Crafting an estate plan is the best way to minimize the amount of taxes payable on death and an effective estate plan begins with a well drafted will. Every adult should have a will; if you die without a valid will, you will have died “intestate.” This means that the Ontario courts will appoint someone to administer your assets and that your assets will be distributed according to the provincial rules. A will simplifies the administration of your estate and ensures that your property is distributed according to your wishes. Careful estate planning will also allow for the reduction in the amount of taxes payable on death.

In Ontario, tax payable on death is called estate administration tax and is levied at the rate of 1.5% of the value of the assets requiring administration. As some assets do not require administration (formerly called probate), one effective planning strategy involves the creation of multiple wills; one to deal with assets that do require probate, and a separate will to deal with assets that do not. If you own property in another jurisdiction, it is also advisable to have yet another will to deal with that asset.

The multiple will strategy is particularly useful for people who own shares in privately held corporations. Due to the fact that shares and debt of a private company may be transferred by the directors without a probated will, no estate administration tax (probate fee) is payable. In the right circumstances, this can result in considerable savings. If you are considering the use of multiple wills, you will want to consult a professional. Multiple wills must be properly drafted and executed, and care must be taken that one will does not inadvertently revoke the other.

Reducing estate administration tax is only one aspect of an estate plan, and should be viewed in light of the plan in its entirety. For example, excluding assets from your estate will result in fewer assts available for other goals, like establishing a trust for a child or a disabled family member. Weighing the needs of your estate against the desire to reduce the amount of tax paid is a significant aspect of estate planning.

Another important aspect of estate planning includes the creation of a power of attorney document. A power of attorney for the management of property allows a person you designate to manage your property should you become incapacitated, unlike a will that only comes into effect upon death. From a practical perspective, it makes sense to ensure that a person of your choosing will have access to your bank accounts and the ability to make sure your bills get paid should you become unable to do so yourself. Like a will, the proper drafting and execution of a power of attorney will ensure that it accomplishes what you intend it to. In the event that you become incapacitated without a valid power of attorney in place, an application to the provincial court for appointment of a guardian of your property may be necessary. That appointed guardian may not be the person you would have designated.

An effective estate plan will provide for the smooth transition of your assets upon death and ensure that your assets are distributed as you intend. No matter how well crafted your estate plan is, it is wise to review your plan every few years. Your family circumstances may change or these may be changes in the law that your estate may benefit from. In either case, your estate plan should be up to date and reflect your current needs and circumstances.

Estate planning is an important part of the services that we regularly provide to our entrepenurial client base in meeting the goals of their businesses and their personal investment in their businesses.