Components of Estate Planning
An integrated estate planning exercise includes five important components. These components should ideally be addressed together as the solutions proposed in one component can contribute to the optimization of another component.
Wishes
Tax
Legal
Administrative
Financial
Wishes
This step consists of defining what the vision of your estate is, what you wish. Do you bequeath everything to your spouse and then to the children? Is it divided into equal parts between the children or not? Do you bequeath certain specific assets to certain heirs? Do you wish to balance the estate? Would you like to plan a charitable donation?
This component is the responsibility of the testator. A discussion with loved ones should be considered. The financial advisor, lawyer, notary, accountant and tax advisor can also be consulted for further reflection.
Tax
The goal of the tax component is the minimization of taxes. Several strategies may be implemented before death, at the time of death and after death. The estate freeze, the gradual redemption of freeze shares, the choice of post-mortem planning strategies to avoid double taxation issues for shareholders and the optimization of the tax accounts of private corporations are some examples.
We recommend that clients consult their tax and legal advisors for advice regarding their tax planning.
Legal
The legal component is achieved in collaboration with your notary and/or lawyer. First, you must draft a will, if it has not already been written, or revise the existing one. You should also draft a protection mandate to ensure your protection in the event of incapacity. For business owners, you must also review other legal documents such as the shareholder agreements and trust deeds. You must ensure that all legal documents are well drafted and consistent with each other.
It is also important to plan to avoid litigation and disputes. When heirs are unhappy with the testamentary provisions, there is a risk of litigation that could incur significant legal fees and significantly reduce the value of the estate. To minimize this risk, you should consider discussions with family members before drafting the will.
Administrative
For the administrative component, we must determine who will administer and liquidate the estate. Who will be the liquidator and, if testamentary trusts were provided, who will be the trustees. They could be family members, professionals or a trust company. Each option has its own particularities; it is necessary to analyze the pros and cons.
We recommend a discussion with a trust and estate consultant about this aspect.
Financial
The objectives of the financial component are multiple. First, meet the capital needs at death (taxes at death, debt, buy-sell agreement, cost of living of the surviving spouse, fair treatment of heirs, buyout of shares of children not involved in the business, etc.). Then, preserve the family capital, ensure the sustainability of assets and avoid the erosion of intergenerational wealth. Finally, for some, carry out a philanthropic project. Among the possible strategies to achieve these goals, buying permanent life insurance is often the most effective way.
As independent insurance advisors, our team can help you reach your financial goals, working with you to assess your financial situation, and analyzing available insurance products to determine the one that suits you best.
