The protection of minors
It is important to know that when a minor child is a heir, the Law provides a lot of control mechanisms to ensure that the goods received by it are protected. First, when a minor inherits a sum of more than $ 25,000, the Law requires a judicial proceeding to create a tutorship council to oversee what the guardian does with the money that is the property of the child, regardless of whether the guardian is the surviving parent or another person appointed to this task.
Then, you should know that the surviving parent, who is also the guardian of the child cannot do what he wants with the goods that his/her child has received. For instance, your spouse could end up as the co-owner of the family-home with your 10 year-old son. To sell the house, mortgage it or even buy out your son, your spouse must legally apply to the Court for permission to proceed. These procedures represent a significant cost in time and money.
Finally, your child will have access to the amounts received from the age of 18 onward. He will own them and be free to spend as he wants. The will provides to include some mechanisms for the administration of property bequeathed to your minor child to protect, to choose who will manage the money, and at what age the goods will be delivered to the heir, thus excluding, with proper planning, the establishment of a tutorship council.
The liquidator
The liquidator is the one who administers the property forming part of an estate and he has a lot of tasks to perform. The will allows you to name a person you trust to perform this role. It also allows you to shape the powers you want to assign to him. Without a will, your heirs will decide who will be your executor and you will perhaps not agree with this choice. It is important to know that, if your heirs are minors, the law does not allow its representative to appoint itself as liquidator, if it is your spouse, for example, a request must be submitted to the Court so that the judge appoints a liquidator according to your estate.
Choosing the liquidator oneself is very important when there are rental dwellings in your heritage. Indeed, a rental dwelling involves a lot of managing work to be done regularly, tasks to be performed by the liquidator in addition to proceed with the settlement of the estate. It is wise to choose the most suitable person as liquidator to manage this investment one would not want in any way to waste away.
The death tax
One of the goals of estate planning is, among others, to reduce the tax impact. Who has not yet heard the famous phrase revealing that nothing is more certain in life than death and taxes? Be assured that at your death the taxman will certainly not forget you. Indeed, at the time of death, the law considers that all the deceased's assets are sold at fair market value and that the capital gain is taxed in the tax return of the deceased up to 50%, as discussed above. There are however some interesting exceptions to this fact:
First, remember that there is an exemption for capital gains that you may not have used entirely during your life, as well as the exemption for the family home. Secondly, the fact of leaving some assets to your spouse or to a trust for the exclusive benefit of the spouse, can avoid paying tax on such property upon death. This is what is called a spousal rollover. Within the meaning of the Tax Act the definition of spouse includes a de facto spouse with whom you have lived for a year, or a couple with one or more children. Thus, your spouse will not pay tax on that good before the time he actually sells it. This approach is advantageous because your estate will not have to pay taxes on the property in question, which could mean thousands of dollars in savings at a time when the estate does not always have cash for tax payments and would reduce the parts of some of the heirs.
This is similar for the deferred income plans, such as RRSPs: instead of being added to income taxed at death, the spouse can collect them and pay tax only when he will benefit from the amounts, rather the estate pays immediately on the income withdrawn. This kind of transfer, with different strategies, for minor children or grand-children, or for adults if they have a physical or mental impairment, is possible to provide an income to them and let them benefit from the tax averaging.
Other strategies
Briefly, the trust is considered as a separate entity that owns its own property. It is possible, by will, to bequeath property inside the trust created from said will. The selected properties are thus transferred into the trust at death, and you have the beneficiaries enjoy according to your instructions. This allows to split the revenue generated by the property held by the trust between the beneficiaries and the trust because it is taxed independently. As long as the trust exists and contains the property, the beneficiaries do not, however, have right of ownership in the property, which allows to keep it in the family.
Life insurance can contribute to the financial management of an estate without an estate tax: it is possible to appoint a particular person as the beneficiary, making sure that it is not part of the mass of the succession. The beneficiary could therefore obtain the insurance proceeds while refusing a succession full of debt. Putting the heirs as beneficiaries life insurance can help pay off debts or any other charge on a property, such as tax debts or a mortgage, which prevents the sale of goods to obtain liquidity or the reduction of cash bequests.