Estate planning is the act of ensuring that, upon your death, your assets are distributed in the manner that desire. An effective estate plan takes into account two essential components: the financial component and the administrative component.

The financial component deals with the assets that you have and whether they will be sufficient to provide for your beneficiaries once they are distributed.

The administrative component deals with the distribution of your assets to your beneficiaries. It is this part of the estate planning process that deals with Wills, Powers of Attorney, trusts and other structures as the means to distribute and manage your assets in the manner that you prefer.

We will work closely with your tax professional, accountant, lawyer and insurance specialist to ensure that your estate plan is properly implemented.

Guaranteed Investment Funds (GIFs)

Most retirees, regardless of their net worth, are reluctant to pass on an early inheritance to a beneficiary because they fear they will run out of money in their golden years. One solution is to use Guaranteed Investment Funds (GIFs) for estate planning.

A GIF is a segregated fund intended to provide continued growth with a predictable stream of guaranteed retirement income for life. With a GIF, you are the owner of the contract and your beneficiary is the annuitant and successor owner. This allows you to retain control of the investment during your lifetime, and to withdraw funds if necessary. If you don’t need to access the funds, your beneficiary can make use of this investment as a retirement fund.

When your estate is settled, your beneficiary receives the inheritance without probate. When they reach age 65, they have the option of cashing it in at market value or continuing the policy with a guaranteed annual growth until age 65 – at which time they will receive guaranteed annual income for life.

Insured annuities

An insured annuity can significantly enhance the income you can earn in fixed-income investments such as GICs or bonds. Because the proceeds are directed to your heirs, and not to your estate, you can eliminate a variety of fees and delays that are often associated with the probate process.

The insured annuity combines the benefits of a prescribed life annuity and permanent life insurance coverage. The annuity provides you with a steady income stream during your lifetime and the insurance coverage ensures you maintain your original capital.

Insured retirement plan (IRP)

This plan is geared towards Canadians who want to supplement retirement income in the future but also want to protect their estate.

An IRP complements your existing retirement strategy with tax-exempt life insurance that offers you tax-free supplemental income. If you are at least 10 to 15 years away from retirement, you are maximizing your annual RSP contributions and looking for additional tax-deferral strategies, this plan may provide a solution to your needs. You should have excess discretionary income, existing coverage or a need for insurance, and you should be in good health.

You purchase a tax-exempt Universal Life contract which is typically funded for 10 to 15 years. At retirement, or when you need income, the policy can be assigned to a financial institution for a series of tax-free loans. Upon your death, a death benefit is used to repay the bank loan and the remaining death benefit is paid out to your beneficiaries tax-free.

Individual Pension Plans (IPPs)

An Individual Pension Plan (IPP) is an employer-sponsored registered pension plan that offers potentially higher tax-deductible contributions for the corporation than an RSP. Unlike a regular pension plan, an IPP is usually established for just one person. In some cases, a spouse employed by the same company can also be a member of the IPP.

IPPs are ideally suited for self-employed incorporated business owners or professionals who want to boost their retirement savings. The main advantages of an IPP compared to an RSP include higher tax-deductible contributions at certain ages (40 and older), large tax-deductible contributions for past service, tax-deductible “top-up” contributions when the IPP is in a deficit, creditor protection for the pension funds and taxdeductibility of fees, including investment management fees, as a business expense.

Estate planning using insurance

Stephen Poon Wealth Management Group of RBC Dominion Securities is licensed under RBC Dominion Securities Inc. to underwrite life insurance contracts, segregated funds, guaranteed interest annuities (GIAs) and the Insured Retirement Plan (IRP) on behalf of RBC DS Financial Services Inc.

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