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Be PreparedMarch 20, 2021

What if you died today? Thinking about it seems odd, but we all want to have peace of mind about the answer to that question. When answering from a financial perspective, it’s natural to want to do the best you can with the finances you have.

Dean’s Estate Planning

In the last few years, it has been challenging to get people to spend their money if they are truly savers. Recently I sat down with Dean, a single senior who wanted estate planning advice. He is in his 70s and living in Qualicum. If he doesn’t spend all his money, he wants to leave it to his two children. His home, his RRIFs, and his investments are worth about $400,000. Dean has named his children as beneficiaries of his RRIF.

I encouraged him get control of the money by taking more of it out of the RRIF, so he can spend and enjoy it and pay tax as he goes instead of losing almost half when he dies. The money outside his RRSPs is invested in segregated funds. The estate advantage is that he can invest in dividend income funds and generate dividends and capital gains. These funds might pay him more but will not tax him more, and 100% of his capital will be guaranteed to his children if he dies regardless of market conditions. This strategy also bypasses probate, so the payout is immediate.

Dean asked if he should add his children’s names as joint owners of his home. I mentioned that they would be responsible for capital gains when the house is sold, since it is not their principal residence. We switched back to his name a GIC that had been jointly held with his boys and invested it into an insurance-company GIC with the boys as beneficiaries. Finally a will and power of attorney needed to be set up outlining his wishes if becomes ill or incapable of making financial decisions. We referred him to a lawyer or notary public to get the proper legal advice. Dean left that day with the peace of mind knowing the answer to the question, “What happens when I die?”

Success seems to be connected to action. Successful people keep moving. They make mistakes, but they don’t quit.
– Conrad Hilton