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nobody ever wants to think about themselves unfortunately passing away however it's going to happen to all of us and having a plan in place to ensure everything happens as we had desired and it's done with the minimal taxes possible is a really good thing so in this video I'm gonna break down estate planning 101 in Canada who should do it what are the problems with it all the ways to achieve it and by the end of this video you'll know exactly what to do and how to build your plan what's up guys for those who do not know me my name is Phillips that I'm the founder and CEO of affinity life which is an online life insurance platform here in Canada where we've helped hundreds of Canadians finally write life insurance coverage at the right price all from the comfort of their own home so if that sounds interesting too I'll put the link in the description below and you can check it out but without further Ado let's get right into the video okay so I have a PowerPoint that I built a long time ago which I will be referencing as we go through this video because there's a lot of things that we're going to go through and I can't just keep it all in my head and memorize it so I'll be referring back and forth here so if you see me looking off camera don't get stressed we're gonna do it here we go so the things we're going to go over today in this video is a little bit extensive but it's okay because I want to make this video for as many people as possible to get the most amount of information so we're talking about creating the plan assets and liabilities to find an objective transferring assets and all the different ways that you can transfer assets Wills what happens also if you don't have a will what probate is how multiple Wills were dying and tested of course assets not subject to probate we're going to talk about that don't worry how you can gift assets prior to death and how that could be maybe a really good idea interviews trust as well which is establishing a trust to give assets to the Next Generation taxes upon death is going to be the last one so most people start out estate planning with taxes in mind here's the thing at the end of the day of course we want to structure your plan in a way that gives you the least amount of taxes however if it doesn't satisfy your goal then it doesn't really make sense like cool you paid less taxes but also it didn't really do what you wanted to do so that doesn't make sense we're going to talk about that last so what is estate planning well estate planning is simply a methodology like I mentioned to transfer Assets in the most tax efficient way ing to your goals to the Next Generation that's it okay so a well thought out estate plan should have quite a few different things and I'm going to go through a list here so number one all adult family members should have a will all registered plans such as rrsp or tfsas or other plans like that should have a valid beneficiary all life insurance plans as well should have a valid beneficiary pardon me you want to determine the ownership the structure of all your different assets and whether it's going to go through probate or it's not going to go through probate and I'm going to talk about that a little bit later in this video Don't Worry also we want to determine the most tax efficient manner that we can transfer this as possible and of course if you're working with someone you want to ask them these questions as well and say you know hey what's the best way we can do this to minimize taxes how can my beneficiaries my children my grandchildren get the most amount possible um you know and we don't give too much away in taxes okay so that's you know a really good thing to do so we want to consider the use of both testamentary trusts and Inter vivos trust and I'm going to talk about it later on in this video so don't stress and also consider the use of charitable given charitable given is a good way to reduce your taxes upon death and also give to Charities that you may really care about so that's you know a good thing and one of the last things that we want to think about is you know we want to pre-plan our funeral arrangements how is that going to look like are we going to get buried are we going to get cremated are we going to go to you know this Cemetery that Cemetery it's weird to think about I know I get it but you know you should start to think about these things because if nothing is in place well you know it's just gonna get decided after your death and maybe that's not the best way to plan it so the first thing that you're going to want to do when considering your estate plan is you're going to want to come up with a list of all your assets and all your liabilities and that's really going to shape the conversation of okay how does this look what's going where what do we have that needs to go somewhere what do we have that needs to be paid off so let's just go over the assets pardon me here so assets could include a number of different things so could be personal home could be vacation properties maybe such as a cottage or something else you've had in the family for a long time could be all your registered Investments such as an rrsp and rrif registered retirement income fund could be a tfsa it could be other non-registered Investments these are of course assets could be your bank accounts insurance or annuity contracts would be pension assets you could own shares in a business all of these are things that eventually are going to have a destination and you want to think about now liabilities could include other things as well such as outstanding mortgages debt related to Investments maybe you did some type of Leverage strategy and you know of course you have a loan pardon me on that investment that you're using for maybe other Investments that's something to consider and credit cards and other debt all of these things are essentially the basis of your estate plan what needs to be paid off how is that going to get paid off if we did pass away what do we have and where is that going and how is it going to get there that's you know really the basis that's the foundation of state plan now once you have a list of okay you have these assets and you know they want to go somewhere how do you get them there well there's a number of different ways you can do it and depend on what asset it is that changes it there's four main ways that you can transfer assets to the Next Generation so the friend I'm going to read off this list here pardon me the first way is very simple it's through a will and this is going to go through probate and I'm going to talk about that a little bit later here so that's the first one the second one is there's assets that are not subject to probate so we have through a will assets go through probate then we have assets that are are not subject to probate we also have the third option which is gifting assets prior to death now this could be a good option for people who just say you know what I know that this is going to go to my grandchild or my child or whoever it is maybe it's a good idea to just do that during your lifetime you don't have to wait until you pass away to do that maybe you can just start to give them those assets and you get to you know live and experience and see them enjoying them which is you know a huge that benefit that's that's great to see while you're still alive so that's the third way that you can do it and the fourth way you can do it is something known as an inter vivos trust and I'm going to explain truss here a little bit later as well and I have a really cool diagram I'm gonna get my Editor to put this up on the screen for you because there's essentially like I mentioned four ways that you can transfer assets to the intended beneficiary whether that be family friends Charities Etc and I really want this on screen so you can see it so the first one we have is like I mentioned the will and that goes through probate I'm gonna explain that very quickly here now through that there's two different ways that you can structure it the first way is directly and so what I mean by that it goes into the will and it's okay I have let's say this investment or this property and it goes directly to the intended beneficiary okay that's the first way the second way is through what's known as a testamentary trust now a testamentary trust is a trust that's established upon your death and now you may have heard trust in Canada and you may have heard that you know it's a tax Haven for the ultra Rich that's not the case the primary reason for a trust is to distribute assets and have assets used for their intended beneficiary and used how you intended it so what do I mean by that okay well let's say that you want to gift your grandchild you know maybe you want to give them this this vacation okay but maybe you really wanted them and this is your favorite grandson he's the best one no no other grandson is better than him okay but you want to make sure that this vacation house maybe it's a cottage that you've had in the family you want to make sure that the other family members have access to it you also want to make sure that he doesn't sell it maybe you want to keep it in the family maybe you want to make sure that you know he doesn't and take a loan against or whatever right you want to make sure that he uses it as you intended it for well a testamentary trust is the best way to make sure that's achieved so a testamentary trust is totally flexible and you can write anything that you want in it so here's a couple examples you could write in this testamentary trust you could say okay here's a vacation home it's for you 100 however you cannot sell it it's got to stay in the family okay or you could say you can sell it but after 20 years or you could say you could sell it but only to another family member they get first write a refusal you can't sell it to you know just a stranger we want to keep in the family it's totally flexible if you look on maybe just like a cash or investment side you can structure this in the way we say Okay I want to give you a half a million dollars or 250 000 however I don't want to give it to all at once I want to give you 25 and then you can have access to more but you have to use it for only investing or only starting a business or only going to school or whatever it is you can structure it any way that you want so it's really flexible and it's a good way way for you to achieve what you want with your estate plan and have your beneficiaries use what you give them in the way that you intended so that's through the will now let's talk about non-probate assets so this doesn't go through probate and I'm going to talk about probate don't worry here very soon in the next slide so non-probate assets could include joint ownership of let's say real estate or houses something like that if you owned it with let's say maybe one of your children or maybe your grandchildren or something like that it also includes registered accounts with named beneficiaries so if you have an rrsp or an rrif or something like that and you know you can put that little beneficiary designation if you name a beneficiary then it doesn't go through probate the third one that I mentioned gift and assets prior to death you can gift assets prior to death there's still taxes upon that but there's no probate and I know you're probably thinking what the hell is probate I'm going to talk about it don't worry okay and the fourth option is something known as an inter vivos trust now this is different a testamentary trust is something that's established upon your death and Inter vivos trust is established during your lifetime so you can transfer assets into this trust and you can have have the intended beneficiaries use it during your lifetime so if you know that you have you know the intended beneficiaries of cottages or Investments or corporations or whatever it is you can put those assets into this trust and the intended beneficiaries could be your children or your grandchildren and that's not subject to probate and also actually not subject to taxes as well because that trust over there is totally separate from your assets upon death now you're probably thinking what is probate I'm going to talk about it okay so taxes upon death and probate are to entirely different things taxes gets way more complicated and there's a whole bunch of different criteria probate is essentially the cost that the government levies upon you for the cost of verifying and settling your will and going through the assets and making sure everything's done properly now how this works is the executor would then submit the will to the courts and they would go through it and they would look at everything and basically they're just making sure okay everything is good and everything is done correctly they're verifying all the assets they're varying verifying everything part me and then okay they release it it's good to go well there's two things that happen with probate that you want to have a concern over number one is the public record issue so everything that goes through probate is now part of public record anyone can go look this up and see what went through your will what went through your estate that was subject to probate and anyone can you know if you had an old maybe golfing partner and you lost a bet to them you said you can't get a hole in one I'll bet you a thousand dollars you can't do it and they got it well if you passed away they could go and look up your estate they could go and look up what went through your will and they say hey wait a second he had a million dollars he said he could never pay me I want that money and he could take the estate to court and say Hey you owe me a thousand dollars so people that want to keep some of their Affairs private and have assets pass on to the next generation without the entire world having access to it forever want to try and separate their assets from going through probate they want to do as much much as they can to separate those and have them bypass probate so it's not a part of public record that's the first issue the second issue that you want to be aware of is the fee so some provinces have a flat fee for example Alberta has a flat fee I think it's like 500 it's incredibly inexpensive you say Okay 500 that's not bad pay that on my estate and go on my way other provinces have a percentage and that's where it starts to get a little bit worrisome if you have a smaller estate maybe your combined total assets are like 100 to 200 or 300 000 that's fine one to two percent isn't the end of the world however it's still something you know to take into consideration but when you start getting up to half a million or a million or 2 million maybe you have real estate that you wanted to pass down maybe you just have you know a corporation that's valuable and you have a bunch of rental properties that you want to pass down well all of a sudden now it's like three five six million seven million you want to pass down one to two percent is quite a bit you're paying like 10 20 30 40 50 000 in fees that's not a good idea so that's what you want to consider when with probate when you start to develop a plan you want to think well what do I want to go through probate and what do I want to bypass probate not be a part of public record and not be subject to these fees okay so let's talk about will real quick you know I talked about a little bit there during that slide and we'll hope we can put it up on screen so a will really serves two basic functions number one it names the executor and that's the person responsible for Distributing the assets of your estate this could be a friend this could be a colleague could be a family member or it could be a professional service you can actually hire companies and if your estate is a little bit larger I would recommend going this route because you know being an Executor is a big decision there's a lot of things that you need to be aware of it can get quite complicated and if your estate is quite complicated you know your brother or your sister or your child might not want to do it it might be a good idea to hire a service that will be responsible for this so that's the first one and the second one really the main basic function of a will is you're just ensuring that the wishes that you want are fulfilled that's really it that's all will does at the end of the day where does what go okay now I mentioned that there's two different ways that you can essentially transfer assets it's through a will one is directly just goes right to the individual and two was through those different trusts that I talked about so there's quite a few different ways that you can structure this there's more than just one way you structure a testamentary trust you could do what's known as a qdt that stands for a qualified disability trust this is essentially a trust that's set up maybe for a disabled child so maybe if you had a disabled child or maybe a disabled grandchild and you wanted to ensure that they were taken care of course they're probably not going to manage what you give them whether you know that's an investment or something like that you want to put it in a q DT which has special tax features as well a qualified testamentary trust or qualified disability trust pardon me so that's one way a spousal trust is another thing that you can do a spousal trust is essentially again you want to give assets to your spouse however you want it to be distributed ing to you so maybe you want your wife to be taken care of if you were to pass away or your husband to be taken care of if you were to pass away however you don't want to gift it directly to them because after they pass away hypothetically you want it to eventually go to your children and and maybe you're worried they might remarry and get with another partner or whatever it is and that's you know nothing to be concerned about however you want to make sure that what you have is Left Behind for your children eventually but your wife to be taken care of or your husband to be taken care of in the meantime that's what a spousal trust is for um there's a bunch of other different ones you can do you can do it for minor children to take care of you know minor children you could do it for maybe credit or protection that's one of the reasons so there's different ways that you can structure it but just know if you wanted an asset to be gifted to someone in a unique way chances are you're probably going to set up a testamentary trust of some kind to establish those goals a couple other things that a will takes care of is of course we want to name Guardians for minor children in case some were to happen to both you and your partner we also want to structure some income tax minimization we're going to talk about taxes later on in this video and burial wishes that's a will now let's talk about multiple Wills multiple Wills this gets a little bit more complicated now we have two completely separate Wills okay so multiple Wills what is that used for that's when you want to separate asset that don't require probate and do require probate because here's the thing if you have everything in one will everything's going to go through probate however if you have some assets that are not subject to probate and you want those to pass to the next generation without going through probate you can use multiple wheels two different wheels or three different wheels or four different Wheels whatever it is to establish those goals obviously this gets a little bit more expensive but if your assets are significant enough this could be a really good idea so I have a couple examples here so assets requiring probate and this has to go through the main will no matter what it's going to go through probate this is Investments accounts this is real estate and this is bank accounts assets not requiring probate and by the way it says not limited too I'm just giving some examples here are shares in a Canadian controlled private Corporation so if you have shares of a business and you do not want that to go through probate you don't want the fee and you don't want it to be a matter of public record you can create another will that deals with just those shares and have it distributed without anyone knowing about it without paying that you know percentage of probate tax if you're in a province maybe like Ontario and that's a good idea so this could be something that you want to think about when creating your estate plan I have a few notes here though you do need to take care when you do this because you don't want one will to supersede the other will and revoke it so you want to make sure that it's done correctly and you want to obviously work with a professional who understands this stuff so this could be a really good idea for people who are in a province with a probate percentage as opposed to a probate flat fee now let's talk about diet and test day which means you die without a will this is obviously not a good idea but I'm gonna go through it real quickly I've talked about it in other videos but I'm going to talk about again this is not a good idea don't do this each province or territory has their own set of guidelines so it's dependent on which province you live in so how this works is you're going to get someone from the court that's appointed as the administrator of your estate and they're gonna usually depending on the province levied in a way where the majority is going to go to the surviving spouse if there is a spouse and then whatever's maybe left remaining might go to the children it's it's kind of complicated they're going to divvy it up and put it kind of you know depend on what province you're in ing to that it's not the best option there's additional fees there's a huge delay in the courts because they're going to have to decide you know how they're going to structure how they're going to tier it who's going to go to also common law usually doesn't get a say in most provinces common law is not really considered as a full partner or a what a wife or a husband would look like in marriage so if you are living with someone and they are common law and you know ing to you that's your main person that's your partner however maybe you just never got married they may have a lot of trouble trying to get something from your estate if you were to pass away so these are some things to think about in the end of the day it just causes a lot of unnecessary complications additional fees additional probate and a big thing as well is there'd be no Guardian assigned for any minor children so I mean obviously if you were to pass away you know hopefully your partner would be there however if they're not well now it's up to the courts to decide who's going to be the guardian of your children that's you don't want the courts deciding who's going to be the guardian of your children that's not a good thing so dining test day which means without a will is a bad thing you should avoid it at all costs yeah don't do it okay so the next thing we're going to talk about is non-probate assets so these are assets that again they're not subject to probate and there's some different ways you can structure it so it doesn't go through probate so this is something that you definitely want to consider okay because again probate public record plus there's that fee that goes on there as well so I mentioned that real estate does go through probate that's if it's a hundred percent owned by you so one of the ways you can get around this is something known as joint Tennessee with rights of survivorship what does that mean it essentially means that you and somebody else jointly own a property and you have rights of survivorship if the other individual passes away so one of the ways you can structure this is you know if you know who you want to pass down this real estate to and you don't want it to go through probate maybe it's your daughter maybe it's your son maybe it's brother maybe sis or whatever it is you can actually get into what's known as this joint tenancy agreement where where you both own the property however one to pass away it would go to the other individual and bypass probate there would still be taxes that are due but there'd be no probate now the other assets that can bypass probate if set up correctly is registered accounts and I mentioned this before but we can kind of talk about it if you list pardon me a beneficiary for a registered account you need to list a beneficiary if you list no beneficiary then your estate is going to be it's going to get wrapped up it's going to go through probate and it's going to be in your estate so this is your rrsp registered retirement uh Savings Plan pardon me or your Rift your registry retirement income fund or maybe a tfsa all of these things can transfer probate free and bypass that if you list a beneficiary now you should think about taxes within your estate and we are going to talk about tax a little bit later on so you want to make this uh coincide with your will pardon me so you do have still some liquidity within your estate to pay for these taxes because there's still going to be taxes upon your rrsp when you transfer it it's going to bypass probate but there will be taxes so you want to make sure that you know depending on where you're putting it there's still going to be some liquidity within your estate to pay for taxes upon death and of course life insurance is a very good way if you know you're going to have a significant tax burden upon death life insurance is a great way to pay for this but you know rsps liquidating your rsps is another way to pay for it there are just you know some taxes that are due and maybe it's not the best time to sell those Investments depending on what you're invested in however that also can be used as well okay so let's talk about now gift and assets prior to death again you know we're just going we're going down the ways you can essentially distribute your estate gifting assets prior to debt I think is a wonderful way to give your intended beneficiaries the gift while you're still alive and see them use it I mean depending on what the gift is I mean maybe this could be you know a portion of your rrsp maybe it's you know 50 000 or 25 000 or 10 000 that's going to each grandchild you could give portions this while you're alive and see them use it and I think that's wonderful you get to see them enjoy it maybe they want to use it for school May maybe they wanted to start a business maybe they wanted to move across the country I don't know maybe they wanted to go travel and they could you know the grandma or Grandpa this is awesome thank you so much for for giving this to us I think it's a wonderful way to transfer assets prior to death I mean you know once you're dead you're dead you can't see what they do with it so I think it's really cool and and valuable to get these assets prior to death and see how they use them and enjoy them so I'm just going to go through a couple things here one thing that you want to be aware of okay is you can gift assets prior to death however there still are going to be some tax complications that arise from that and that's fine you're gonna have to pay the taxes anyways so it doesn't matter if you pay it now or you pay it upon death so I'm just gonna go through a couple quick examples here just so you can kind of get an idea let's say that maybe you had a cottage that you knew that you wanted to give to the Next Generation and I always use this example just because it's a little bit easy a caught and we're gonna get into Texas here a little bit later on here taxes upon a cottage work like this okay let's say you bought the cottage for 400 000 and it's worth six hundred thousand dollars so essentially if you gift that whether you die or whether you gift that the taxes are going to be the same you can gift that let's say to your grandchild or to your child it's worth six hundred thousand six hundred thousand dollars pardon me so you will get a taxable capital gain of 600 minus 400 which is that 200 000 so there is some taxes to consider when you are transferring assets or gift and assets prior to death but I mean you're gonna have to pay for those anyways as long as you factor them in I think this is a great way to give things to the Next Generation Now the last thing I'm going to talk about before we go to taxes is how you can transfer assets through an interviews trust now I mentioned that before an intervivos trust is essentially a trust that's created while you're living so how that works is just like a testamentary trust and into vivos trust has a few different components the trustees of this trust which are the people that manage the Affairs of this and this could be yourself and you could set up other children and grandchildren etc etc and they manage the distribution of the assets that are held within the trust which leads me to the second one which is the beneficiaries of the trust the beneficiaries are the people that you know get the benefit of the assets of the trust again this goes back and remember how I talked about a testamentary trust is really used to make sure that the assets are distributed exactly how you want and interview those trust is the same way it's just done while you're alive it's not done now upon your death it's done while you're living so again you know if you had that second vacation home if you had some other Investments if you had other things maybe shares in a corporation that you wanted to pass down to your children however you weren't ready to give it to them right away and you wanted some stipulation instead of having a document that says this is exactly how it's going to go you have trustees that manage the Affairs so you could be a trustee of this family trust and you could distribute you know your personal assets your personal shares in a corporation your personal Investments whatever it is into this trust and everything that you again there's still going to be taxes so everything that you put into this trust is disposed of at what's known as fair market value so there would be some taxes upon it however now if you were to pass away nothing is taxed pardon me and nothing goes through probate okay so trust rules are completely separate I'm not going to get into them in this video however it's not yours anymore it's the trust the trust owns those assets not you so when you pass away there's no probate and there's no taxes for that so this is a really good option for people who have assets that they want to pass down to the Next Generation maybe shares in a corporation maybe real estate maybe Investments and they want to manage that while they're alive minimize tax upon death minimize probate upon death and distribute them still while they're living I'm not going to get into exactly how it works because it can get quite complicated but this is a good option for those people all right let's talk about taxes it's the last thing we're going to talk about this video has gone actually quite a long time hope you guys are enjoying this content okay the way that taxes work upon death here in Canada is when we die everything that we owned is deemed disposed of and wrapped up into this estate and I mentioned there's different ways you know the interview post trust is one way to get around that however there are taxes that will still be due eventually if you go that route so it's not like they're not being paid ever it's just we're delaying them a little bit so here's how it works when you pass away the entirety of all your capital gains or Capital losses from all of your different Investments and all your real estate and everything is then triggered at that point and anything that you own like I mentioned is deemed disposed of what does that mean deem disposed of that means even though you didn't sell it you're not selling it you're just passing it down it doesn't matter it's sold ing to the government okay and what that means is that the entirety of your state is then going to be wrapped up in this thing so let's say that you had real estate that you bought at two hundred thousand dollars and that was worth a million and you're gonna gift it to the next Generation it doesn't matter that you're not selling it it's still going to be deemed disposed of and there's going to be a capital gain an 800 000 capital gain that's due upon that real estate so I'm gonna go over a list here of things that are going to be taxed upon death okay so rrsp's rrif so register retirement income funds and that's just essentially what an rrsp transfers to and at age 71 pardon me and your pension plans these are all going to be 100 taxable any non-registered Investments account these are also going to be taxable your vacation homes these are also going to be taxable if you had a cottage or you had other second properties these are 100 taxable and shares in any Corporation any Canadian controlled private Corporation so if you're a business owner those Shares are going to be taxable and the value of your corporation is essentially what they'll be taxed on so most people start their business with you know a hundred dollars and they don't think anything of it and then the business May grow to a million or two million dollars of value well that capital gain is essentially one million 990 900 because costs us a hundred dollars to start it so it might get a little bit more complicated than that but there could be some big taxes that are due upon death now there are some things that are not taxed upon death so it's not a hundred percent bad a tfsa is not taxed so your tfsa there's zero attacks upon that you don't have to worry about that personal items also are not taxed so maybe you have jewelry computers books CDs cassettes uh Records TVs couches is whatever all of your items within your house you know you can see behind me any of this stuff this is not taxed you don't have to worry about that which leads me to the last thing that's not taxed the third one this is the biggest one which is your principal residence so just like when you sell your home you have a principal residence exemption when you pass away you also have that principal residence exemption so I've talked about real estate quite a bit during this entire video however your principal residence is not taxed the main house that you live in your second home your cottage your real estate that's an investment all of that is taxed but your principal resident is not taxed now one of the things you can do upon your death is you can actually roll all of your assets over to your spouse 100 tax free so this is a huge planning tool that you want to utilize if you have assets that are intended for your spouse or your partner if you were to pass away well then you can elect to roll well not you I mean you have to write it in your will obviously you're dead at that point however you can elect to have all of that rolled over a two-year spouse tax free and then when they pass away that's when the final taxation would happen so there are some planning opportunities that are available in that regard I hope that I answered a ton of your questions about estate planning here in Canada you can see that if you have a relatively simple estate it's relatively easy to set this up and you know structure it in a way that makes sense for you however you can see that as you start going down the line and you have more and more assets and maybe real estate and corporations and all these other things there are a lot of different planning opportunities that you can take advantage of however it does get very complicated so if you guys do have any questions feel free to drop them in the comments below or book a meeting with me and if you guys are enjoying this content all I ask is that I give it a thumbs up and I'll see you guys in the next one