-law partner to do this. If you appoint more than one person, you must also
consider whether they should act together, whether the second one acts only if the
first one cannot, or whether to make some other arrangement.
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After you decide on the person(s), you need to prepare a legal document to record the
appointment. As discussed earlier, working with a lawyer is a wise decision.
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Chapter 10
Trusts
An effective asset-protection tool
A trust is a legal arrangement in which a person or corporation holds property for
the benefit of another person or persons. Trusts can be fixed, wherein the terms
and amounts are spelled out, or they can give the trustee discretion to manage and
distribute income and assets as circumstances determine. People typically set up trusts
to protect assets, to provide someone with an income for life, to avoid having assets go
through probate, and to help defer taxes.
Who does what in a trust
Three parties have a role in a trust:
Settlor
• places assets or property into a trust
• names the conditions and beneficiary of the trust
• determines how the trust is to be ended, and who gets what is left when it is ended
Trustee
• manages the trust assets for the benefit of the beneficiary as outlined by the settlor
• files the trust’s income tax return
Beneficiaries
• receive trust income, property and/or assets.
Types of trusts
You can set up two types of trusts: a testamentary trust and a living trust.
A testamentary trust is set up through your will and takes effect when you die. It is the
easiest and least expensive trust to create, as you pay only the cost of writing your will.
A living trust (inter-vivos trust) takes effect while you (the settlor) are still alive. It is
more complicated than a testamentary trust and usually not worth the cost unless the
value of the assets being transferred is quite large. One advantage that living trusts
offer over testamentary ones is that they remain private. Another is that the assets do
not become part of your estate and so do not have to go through probate, which saves
time on distribution of the assets.
Purpose of trusts
You can set up a trust as part of your estate planning to benefit others and yourself.
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To provide income for minors or others unable to care for property
• to provide for the care, upbringing, and education of children or grandchildren.
Minors cannot receive an inheritance except through a trustee (usually your executor)
• to provide for beneficiaries who are not able to look after the property because
of the following circumstances:
• age (i.e., minors)
• mental incapacity (“discretionary trust” or known in Ontario as the Henson trust)
• infirmity
• lack of business experience.
To provide an income for a spouse
You can set up a spousal trust to provide an income for your spouse during his or her
lifetime without transferring ownership of the property that generates the income.
Upon the death of your spouse, the property in the spousal trust passes to the
beneficiaries (such as your children or charity).
Property can normally be transferred to a spousal trust on a tax-deferred, rollover
basis. This kind of trust can be useful if you have a blended family and you want to
make sure that children from previous marriages receive an inheritance.
To manage taxes
You can use a living trust to freeze assets at their current value. This results in any
future growth in the value of those assets being passed on to your beneficiaries (e.g.,
your children or a charity). This may make it possible for you to limit your capital gains
tax liability (in the case of private company shares you own) and to defer taxes for your
beneficiaries until the last one dies.
When you leave publicly traded shares or mutual funds to a charitable beneficiary, the
capital gain isn’t taxed.
To transfer property and continue to enjoy its use
You can use a living trust to transfer property (land, family home, cash, and cottage) to
other people or charity without giving up full control of that property. You may be able to
continue enjoying the property during your lifetime or receiving income from the trust.
If a living trust lists a charity as a beneficiary, you may be able to receive a charitable
receipt for a portion of it and receive income during your lifetime as well.
This type of trust allows any capital gains to be passed on to the beneficiaries and the
property can pass outside your estate when you die, which reduces the costs for your estate.
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Legal documentation
Trusts and the rules surrounding them are often complex and detailed. Talking to a lawyer
and an accountant concerning any plans to create a trust, whether through your will or
during your lifetime, is an important step in deciding whether or how to set up a trust.
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Chapter 11
Personal effects
Dividing your personal possessions
When a person passes away, she or he usually leaves personal possessions (items such
as furniture, household goods, clothing, collections, photo albums, books, and tools)
to be distributed to others or to be disposed of. Although not legally binding if written
outside of a will, leaving written instructions that clearly explain what you want done
with your things will help make your wishes clear to your executor and beneficiaries.
If you don’t leave distribution instructions
Most often, an executor will oversee the distribution of your personal possessions. If
you don’t leave specific instructions in your will, your executor will likely allow family
members (children, grandchildren, parents, and siblings) to divide your personal items
among themselves. This could lead to misunderstandings or disappointment. Studies
show that disputes arising from an estate’s distribution are more often over items that
have sentimental value than over money.
If you have no family or your family is not interested in the things you have left, the
executor may sell what is of value and add the proceeds to your estate.
Sentimental value
Bob and Sara were getting older and had recently updated their wills. But they had not yet discussed
who might want their dishes, jewellery, and home furnishings. Sara remembered those decisions had
been difficult when her parents died. Following a family holiday dinner, Bob and Sara began a conversation
about distributing their personal effects and were surprised when their four adult children quickly started
to argue.
After calling a brief time out, the couple began again, this time slowly sorting through the emotions and
relationships with their children before moving on to tackle their belongings. It was a very open and
healing conversation.
For Bob and Sara, it was important to deal with the distribution of their possessions while they were still
alive. Leaving it until they had passed away or were no longer able to have the conversation could have left
their children with painful memories of a family feud. They now believe their children are comfortable with
the decisions made about their parents’ personal effects and will remain close friends after their passing.
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Benefit of leaving instructions for distribution
A carefully prepared will can go a long way toward reducing the chance of arguments
among those who have a claim to your estate. Giving items to the people who enjoy
them most and ensuring that your beneficiaries see the process as fair are both
important considerations when deciding who will receive your personal effects.
Here are some ways you might deal with having your personal possessions distributed:
• Write specific distribution instructions into your will. Some choose to designate
certain items, such as family heirlooms, to be given to particular persons so they
stay within the family. However, this might cause issues with distribution in the
event some of these items have been sold or otherwise disposed of during your
lifetime and the will has not been changed.
• Give away those items you no longer need to family members, friends, or thrift
stores while you are still living. This can save your executor and family much time
and energy. It will also give pleasure to the recipients and to you, as you see them
enjoying the gifts.
• Put name tags on items you want particular persons to have. The problem with
this is that the tags may fall off, become unreadable, or be switched between
now and when the time comes for the items to be distributed.
• State your wishes in writing in a letter or memo separate from your will and file it
where your executor will find it.
If you have no spouse, children, or grandchildren, naming a charity (or a thrift store) to
receive your personal possessions might be an excellent option. The charity will turn
your good-quality, saleable personal effects into money it can use in its programs, and
your executor will have less work to do.
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Chapter 12
Your family and your estate
Planning for the unexpected and family matters
No one likes to think of all members of a family dying at the same time. However,
given that this can happen, it is prudent to leave instructions that would apply if
tragedy strikes. Similarly, because changes in marital status can have an effect on the
distribution of your estate, it is wise and caring to make arrangements that take such
changes into account.
Common disaster: What if all beneficiaries die?
If you and your family should perish at the same time, does the wording of your will cover
the disaster? This is especially important to consider if you and your minor children travel
together. Even if your children are older and are unlikely to be in situations where disaster
could strike your whole family, it is wise to prepare for the unexpected. You can do this
by including a clause in your will that gives clear instructions on how your estate is to
be distributed if your family should all die at the same time.
Changes in marital
status can have
an effect on the
distribution of
your estate.
You have a number of options for the distribution of your estate. If no immediatefamily beneficiaries were left:
• You could leave all or part of your estate to your favourite charity(ies) — your
church or denomination, relief and service agencies, mission agencies, Bible
college, university, or hospital — to continue your legacy of caring. MFC
Stewardship Consultants can assist you with the distribution of your gift to charity.
• You could leave something to siblings, parents, nieces, and nephews, other
members of your extended family, or to friends.
You should also consider writing a clause in your will to cover situations in which
beneficiaries die before receiving their full inheritance.
Marriage and remarriage
Any time you make a change in your marital status, you should review your estate plan
and make the changes needed to protect the assets you bring into the marriage, your
estate, and those you want to benefit from it. There is nothing preventing anyone who
feels unfairly treated by a will from challenging that will in court.
Marriage contract
Couples have been making marriage contracts since before Roman times and are still
doing it. When you marry someone, you and your partner agree to accept the terms of
a contract written for you in law.
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What’s in a name?
• marriage contract
• pre-nuptial agreement
• post-nuptial agreement.
These different terms
all mean the same
thing — a written
agreement between
spouses or intended
spouses arranging for the
distribution of property
different from that which
is normally provided under
marital laws.
Similarly, you and your intended partner can create a legal agreement that sets out
decisions you have made together regarding your marriage, often about financial
arrangements. Drawing up a marriage contract is important if you and your partner
would like to divide your property after your death or in case the marriage fails in a
way that is different from the terms set out in marital laws. In the marriage contract,
you and your intended partner can state how the property should be divided. A marriage
contract is also important if you are supporting a previous spouse or children, want to
protect an inheritance for children from another marriage, or want to protect assets
you are bringing to the marriage in case of a divorce.
It may not seem romantic to be negotiating a marriage contract just before you say,
“I do,” but think of it as a tool to bring mutual understanding to two family units,
each with unique patterns and habits, that are now merging into one. Having things
in writing may not entirely prevent tension and stress, but it could go a long way
toward minimizing them for all concerned.
Pre-nuptial agreements
Frank had been widowed eight months when he met Martha, who had also been widowed. Within the year,
they married. Frank had three adult children from his previous marriage and Martha had two. Frank and
Martha had each done reasonably well financially.
Before getting married, the couple agreed that they would maintain their financial affairs separately
and would benefit their own children through their wills. During their lifetime, they would live in the
house Frank owned, and he would cover the housing expenses. They contacted a lawyer who prepared
a pre-nuptial agreement.
Eight years later, Frank and Martha were involved in an accident that resulted in the death of Frank and
injuries to Martha. She recuperated in hospital for three months.
While Frank’s and Martha’s children had got along well enough, the loss and the settling of the estate put
some strain on their relationships. The question of whether Martha would continue to live in the home she
and Frank had shared was especially difficult. Thankfully, the couple’s pre-nuptial agreement clarified their
intent. When Martha moved into an apartment three years later, the house was sold and Frank’s estate was
finally settled.
Money matters
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Money ranks high as a leading cause of conflict for couples at the best of times,
and perhaps more so for couples who are remarrying. They frequently bring more
financial responsibilities and assets into the relationship than they did into their first
marriages. They may be responsible for child or spousal support payments, business
interests, children from previous marriages, credit card payments, insurance policies,
investments, cottages, and homes. Some couples have different values regarding
finances, which can lead to difficulties.
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Here are some steps to take before you marry to minimize conflict afterwards:
• Discuss how to blend household finances. Finding ways to handle your finances is
important, especially if you each have different saving and spending habits. Talking
about whether you will have joint or separate bank accounts, and who will be
responsible for financial records can reduce or prevent future tensions.
• Identify which possessions each of you owns. Often, items of sentimental value
create more disagreements in settling estates than items of monetary value.
Keep in mind the significance of family heirlooms; antiques; collections of art,
stamps, and coins; and other items that have value — either sentimental or
monetary. Involve your children in deciding who will receive what, because
they are the ones who will ultimately benefit from your decisions.
Wedding bells
If you marry, take
the time to make a
new will, because
your old one may
no longer be valid.
• Work together to set goals: the more in agreement you are, the stronger your
marriage will be. Some things can be stated in a marriage contract; others can
be worked out only as your marriage unfolds.
Redrafting your will and updating beneficiary designations
If you marry, take the time to make a new will, because your old one may have been
revoked by the marriage. (For information on the consequences of dying without a
will, known as intestacy, see Chapter 3.)
It is important to do the following when redrafting your will:
• Review and update your beneficiary designations on insurance policies, pension
plans, RRSPs, RRIFs, TFSAs, annuities, or any other financial instrument.
• Review and update your life and disability insurance.
• If you have a two-income household, consider whether you will be able to
manage if either of you loses your job or becomes disabled. Review, too, whether
there would be enough insurance and income to provide for the needs of the
surviving spouse and any children or dependants, if one of you should die.
Special family situations
Single-parent families, stepfamilies, and blended families have their own estate
planning issues that need careful consideration.
All families need wills. For single parents, stepparents, and blended families, not having
a will can mean that family members they want to benefit from their estate could
instead be left out.
MFC’s Stewardship Consultants can help you navigate estate planning in these situations.
Single-parent families
As a single parent, you need a will to protect and provide for your child(ren) in the
event of your death. Estate planning issues for single parents include:
• Choosing a guardian for any minor children. It is possible the minor will be cared
for by the surviving parent (if there is one), but at least one alternate should
be named. If there are reasons a surviving parent should not care for the child,
review them with your lawyer while preparing your will.
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• Naming a trustee to manage inheritance(s). Unless specified differently in your
will, children receive their inheritance upon becoming an adult. In your will, you
can arrange to have children receive their inheritance over time by specifying the
age(s) at which they can inherit and the percentage of the estate at each age.
Such an arrangement allows children, who have likely not handled large amounts
of money, to receive their inheritance when they might be more mature and in a
better position to manage the money.
• Making arrangements in case of a common disaster. All single parents need to
consider how they would distribute their estate if their child predeceases them
or dies at the same time.
Stepfamilies
Stepfamilies are those in which the partners have no blood or adopted children
together but one or both have a child or children. Estate planning issues for
stepfamilies include:
• Assets brought into the relationship. If one partner brings significantly more
assets than the other into the relationship, that contribution may be reflected in
the eventual estate distribution.
• Stepparent’s relationship to the stepchild. You may not realize that as a
stepparent, if you have a clause in your will that leaves your estate to your
child(ren), your stepchild would be excluded from receiving a part of the estate.
If you wish to include a stepchild, you need to specifically name the stepchild
in your will.
• Pre- or post-nuptial agreements. Your will should be consistent with any legal
agreements between you and your partner.
• Spousal trusts. One or both of you can establish a spousal trust so that the other
can receive an income as long as he or she lives and, upon the spouse’s death,
the trust flows to your child(ren). Trusts can ensure that the child of the first
partner to die is not left out of his or her parent’s estate.
• Obligations for spousal or child support. Your will can be overturned by the
courts if you are legally obligated to provide financial support to a child or former
spouse and fail to do so in your will. Have your lawyer review your separation or
divorce agreement when preparing your will.
Blended families
Blended families are those in which the partners have at least one blood or adopted
child together and a child of one or both partners. Estate planning issues for blended
families include:
• Assets brought into the relationship. If one partner brought significantly more
assets into the relationship than the other, that may be reflected in the eventual
estate distribution.
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• Stepparent’s relationship to the stepchild. You may not realize that as a stepparent,
using a clause that simply states that you are leaving your estate to your child(ren)
would exclude your stepchild from receiving part of the estate. If you wish to
include a stepchild, you must specifically name the stepchild in your will.
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Blended-family considerations
For Doug and Susan, being part of a blended family meant that nearly everything required extra planning.
Even their wills required careful consideration, since they couldn’t just leave assets to each other. Doug and
Susan each had children from their first marriages to consider, and they were expecting their first child
together. Their pastor recommended they contact Mennonite Foundation of Canada for assistance.
The MFC Stewardship Consultant was familiar with the laws of their province and was able to suggest ways
for Doug and Susan to provide for their own children and for each other if one of them were to die. For the
couple, this meant purchasing life insurance policies that would benefit their children, while leaving joint
assets such as their home and retirement savings to the surviving spouse. As the children grow and family
needs change, Doug and Susan will need to review their wills and estate plans. For now, they can check it off
their to-do list.
• Pre- or post-nuptial agreement. Your will should be consistent with legal
agreements between you and your partner.
• Spousal trusts. One or both of you can establish a spousal trust (or trusts) so that
the other can receive money so long as she or he lives and, upon the spouse’s
death, the trust flows to your child(ren). Trusts can ensure that the child of the
first partner to die is not left without an inheritance.
• Obligations for spousal or child support. Your will can be overturned by the
courts if you are legally obligated to provide financial support to a child or former
spouse but do not do so in your will. Have your lawyer review your separation or
divorce agreement when you are preparing your will.
• Fair distribution of assets among the children. An equal distribution of assets
between blood and adopted children and stepchildren may or may not be fair
depending on the circumstances.
Contact an MFC Stewardship Consultant for more information on how to plan your
estate to meet the needs of your family situation.
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Chapter 13
Succession planning
For family farms and businesses
Transferring your family farm or business to the next generation can be complex and
challenging, especially if you have some children who are interested in taking over
and some who are not. One or two of your children may already be involved with or
interested in operating the farm or business, while others may be pursuing different
careers. If that is the case, you may be caught between trying to treat all your children
fairly in your division of assets and ensuring that the family farm or business is passed
on as a financially viable unit for the next generation to manage and enjoy.
The timing of the transfer of assets may be another issue you have to sort out. Those
who take over or inherit the farm or business may receive their inheritance much
earlier in life than the non-farm/business heirs.
Good planning can minimize the family conflicts and financial struggles that often
accompany transfers of family farms and businesses. Succession planning goals include:
• treating family members fairly
• minimizing taxes
• maintaining the viability of the business or farm after the transfer.
Capital gains exemption
At time of writing, the federal government provides a $750,000 lifetime capital gains
exemption for qualifying farms and small businesses. This allows you, as a current
owner, to pass on qualifying assets to your children without paying tax on the exempt
portion of the capital gain. It also allows the next generation — your children or
grandchildren — to begin operating the farm or business without worrying about
future taxes on deferred capital gains.
To benefit from this provision, you must apply for the capital gains exemption when
you sell the property or gift it to your heirs. You can also apply for the exemption when
capital gains are crystallized through an estate freeze, which locks in the value of an
asset on the date of your choice. Any future growth is then taxed in the hands of the
next generation.
You have three options to consider for utilizing the capital gains exemption:
1. selling or gifting the property
2. reorganizing the share structure of the corporation so that non-growth, preferred
shares are assigned to the seller and growth shares to the buyer(s)
3. rolling over qualifying farm assets to your child or grandchild at your adjusted cost
base (ACB), or at a value you choose between your ACB and fair market value (FMV).
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Consult your accountant and lawyer to determine if you qualify for these provisions
and to design the right succession strategy for your situation.
Business agreements
If you are a partner or shareholder in a business, it is important to have a written
agreement outlining what is to happen to the business or shares if a partner/co-owner
dies or leaves the business. The agreement is essential to the success of the business.
If you are a partner in a non-incorporated business, you need a written partnership
agreement, whether the partnership is with family members or with someone
unrelated. An agreement puts in writing the details of the division of assets and
liabilities and the financial responsibilities of each partner, and outlines what is to
happen if a marriage breaks up or a partner dies or chooses to leave the partnership.
Having prescribed steps for dissolving or getting out of a partnership is critical to your
financial well-being.
If you are involved in an incorporated business, you need to consider what will happen
to the shares, such as to whom they would go. You may need a shareholder agreement
dealing with what happens when one or more shareholders die or wish to leave the
corporation. You should seek legal advice as to the appropriate structure for your
shareholders’ agreement.
Insurance
Life insurance has many potential uses in a farm or business succession plan. It may assist
with paying taxes, providing funding for interim management, providing an inheritance
for non-farm/business heirs, or providing funds to buy out a deceased partner’s
interest. Premium payments can be made by either you or the company. Planning well
in advance will keep the costs of insurance in your estate plan manageable.
Legal and accounting advice
Always seek competent legal and accounting advice as you develop and carry out your
succession plan. Your heirs will be glad you did.
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Chapter 14
Probate
Proving your will’s validity
Probate is the process of getting a provincial court to approve a will as valid.
(In Ontario, an application for probate is called a certificate of appointment of estate
trustee with a will.)
Not all estates have to go through this process, depending on the amount of
money involved.
A small estate that is divided equally between your children may not require probate,
for instance. Sometimes assets can be structured so that the costs associated with the
probate process are reduced or avoided entirely.
Reason for probate
Depending on
The primary reason for probate is to authorize and require institutions such as
mutual fund companies to release assets belonging to the estate to the executor.
how complex your
If an executor proceeds to act on a will that is not probated and a more recent will
is found, the executor may be held legally responsible. If a court approves a will as
valid, then the executor will be protected, even if another will is discovered later
and is deemed to be valid.
take from six months
estate is, it may
to several years for
your executor to
settle your estate.
Privacy issues and probate
If your will goes to probate, it is automatically considered to be a public document.
Anyone who makes application to the appropriate court (usually for a fee) will be able
to read your will. You can keep your will private by creating a living trust, whose details
are not open to public scrutiny. (For more information, see Chapter 10.)
Probate process
Submitting documents to court
To achieve probate, an executor will normally be required to deliver the following
documents to the court before the court will approve that person’s appointment and
the validity of a will:
• your original signed and witnessed will
• a certificate verifying the date of your death
• an inventory of your estate, including a list that describes and values all assets
you owned or that were owed to you on the date of your death
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• an application for probate, giving your address and marital status at the time of
your death, the date of your will, and proof of the executor’s identity
• in many provinces, a sworn statement by your executor to verify that the estate
inventory as submitted is complete, and that the executor is committed to
fulfilling the duties of the job
• a sworn statement confirming the document’s authenticity that is signed by at
least one or both of your witnesses at the time your will was signed.
Receiving probate certificate
Once proper documentation has been filed and approved and fees have been paid to
the court, the court will issue a probate certificate, normally within a few weeks.
The certificate is required in order to transfer property into your estate or to your
beneficiaries. This certificate is not needed for property held in joint tenancy, which passes
automatically to the surviving joint tenant(s) without becoming part of your estate.
Probate fees and how to reduce them
Probate fees, which vary from province to province, are generally based on the size of
the estate (see Appendix 2, page 71).
The following actions can reduce the portion of your estate that is subject to probate:
• naming beneficiaries on your life insurance policies and pension plans
• holding property in joint ownership with right of survivorship. If you do this,
make sure it does not conflict with any trusts set up in your will
• transferring property to your beneficiaries prior to death. Keep in mind that
transferring property to anyone other than a spouse may result in you having to
pay taxes
• making charitable gifts prior to death.
Although the above actions reduce the costs of administering your estate, cutting costs
should not be the only consideration. You need to be careful to ensure that your own
retirement needs will be met. Placing property into joint title may reduce probate
costs, but may lead to other problems as well, and should only be done after seeking
professional advice. Transferring or gifting property will reduce your assets, so you
must consider your own financial needs before doing this.
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Chapter 15
Final tax returns
Tax issues
After you die, your executor will have to file one or more tax returns, depending
on when you die, how complex your estate is, and your personal financial situation.
The possibilities are as follows:
• final or terminal personal return
• tax return for the estate
• tax return for rights and things
• tax return for business income
• tax return for trust income.
If you are dealing with someone else’s estate, it is advisable to use a professional to file
the final tax returns.
Types of tax returns for a deceased person
Final personal income return
In Canada, your final tax
return must be filed by
your executor for the
period from January 1 to
the date of your death.
If you die between
January 1 and October 31,
a terminal return is due
April 30 of the following
year.
If your death occurs
between November 1 and
year-end, a terminal return
is due six months after
your death. Your executor
is also responsible for filing
a return for any previous
year in which you did not
file a return.
Your executor will prepare a final tax return, also known as a terminal return, after
you die. While neither federal nor provincial governments levy an estate tax, they do
collect final income and capital gains taxes through your final tax return.
Upon your death, special rules apply relating to the following:
• the assumed sale (deemed disposition) of capital property
• spousal rollovers of property. If when you die, an asset passes to a spouse or
spousal trust within 36 months, any tax payable may be deferred until the asset is
sold or transferred
• collapsing RRSPs or RRIFs, or transferring them to a spouse or to a financially
dependent child or grandchild
• income accrued to your date of death, including salary, interest earned on any
un-matured Guaranteed Investment Certificates (GICs) or other investments,
and any pension benefits. In some instances, income earned after death can be
passed on to a beneficiary, avoiding the use of a separate trust (T3) tax return
• medical expenses. For any 24-month period that includes the date of your
death, medical expenses may be claimed in the year you died. This permits your
executor to include expenses paid after your death.
If you owned property outside of Canada, or if you were a citizen or resident of a
foreign country, your estate may have to pay foreign or estate taxes.
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Tax return for the estate
A separate tax return must be filed for your estate that covers the period from the
date of your death until the date all assets are distributed to your beneficiaries. As is
the case with individuals, estates are taxed with progressive rates of marginal taxation,
meaning that a higher level of tax is charged as income increases. Estates cannot claim
personal tax credits other than the charitable donation tax credit.
In certain circumstances, it may be a good idea for an executor to file separate optional
returns related to particular assets.
Tax return for “rights and things”
Tax must be paid on amounts of money owed to you that you did not receive before
you died. These rights or things might include the following:
• income from matured but un-cashed bond or debenture interest coupons
• vacation pay, commissions
• declared but unpaid dividends
• crops and livestock of farmers on a cash basis and inventory or equipment that
would have been sold in the course of business.
Filing a return for rights and things is most useful for a someone who had reported
business or investment income on a cash basis. Land held in inventory is not
considered a right or thing.
Filing a separate tax return for rights and things could result in the estate having
additional tax credits in the year of death and paying a lower rate of tax. However, if a
beneficiary is in a low tax bracket, it is sometimes better for him or her to include the
rights and things in his or her income for the year, rather than the executor including it
in the deceased’s estate.
Tax return for business income
The executor may be able to file a separate return to report business income from a sole
proprietorship or partnership to the date of death, if the year-end of the business is other
than December 31. The advantages would be timing and possibly certain tax credits.
Tax return for trust income
If the testamentary trust of which the deceased was a beneficiary had a year-end
other than December 31, it may be possible for the executor to file a separate return
to report income from the trust. This return would cover the period from the end of
the trust’s last year to the date of the person’s death. The benefit of filing this return
is that it allows double use of personal tax credits, such as the single status, married,
equivalent to married, dependent, and age credits.
Tax returns for ongoing trusts
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A trustee must file annual tax returns for a trust set up under the terms of a will.
Because special tax rules apply to trusts, there may be ways to reduce taxes under
certain circumstances.
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After all tax-filing requirements have been met and assessment notices have been
received, your executor should ask Canada Revenue Agency (CRA) for a clearance
certificate. Once this document has been received, the executor should be able to
distribute the rest of your estate to your beneficiaries.
Donations to charity
For the final tax return and for the year prior to death, the deduction limit for charitable
donations is increased from the normal 75 per cent to 100 per cent of your net
income. Your executor can claim this tax deduction as long as the charity provided a
tax receipt for your donation. Your executor should review your previous tax returns
to determine if there are any unclaimed credits from the past five years that could be
applied to your final tax return.
Planning ahead
Meeting CRA’s requirements and taking advantage of all tax provisions that apply
to your estate may be a challenge for your executor. Depending on how complicated
your estate is, it may be wise for you to do some advanced planning, along with your
executor and your accountant, so your estate can be wound up more quickly
and efficiently.
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Chapter 16
Implementing your estate plan
Your estate planning checklist
Congratulations on taking the time to become familiar with the estate planning
process. As you act on each of the steps that apply to you and your family, you will be
taking thoughtful, caring steps to provide for your family and the organizations you
care about. As stated in Chapter 1, putting your plans in place is an intentional act of
stewardship that expresses your faith and values and shows what was important to
you. It lets you leave a meaningful legacy.
Once you put your estate plan in place, you will feel a well-deserved sense of satisfaction.
But remember, estate planning is not a one-time exercise. It is an ongoing process
because circumstances and needs will change in your life, your family’s, and those of
the charities you want to support. As circumstances change, so should your estate
plan. Good planning will reduce the complications and expense of dealing with your
estate. Planning may also increase the assets you leave to the people who are near and
dear to you, and your favourite charities. An MFC Stewardship Consultant can help
guide you through the estate planning process as your circumstances change.
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Checklist
To help you implement your estate plan, here is a checklist you can use to keep you on track:
Step
Date
Attended a Mennonite Foundation of Canada will and estate planning
workshop
Set goals for what I/we want to accomplish by doing estate planning
(Chapter 1)
Read and marked-up MFC’s Your Will and Estate Planning Guide
Chose an executor (Chapter 4)
Chose a guardian(s) for minor children or adult dependants (Chapter 5)
Filled in the Planning Your Will worksheet (Chapter 1 and pocket of the guide)
Met with an MFC Stewardship Consultant (Chapter 1)
Reviewed tax considerations for the estate and made appropriate
choices or changes (Chapter 6)
Reviewed insurance needs and made appropriate choices or changes
(Chapter 6)
Filled in Personal Information Directory (Chapter 7 and pocket of the guide)
Spoke to executor and family about wishes and location of important papers
(Chapter 7)
Made list of assets and liabilities (Chapter 7)
Spoke to family about who will receive my personal effects (Chapter 11)
Had a lawyer draw up my will (chapters 2, 3, 12)
Had a lawyer draw up my incapacity documents (Chapter 9)
Spouse had a lawyer draw up a will (chapters 2, 3, 12)
Spouse had a lawyer draw up incapacity documents (Chapter 9)
Reviewed trust considerations and made appropriate choices or changes
(Chapter 10)
Did succession planning (Chapter 13)
Reviewed my estate plan
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Glossary
Adjusted cost base (ACB) — A calculation used to determine the cost of an investment
for tax purposes.
Administrator/Administratrix if female — A person who is appointed by a court to
settle the estate of a person who dies without a will. See also “Personal representative.”
Affidavit — A sworn or affirmed written statement, made before someone having the
power to witness an oath or affirmation.
Affidavit of execution of will — A statement prepared by a lawyer or notary and
signed by a witness to a will, confirming due execution of the will. This may prevent
verification problems upon probate of the will.
Age of majority — The age at which a person is considered to be an adult for legal
purposes. See Appendix 1.
Annulment — In marriage, a legal decision that a marriage never existed.
Assets — Everything of value that a person owns, including money, investments and
business interests, equipment, personal effects, land, and buildings.
Beneficial owner — The “real” owner. Although assets may be registered in the name
of a broker or trustee, the beneficial owner is the party to whom dividends, interest,
and profits are paid.
Beneficiary — The person or organization that is entitled to receive a gift or benefit
from someone else, usually under a will, life insurance policy, or trust.
Bequest — Any money or other property given to a person or an organization through
a will.
Canada Pension Plan (CPP) death benefit — A lump sum payment by CPP to the
estate upon the death of a plan holder. The amount depends on the total contributions
made to the plan, pursuant to a given maximum.
Capital gain — The profit that results from investing in a capital asset, such as stocks,
bonds, or real estate, which exceeds the purchase price. It is the difference between a
higher selling price and a lower purchase price, resulting in a financial gain for the seller.
Capital loss — The difference between a lower selling price and a higher purchase
price, resulting in a financial loss for the seller.
Charitable Remainder Trust — A trust that allows a person to donate an asset while
maintaining the use of the transferred asset for life — or for the term of the trust.
Assets placed in the trust can include cash, securities, and real property. The donor
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receives a tax receipt for the present value of the assets placed in trust. Present value
is calculated using the donor’s life expectancy and the discount rate at the time the
trust is established.
Codicil — An addition or supplement to a will. It may delete or modify various provisions
of the original will. It must be witnessed and signed in the same manner as a will.
Cohabitation agreement — A contract that protects a couple who lives outside
of marriage as husband and wife. This contract is valid in Ontario, Quebec, New
Brunswick, Prince Edward Island, and Newfoundland and Labrador.
Commissioner for taking oaths — An official authorized by law to take affidavits.
Common disaster — A situation in which all the people you would normally want to
benefit under your will die before they receive their inheritance; for example, you,
your spouse, and all your children die in an accident.
Contingency — The possibility of something happening; an event that may occur.
Creditor — A person (or a business or institution) to which money is owed.
Debtor — A person (or a business or institution) who owes money.
Devise — To give or bequeath property through a will.
Devolve — Transfer property by transmission or succession from one person to
another according to regular legal processes.
Disclosure statement — A document filed by an executor or estate administrator with
the probate fees department of a provincial court.
Distribution memorandum — A document, separate from the will, that gives the
executor details on how an estate gift is to be disbursed.
Dividend — An amount of money distributed out of a company’s profits to its
shareholders in proportion to the number of shares held in a particular class.
Encroachment — Paying out a portion of the capital of a trust fund, rather than paying
out only the earnings of a trust fund.
Escheat — The process by which the assets of a deceased person pass to the provincial
government when he or she dies without a will and without a spouse or next of kin.
Estate planning — The process of planning for the ownership and responsible use of
your assets during your lifetime or after you die.
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Executor (Executrix if female) — A person named in a will to administer the estate
of a deceased person; referred to as an estate trustee in some provinces. See also
“Personal representative.”
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Fair market value (FMV) — The dollar value of an asset that is purchased by a willing
buyer, from a willing seller, under normal conditions. This may not be the same as the
amount that is actually paid for the asset.
Guarantee — Something that is given or pledged as security against a loan.
Guardian — A person who has the legal authority to oversee the affairs of a minor
and has the legal responsibility to care for that minor until he or she attains the age of
majority. Also a person who has the legal authority to oversee the affairs of an adult
dependant.
Health Care Directive (also Advance Directive, Advance Health Care Directive,
Authorization to give medical consent, Mandate in anticipation of incapacity, Personal
Care Directive, and Power of Attorney for Health Care, Representation Agreement) —
A document that allows a person (the “donor”) to express personal wishes with regard
to health care decisions, and to name a substitute decision-maker should the donor
become mentally incapable.
Heirloom — Any personal property that has been in the family for many generations.
Holograph will — A will written completely in the handwriting of the person making
it, not requiring witnesses to that person’s signature. A holograph will is valid in all
provinces and territories except British Columbia and Prince Edward Island.
In specie — A phrase describing the distribution of an asset in its present form, rather
than selling it and distributing the cash. The phrase is Latin for “in its actual form.”
Inter-vivos gift — A gift made by someone during his or her lifetime.
Inter-vivos trust — Also known as a living trust, this is a legal trust created during a
person’s lifetime (as compared to a testamentary trust, which is created when a person
dies). Inter-vivos trusts are often used to minimize taxes due on death, to protect the
anonymity of beneficiaries, to facilitate charitable gifting, or to protect assets and
property from creditors.
Intestacy — The estate of a person who dies without a will, or that portion of the
estate that is not covered by a will.
Joint and several — A term that indicates extent of responsibility if two or more
people are named to do something. Joint, or jointly, means that all named persons are
responsible together — or that they must sign all documents or carry out instructions
together. Several, or severally, means that though several persons have been
named, each one is responsible independently of the others — or that they may act
independently of each other, and the signature of one is sufficient.
Joint tenancy — Property owned together by two or more persons in which the
surviving joint tenant(s) becomes the owner of the entire property upon the death of
another joint tenant, usually without reference to the will of the deceased joint tenant.
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Letters of administration — A court document appointing someone to administer the
estate of an individual who dies without a will. The name of this document varies by
province; for example, in Ontario this is a Certificate of Appointment of Estate Trustee
Without a Will.
Letters of administration with will annexed — A document appointing someone to
settle the estate of an individual who left a will, but where the named executor has
died or is unable or unwilling to act.
Letters probate — Also known by other names in some provinces, this is a document
granted by a provincial court confirming the appointment of the named executor and
the validity of the will.
Liabilities — The debts or other financial obligations and responsibilities of a person.
Life interest — A benefit given to a person, often but not necessarily in a will, that
permits that person (also known as the beneficiary) to have the use of some property
or the investment proceeds of some amount of money for the balance of that person’s
lifetime only. When that person dies or waives the benefit, a secondary beneficiary,
often a charity, receives the property or money outright.
Liquidator — The term that is used in Quebec for executor.
Living trust — See “Inter-vivos trust.”
Living will — See “Health Care Directive.”
Mandate — A term used in Quebec to describe what is known as a power of attorney
document in many Canadian provinces.
Marriage contract — This may also be called a pre-nuptial or post-nuptial agreement.
It is a written agreement between spouses or intended spouses in which an
arrangement for property division may be contrary to the normal marital laws.
Minor — A person under the age of majority.
Mirror wills — See “Reciprocal wills.”
Net worth — The difference between a person’s assets and liabilities.
Next-of-kin — The closest relative of a person, defined in accordance with the law of
the province or territory in which that person lives.
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Notary public — A person who is authorized to witness signatures, to administer
oaths, and to perform similar tasks, including swearing to the genuineness of various
documents. In some provinces, notaries public are also authorized to prepare wills,
powers of attorney, and real estate transfers.
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Null — Not binding, invalid, or having no effect.
Oath — An affirmation as to the truth of what is stated.
Per capita — In dividing the assets of an estate, an equal share is given to each of a
number of persons who all stand in equal degree of relationship to the deceased.
Person — In law, the word “person” includes an individual human, a corporation, a
trust, or other organizational structure.
Personal property — All property, with the exception of real estate and buildings.
Personal representative — Someone who administers an estate, whether an executor
or administrator for the deceased person or as an attorney under a power of attorney.
Per stirpes — In dividing the assets of an estate, if a beneficiary has died and has
descendants, that share will be divided among the descendants of the deceased beneficiary.
Power of attorney — A written document by which an individual (the “donor”) grants
to another person(s) the authority to deal with the donor’s property and to act on the
donor’s behalf. Unless drawn up as an enduring power of attorney, it will become void
if the donor becomes mentally incompetent. Powers of attorney generally terminate
upon the donor’s death.
Power of attorney for health care — See “Health Care Directive.”
Pre-nuptial agreement — See “Marriage contract.”
Present value — The current worth of a sum of money that will be received at some
time in the future.
Probate — A court document confirming the appointment of the named executor and
the validity of the will of a deceased person. In Ontario, this is called a certificate of
appointment of estate trustee with a will.
Promissory note — A written instrument containing an unconditional promise by a
party who signs the instrument to pay to another a definite sum of money either on
demand or at a specified future date. The note may be made payable to the bearer or
to a third party named in the note. A promissory note differs from an IOU in that the
former is a promise to pay and the latter is a mere acknowledgment of a debt.
Proxy directive — Written authorization given by one person to another to represent
the first person’s interests.
Public Trustee, or Public Guardian and Trustee — A provincial officer appointed to
uphold the legal rights and safeguard the financial interests of children, dependent
adults, and other vulnerable persons, and, in some cases, to administer the estates of
deceased and missing persons.
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Real property — Refers to land, fixtures, and buildings. Also known as real estate
or realty.
Reciprocal wills — Also known as mirror wills, these are wills made by a couple in
which the details, except for the author’s name, are identical.
Residual interest — Residual interest is what a donor retains after assets, typically
property such as a principal residence, work of art, or book collection, is put in a trust
as a gift. A fair market value for the property is determined at the time of the gift.
Then the donor’s age is taken into account and an appropriate discount rate is used to
determine the amount of the tax receipt. The donor continues to enjoy the use of the
property until the end of the term of the trust.
Residuary beneficiary — Someone who receives part of or the entire residue of
an estate.
Residue (or residual amount) — That part of an estate that remains after all taxes,
debts, fees, and expenses are paid, and specific bequests and gifts are made.
Right of survivorship — The right of a surviving joint tenant(s) to ownership of jointly
held property upon the death of another joint tenant. See “Joint tenancy.”
Rollover provisions — Where assets are sold or transferred and that transfer triggers
tax consequences, the Income Tax Act allows some assets to be “rolled over” to a
spouse or child on a tax-deferred basis. The rollover may be pursuant to an inter-vivos
gift or pursuant to an estate gift.
RRIF — A Registered Retirement Income Fund is a tax-deferred investment vehicle
available to Registered Retirement Savings Plan (RRSP) holders who deregister their
plans, typically on reaching age 71 — which they are required to do under federal
regulations. The plan holder invests the withdrawn RRSP funds in the RRIF, and each
year must withdraw a minimum set percentage and pay income tax on the withdrawal.
RRSP — A Registered Retirement Savings Plan is an investment vehicle available to
individuals to defer tax on a specified amount of money intended to be used for
retirement. Income tax is deferred until the money (the amount originally deposited
plus any interest, dividends, or capital gains) is withdrawn, whether at retirement or
earlier.
Securities — Transferable certificates of ownership of investment products, such as
notes, bonds, stocks, futures contracts, and options.
Sole proprietorship — An unincorporated business with one owner who pays personal
income tax on profits from the business.
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Specific bequest — A testamentary gift of a designated item of personal property or a
designated amount of cash. Any fixed amounts or specific bequests are distributed first
and take precedence over the distribution of the residue of the estate.
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Spouse — In law, marriage is recognized as between two persons, regardless of
gender. Additionally, most provinces give spousal rights to partners in a common-law
relationship, again regardless of gender. The laws vary from province to province, and
are currently in a state of flux.
Statutory will — The terms of the provincial law that dictates the distribution of an
estate when someone dies without a will.
Succession — The transfer of ownership in property to a person who has the right to
own that property.
Tenancy in common — Property owned jointly by two or more persons. Upon
the death of one of the tenants in common, ownership of the deceased’s share is
transferred to that person’s estate, not to the other joint owner(s). There is no right
of survivorship.
Terminal return — The final tax return of a deceased person for the year of death.
This must be filed by the personal representative of the deceased for all income
earned by the deceased during the period from January 1 to the date of death.
Testamentary — Deriving from the provisions of a will.
Testamentary trust — A trust established by a will.
Testator (Testatrix if female) — A competent person who makes a valid will.
TFSA — Tax-Free Savings Account. A TFSA allows Canadians to shelter money tax-free,
with no tax payable when it is withdrawn. See Chapter 6 for a discussion of TFSAs.
Transfer — Conveying property to another person.
Transmission — Conveying property to another where the rights of the beneficiary
take effect on the death of the donor.
Trust — A legal relationship whereby a person(s) holds title to an asset (including
money), but the benefit of the property belongs to someone else.
Trustee — A person who holds property rights for the benefit of another through the
legal mechanism of a trust. A trustee usually has managerial and administrative rights
over the property. These rights must always be exercised to the full advantage of the
beneficiary. All profits from the property go to the beneficiary, although the trustee is
entitled to reimbursement for administrative costs. A trustee can also be a beneficiary
of the trust.
Void — Not legally binding. A document or a term in a contract that is void is
worthless, as if it did not exist.
Will — A written document that lays out the wishes of the deceased with regard to
the distribution of his or her assets and personal property.
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Appendix 1
Canadian age of majority
The age of majority in Canada is the age at which a person is considered by law to
be an adult. A person younger than the age of majority is considered a minor child.
Each province and territory determines its age of majority. They are as follows:
Province/Territory
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Age of Majority
British Columbia
19
Alberta
18
Saskatchewan
18
Manitoba
18
Ontario
18
Quebec
18
New Brunswick
19
Nova Scotia
19
Prince Edward Island
18
Newfoundland and Labrador
19
Yukon
19
Northwest Territories
19
Nunavut
19
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Appendix 2
Probate fees across Canada
Province/
Territory
Rate*
Maximum
British Columbia
$6 per $1,000 on estates of $25,000 to $50,000;
$14 per $1,000 on estates over $50,000
None
Alberta
Small, increasing scale based on size of estate
$400 (estates
over $250,000)
Saskatchewan
$7 per $1,000 of estate
None
Manitoba
$70 plus $7 per $1,000 on estates over $10,000
None
Ontario
$5 per $1,000 on estates up to $50,000;
then $15 per $1,000
None
Quebec
$0 for notorial will; nominal charge for non-notorial
will ($99 court filing charge for verification of will;
$111 when made by a corporation)
Not applicable
New Brunswick
$5 per $1,000 on estates over $20,000
None
Nova Scotia
$902.03 for estates of $50,001 to $100,000;
add $15.23 per $1,000 on estates over $100,000
None
Prince Edward Island
$400 on estates of $50,001 to $100,000;
add $4 per $1,000 on estates over $100,000
None
Newfoundland and
Labrador
$60 for first $1,000 of estate;
then add $0.50 per $1,000 on remainder of estate
None
Yukon
$0 on estates under $25,000;
$140 on estates over $25,000
$140
Northwest
Territories
Small, increasing scale based on size of estate
$400 (estates
over $250,000)
Nunavut
Small, increasing scale based on size of estate
$400 (estates
over $250,000)
*Information current as of November 2010; Source: www.taxtips.ca
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Appendix 3
Names used for incapacity documents by province
and territory
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Jurisdiction
Financial document
Health care document
British Columbia
Power of Attorney
Representation Agreement
(can also be made for financial,
legal, and health all together)
Alberta
Power of Attorney
Personal Care Directive
Saskatchewan
Power of Attorney
Health Care Directive
Manitoba
Power of Attorney
Health Care Directive
Ontario
Power of Attorney
Power of Attorney for Personal
Care
Quebec
Mandate in anticipation of
incapacity
Mandate in anticipation of
incapacity
New Brunswick
Power of Attorney (can be
for financial and health
together or separate)
Power of Attorney (can be for
financial and health together
or separate)
Nova Scotia
Power of Attorney
Authorization to give medical
consent
Prince Edward
Island
Power of Attorney
Health Care Directive
Newfoundland
and Labrador
Power of Attorney
Advance Health Care Directive
Yukon
Enduring Power of Attorney
Advance Directive
Northwest
Territories
Enduring Power of Attorney
Personal Directive
Nunavut
Power of Attorney
No specific legislation
for health care yet
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Appendix 4
Funeral arrangements
Telling your family what your wishes are for your funeral arrangements is a great idea, but it is important
to also put them in writing. To help your family and executor, you can leave written copies of your
medical decisions, funeral arrangements, and financial records in places that are easy for them to locate.
Funeral or burial pre-arrangements
I have pre-arranged my funeral or cremation service. q Yes q No
If yes, please advise where:
Cemetery:
I have purchased a plot.
Name and contact:
Plot #:
Funeral or memorial service information and preferences
Funeral service provider (include name, location, and phone number):
Service location (include name, location, and phone number):
q Funeral Home:
q Church:
q Other:
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Disposition of remains:
q Burial q Cremation
I wish to be buried at (please include name, location, and contact information):
I wish my ashes to be scattered at (please include name, location, and contact information):
Other:
Religious traditions:
q Yes q No
Describe:
Clergy/celebrant:
Tribute/eulogist:
Music:
q Hymns:
q Solo:
q Other:
Please provide photocopy or CD copy of chosen music selection(s) for clarity.
Readings:
q Scripture:
q Poetry:
q Other:
Please provide photocopy of chosen reading(s) for clarity.
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Pallbearers: (active)
1.
2.
3.
4.
5.
6.
Pallbearers: (honorary)
1.
2.
3.
4.
5.
6.
Special rites: q Occupational
q Fraternal
Please notify:
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www.mennofoundation.ca
1-800-772-3257
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