effective estate and tax planning strategies - navigating the next … · this presentation is...
TRANSCRIPT
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WELCOME
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTRÉAL
Effective Estate and Tax Planning Strategies – Navigating the Next Normal.
Thursday, June 18, 2020
Recording:
https://millerthomson.webex.com/millerthomson/ldr.php?RCID=3f0e d56a350847dcb3748afd22449bc3
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Jag Gandhi, Host
Partner l Vaughan Office
905.532.6650
Bio
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Please note all information provided during this session is not intended to constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.
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Estate Planning 2.0: Beyond the Will and Power of Attorney
Nicole Woodward & Troy McEachren
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Nicole Woodward, Panelist
Partner l Toronto Office
416.596.2115
Bio
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Troy McEachren, Panelist
Partner l Montreal Office
514.871.5422
Bio
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Letters of Wishes • Adds colour to the clauses in the Will.
• Privacy.
• Can prevent hard feelings and litigation.
• Often, to
• Trustees.
• Children/Beneficiaries.
• Others .
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Statutory Declaration or Affidavit • Sworn by the testator.
• Testator’s side of the story. • Disinheriting or unequal distribution scenario.
• Other facts known to the testator.
• Dependent support claims, SLRA explicitly allows written document by the testator.
• Store in vault.
• Release only if necessary.
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Shareholder Agreements • Testator bound by obligations.
• Important when dealing with shares in a family corporation.
• Restrictions .
• Conditions.
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Guardianship of Children • Appointment on death.
• Precatory.
• Consider appointment on incapacity.
• Also precatory – court will consider in an application for guardianship of children.
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Insurance Declarations/Life Insurance Trusts
• Avoids estate administration tax in Ontario.
• Trusts for beneficiaries for minors and other.
• Asset protection.
• Creditor protection.
• Staged distributions.
• Preserves privacy.
• Due diligence up front reduces uncertainty later.
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Wishes Regarding the Cottage • May be contentious.
• Letter of wishes to make intentions known.
• Valuation and equalization.
• Process for buy-out .
• Co-ownership agreement.
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Domestic Contracts: Know Your Limits.
Taryn Simionati & Allison Barkwell
VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R-WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTRÉAL
Taryn Simionati, Panelist
Partner l Guelph Office
519.780.4616
Bio
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Allison Barkwell, Panelist
Associate l Edmonton Office
780.429.9721
Bio
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What is a Domestic Contract?
Domestic contracts are cohabitation agreements, marriage contracts (pre-nuptial and post-nuptial)
and separation agreements.
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What is Included in Them? • Property
• What is it? Should it shared? Returned? Kept separate?
• Retirement
• Expectations? Pensions? RRSP?
• Debt
• What is the value now? How will it be valued upon separation?
• Expenses
• Life Events
• Death
• Spousal Support
• Agreement
• How and when can it be changed? How do you resolve disputes?
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Rules that Make Domestic Contracts Binding 1. The contract needs to be in writing and signed by the parties and witnessed.;
2. There needs to be full financial disclosure as of the date the contract was made;
3. No party can be under duress; and
4. Parties to the contract need to be competent.
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When Domestic Contracts Can be Set Aside
• Statutory requirements are not met
• Inadequate financial disclosure
• Duress
• Unconscionability
• Lack of independent legal advice (not all jurisdictions)
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Who Should Have One?
• Adult children who have received significant gifts from their parents
• Adult children who own shares in the family corporation
• People entering into a second marriage or marriage like relationship
• People who want to ensure if any spousal support will be paid
• People marrying or entering a marriage like relationship after acquiring assets on their own or they are self-sufficient
• People who want to ensure their property is dealt with upon the breakdown of a relationship
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What Cannot Be Included
Cannot contract out of the right to possess the matrimonial home (Marriage Contracts)
All terms with respect to custody and access of future children
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The Family Cottage Mr. and Mrs. Smith have decided to transfer a 25% interest in the family cottage to each of their children, John (32) and Jane (28). It is their intention, Jane and John will each own a 50% interest in the family cottage once both Mr. and Mrs. Smith have passed away.
John is engaged to Mary. They are planning on getting married at the family cottage at the end of September 2020.
Jane is married to Glen and they have two children. They do not have a marriage contract.
How can Mr. and Mrs. Smith protect their gifts to their children from being part of matrimonial property if the relationships end? How can they protect the inheritance the children will eventually receive?
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The Family Business Mr. and Mrs. Famco own 100 Class “A” shares in Businessco and upon tax advice have decided to complete an estate freeze. They would like to new growth shares to be given to their only child, Marigold. Mr. and Mrs. Famco expect the corporation to triple in value over the next 10 years.
Marigold has been living with her partner, Silver for 5 years. Silver is an artist and does not have a regular income. Marigold has been the primary income earner and has paid the majority of the expenses since they moved in together. They do not have a cohabitation agreement.
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The Family Business – The Cohabitation Agreement
Items to consider for the cohabitation agreement:
• Increase in value of the new growth shares
• Value of the family business
• Spousal support
• If Marigold and Silver decided to marry in the future
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Second Marriage Don is 50 years old. He was previously married to Ginger and they have two adult children, Sarah and Michael. Ginger and Don divorced 5 years ago. Don is now engaged to Beth. They are planning to marry sometime in 2021.
Don owns a business valued at $2,000,000.00. His annual income from the business is $300,000. He also owns his a home valued at $500,000 and has investments valued at $1,000,000. Don does not have any debts. Once Don and Beth are married, it is their plan to reside in Don’s home.
Beth is 56 years old. She was previously married to Derek and they did not have children. She is employed and currently earns $50,000 per year. She has a pension valued at $450,000 and other investments of $50,000. Beth has had some financial difficulties and has $25,000 in credit card debt.
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Second Marriage - The Pre-nuptial Agreement
Items to consider for the pre-nuptial agreement:
• Spousal support
• Matrimonial home
• Don’s business
• Retirement
• Debts
• Life Events
• Nursing home
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Gifts to Children
Joey has recently graduated from university. He would like to buy a house with his girlfriend, Samantha. Joey’s parents are gifting Joey $200,000 for the down payment.
Items to consider for protecting the gift:
• Cohabitation agreement
• Second mortgage
• Joint tenancy versus tenants in common
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Spousal Support
Spousal support releases are not always enforceable
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Questions?
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Upcoming Webinars
Thursday, June 25, 2020
• Facilitating Business Succession during Recessionary Times.
• Split That Income, Even In a TOSI World.
Thursday, July 9, 2020
• Have You Heard What The Judges Did Now to Alter Testator Intent?
• Trustees: Know Your Responsibilities During Volatile Market Conditions.
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More information Attend a webinar:
https://www.millerthomson.com/en/news-and-events/mt-seminars/
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Visit our COVID-19 Resource Hub.
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M I L L E R T H O M S O N . C O M
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VANCOUVER CALGARY EDMONTON SASKATOON REGINA LONDON KITCHENE R WATERLOO GUELPH TORONTO VAUGHAN MARKHAM MONTRÉAL