Estate Planning Strategies

By: Jennifer Daniel

By: Jennifer Daniel
If you are looking for ways to leave money or assets to your loved ones upon your passing, the following strategies offer ways to reduce taxes, bypass probate and provide protection against creditors.
The most tax efficient way to pass an inheritance to a loved one is by gifting cash while you are alive. Canada does not have a “gift tax” like the US – you can gift any amount of money while you are alive with no tax implications. In comparison, cash left as a bequest through your estate would be subject to creditors as well as probate fees, formally known as the Estate Administration Tax in Ontario. Estate values over $50,000 are subject to 1.5% in probate fees.
Life insurance is a great tool for providing an inheritance to your beneficiaries after your passing. Payments made to beneficiaries are tax-free and pass outside of probate, leading to cost and time savings, plus insurance proceeds are protected from creditors. Insurance proceeds are typically paid shortly after providing proof of death to the insurance company. Naming your estate as beneficiary should be avoided in most cases as the proceeds would be paid to your estate and therefore subject to probate fees and creditor claims.
You can also name beneficiaries on registered investments like RRSPs, RRIFs, LIRAs and TFSAs, to ensure the assets avoid probate fees and pass efficiently to your beneficiaries. Although the beneficiary receives the payment, there will likely be a tax liability to your estate depending on the type of plan, and that needs to be accounted for in your planning. CRA will look for payment from the beneficiary if your estate has insufficient liquid assets to cover the tax liability. When your beneficiary is your spouse, registered accounts like RRSPs, RRIFs, LIRAs and LIFs, benefit from the spousal rollover provision, allowing your spouse to keep the plan intact with no immediate income tax consequences. For TFSAs, naming your spouse as Successor Annuitant allows your spouse to keep the plan intact regardless of whether they have TFSA contribution room.
Segregated products, including segregated mutual funds, offer a unique opportunity from an estate planning perspective, especially for non-registered investments. When you pass away, the segregated fund proceeds pass directly to your named beneficiary upon providing proof of death, avoiding probate and creditor claims, and offering a private way to bequest outside of your will.
Joint ownership is another way to pass assets to your loved ones outside of probate, although joint ownership with anyone other than your spouse can be risky. When you add a joint owner to a property or an investment, CRA requires you claim a deemed disposition at fair market value. This will lead to an immediate income tax implication for you if the item has gained in value since you purchased it. Also, when you add a joint owner you are exposing that asset to the potential creditors of the new joint owner, and you are giving the joint owner a say in any future decisions regarding that asset. There are two types of joint ownership – joint with right of survivorship and joint tenants in common. Be aware of the differences and select accordingly.
The best way to start an estate plan is to start with your objectives: What are you looking to achieve? Once your objectives have been defined, we can develop a plan utilizing the above-named strategies or other strategies, to best achieve your objectives.

Jennifer Daniel, B. Comm
Jennifer Daniel is a dually licensed Financial Advisor and Insurance Advisor and can be contacted at or (519) 732-7741.

Estate Planning Strategies

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