How to Plan Your Estate in 10 Easy Steps and Begin to Live!

By George Dube

Real estate investors and business owners tend to be more proactive than others in estate planning. I’ve seen many business people over the years avoid the idea of estate and succession planning because they view them as issues of death and disability. Instead, I would argue that estate and succession planning are about living! And to help you with estate planning you could look at estate planning attorneys that are specialized in this area, they can help you with everything estate planning is and will leave you feeling better about what the future holds.

They are also about seeing legacies created, protecting loved ones, maintaining family harmony, protecting the long-term health of your business and, of course, minimizing taxes where possible.

What is estate and succession planning?

At the very least, estate and succession planning are about determining how your asset base will be managed in the event you are disabled or die, including the bequest of assets to heirs.

Some of the major estate planning tasks includes:

• Creating a will
• Establishing a guardian for children or other dependents
• Naming an executor of the estate to oversee the terms of the will
• Creating/updating beneficiaries on plans such as life insurance, RRSPs, and other investments
• Setting up funeral arrangements
• Establishing gifts to charities
• Setting up a lasting power of attorney (POA) for property to direct assets and investments and for health to direct care decisions
• Implementing strategies to reduce taxes
• Creating plans for others to manage your assets and business activities, in many cases teaching others to do parts of what you do, or identifying who can do this if needed

Estate and succession planning provide you the opportunity to save money that would otherwise go to the government in taxes and provide more money for the next generation, for charities, and for providing a lasting legacy.

When should you start the process of estate and succession planning?

Likely some time ago.

I’ve been in many meetings with clients with substantial assets who haven?t even set up a basic will indicating guardianship for their children, perhaps their greatest asset.

That’s when I normally climb on my soapbox for a moment and say that you should not walk but run to your lawyer and set up guardianship for your children. I believe it is grossly negligent to have children without providing guardians for them through a will. Leaving this to family members, lawyers, judges, friends, etc. to fight over after the fact is irresponsible. Period. If you need to find someone who will help you write your will and give independent legal advice, then visit Britton and Time.

Yes, estate and succession planning involve a lot more than having a will to name the guardians of minors. But, I cannot think of a more important legacy than children. I appreciate the difficulty in identifying who the guardians should be. Nobody will raise your children as you would. When my wife, Robin, and I went through an estate and succession plan update last year, it took us over six months to decide on updates to our guardians. And, at the advice of our lawyer, we actually involved our oldest child in the process. This was an aha!? moment for us, and maybe for you too, where you have children with whom you could discuss this in an age-appropriate manner.

But, if there is one thing you take away from reading this article, it is if you haven?t set up guardians yet, do it now. Now exiting off the soapbox!

10 points we considered when completing our estate plan, and that you should too!

Robin and I recently went through an update in our estate plan and succession plan and based on our experience, and the experiences of our clients at Dube & Cuttini, I wanted to highlight some key points:

1. Estate and succession planning is not a DIY project. For Robin and me, our estate plan involved multiple meetings with our team of advisors, even though I have literally written my Master’s thesis on this subject and helped many clients over the years?we couldn’t do this alone. We involved our team of professionals including our insurance agent, lawyer, investment advisor, banker, and mortgage broker.
2. We asked ourselves, very bluntly, does the next generation or our executors know who to speak with if we die? My wife and I have set up a spreadsheet shared with key people listing those they need to talk with if something happens. We’re fortunate because we invest and work together, and have done our estate and succession planning together, so we can step into each other’s shoes a little more easily than some couples. Ask yourself if your spouse or loved ones know who to talk with, and who to trust, if something happens to you.
3. Estate planning is also about succession and disability planning. Who do you want to take over your investment business if you want to retire, or become unable to continue? Do you have a person in mind? Do you have adequate disability insurance? Disability insurance and a plan to run our business for our children until they are old enough to take over were key concerns we addressed.
4. We took the opportunity to define how assets would be divided between family members and charities now. As I’ve often pointed out to clients, your family is much more likely to accept your decisions, even ones that may seem unfair to one family member, when they come from you and are formalized rather than being left up in the air to be argued over when you’re gone.
5. We clearly indicated what we wanted our executors to do with our properties when making decisions about selling vs. maintaining. We wanted them kept for the next generation where possible. And, we ensured that the executors have the written support plus request to keep the properties (legislation exists which creates incentives for executors to sell of these types of assets). What about you? If you drop dead, will properties be sold? Do the properties care who owns them? Are you the person holding together a group of investors so that there?s nobody to replace you? How will you address these issues?
6. We spent time updating our wills, and ensuring we had both a corporate and personal will. Ensure wills, shareholder agreements, JV agreements, and powers of attorney are complimentary to each other. Make sure they don?t have conflicting requirements. For example, your will says give an asset to your niece but the JV agreement says that you must sell the asset.
7. We reviewed our corporate structure ? which we do on a yearly basis. Corporations can provide more flexibility and save on probate fees. What we did do, however, is set up a second corporate will, which amongst other things, saves even more probate fees.
8. We checked that our beneficiaries were in line with our overall estate plan. Watch that beneficiaries for insurance/RRSPs/TFSAs and so on are in accordance with what you actually want. I?ve seen firsthand, even in my own family, the problems created when someone?s estate ?plan? didn?t actually carry out their true wishes upon death.
9. We made plans with Peter Cuttini, my business partner, to ensure that if either of us is unable to act for the business that clients, team members and families are taken care of to the best degree possible.
10. We started to decide (and still discuss) what we want our legacy to be now and when we are gone. Do you know what yours is? I?ve been very excited to have, for the first time that I?ve been practicing, a number of people approach me in the past year specifically concerned with charitable giving (in a tax efficient manner). I love the trend. In my opinion, life is much more than just making money.

How do I get started and then maintain my plan?

For your accountant?s involvement in your estate plan, it can start out as simple as an annual tax planning meeting. But, it can also become more advanced as needed. Pull in your other advisors to formalize wills, powers of attorney, shareholder agreements, and JV agreements.

I have seen a significant increase in the number of families creating plans of different levels of sophistication and at different stages of their lives. But, no matter how ?simple? or ?sophisticated? your plan is, regular reviews and updates are critical. From a tax perspective, a yearly review should only take an hour or so once the right plan is in place. For example, each summer, for several years, I have had an annual update with one particular family involving all of their business activities and real estate. We take the afternoon and discuss their current situation, future plans, and next steps.

And, note that the ?right? plan does not need to be complex or expensive. In straightforward situations, where the families are completing much of the work themselves with some guidance from us and other advisors, plans can be approximately five hours of our time up front and thus quite economical.

Alternatively, we have worked on plans requiring more than 100 hours of our time which, while initially costly, also saved hundreds of thousands of dollars in taxes and various charges for the families.

In our practice, Peter Cuttini, Terry Wichman (our Senior Tax Manager), and I have found that estate and succession planning has become a more and more regular part of what we do as people come to see the importance of this key aspect of being a business owner and/or real estate investor.

10 Steps for Estate Planning

1. Gather personal and business information including current details and future plans.
2. Determine the relevant objectives for you and your family related to your personal and business situation.
3. Analyze the available information and future expectations.
4. Determine possible tools that you can use to achieve your objectives.
5. Develop an overall game plan in summary form. Add details to the segments that need to be implemented initially ?guardianship, education plans, debt repayment, etc.
6. Begin implementing the first segment(s) of the plan. Ideally all segments would be implemented over a short period of time. Set up a timeline for implementation.
7. Live life.
8. Update and re-evaluate the plan periodically. Make sure the objectives are still applicable.
9. Implement the next segment of the plan and recommit to updating and implementing.
10. Repeat from step 7.

Do you have any estate planning secrets? We would love to hear from you!

Source: Legal, Tax, and Accounting Strategies for the Canadian Real Estate Investor (Dube and Cohen)

George E. Dube, CPA, CA, LPA is a veteran real estate investor and accountant (CPA). He has spoken, written various articles, and co-authored two books on real estate accounting. Reach George at georgedube@dubecuttini.com.