Estate Planning for Business Owners

Jackie and Jin are back discussing the theme of the “last dance,” reflecting on the passing of Donna Summer, a talented singer. The song acknowledges that confronting our mortality is a universal experience, regardless of fame, and emphasizes the importance of cherishing every moment. Nobody talks about dying, but if it is not prepared well, it could lead to unintended consequences that you won’t feel comfortable about. Have you watched Sunday afternoon tv shows or movies? There is always someone who passes away without a will, and the family goes through the drama and ends up not speaking to each other. Talking about estate planning is a crucial piece.

Why is it important to talk about this with a financial planner? Because we can discuss how to create the desired outcome for your loved ones. Leaving space for talking through what you want to happen, your concerns about your estate, and the next best steps. 

The topic of estate planning, noting that while it can be initially daunting, clients often find relief when discussing it. They highlight the importance of having a plan to avoid potential conflicts and disagreements among loved ones after one’s passing. Our busy lives can hinder progress in this area, but it is essential that we are accessible and have open conversations about estates to prevent animosity among family members. Lastly, they seek to explore the key considerations for estate planning, particularly for business owners and individuals seeking to organize their estate affairs. 

Some things that individuals trying to organize their estate affairs look out for is the common issue of needing to have all the necessary estate documents. Jin mentions the importance of wills, along with two types of power of attorney: one for property and one for personal care. Jackie adds that disputes can arise when end-of-life care and asset distribution are not clearly defined, leading to emotional turmoil and legal battles. Jin emphasizes that estate planning is not just about fulfilling one’s wishes but about taking care of loved ones after passing away. Without guidance, loved ones are burdened with making difficult decisions without knowing if they align with the person’s intentions, emphasizing the importance of comprehensive estate planning. 

Some other things that people need to think about when it comes to their estate are the importance of making decisions and not delaying estate planning, as every decision (or lack thereof) impacts one’s legacy. They then address the issue of choosing the right individuals for important roles, such as the executor and guardian. Jackie shares a personal example of considering Jin as her executor without discussing it with him, highlighting the importance of communication and informing the chosen individuals about their roles and responsibilities. Remember that the executor has various duties, including dealing with family dynamics, financial matters, and tax liabilities. Jin adds that it’s crucial to consider the availability and longevity of the chosen individuals to fulfill their roles effectively.  

Another important consideration in estate planning is the compensation of the executor. Executors can charge for their services, and the percentage may vary. The compensation can be up to 4%, although it’s important to note that the compensation will be subject to legal regulations and may vary depending on the jurisdiction. 

Mistakes or issues that individuals should be aware of when contemplating their estate plan, a common one being the mistake of thinking that estate planning is a one-time task that can be forgotten once completed. They emphasize the importance of regularly reviewing and updating estate documents to align with changes in one’s life circumstances. For instance, if you go through a divorce, marriage, having children, and the passing of loved ones, all of these can impact the distribution of assets and beneficiaries. 

It is vital to ensure that beneficiaries listed on various financial documents, such as pension plans, group RRSP plans, and insurance policies, are up to date and aligned with one’s current wishes. 

Then there’s the importance of considering taxes. The government continues to seek tax revenue even after a person’s passing, and it’s crucial to plan to minimize the tax burden on assets and ensure that more of one’s wealth can be passed on to their loved ones. Tax efficiency in estate planning is crucial, and people need to understand how different types of assets are taxed. You must know how income, capital gains, and other taxes may apply to various investments. Overall, they stress the importance of working with a financial advisor to project tax liabilities and explore strategies for minimizing taxes on the estate. 

The final thought on estate planning is ensuring you do not give too much money to your children when they are still young. Large windfalls during early age could lead to long-term unhappiness, especially if your heirs are not financially responsible. Contact our team at jody.euloth@askjackie.ca for our vetted list of lawyers and to start discussing your financial future.