Two types of goals: retirement income and legacy
Everyone progresses at their own pace in life. Concerns, values and needs vary from person to person. The way to approach the theme of estate planning will vary according to the extent of the wealth of the person concerned. Let’s distinguish between two more global types of goals that reflect the stage a person is at.
Goal related to retirement income: this goal concerns people who have not reached (or do not plan to reach) financial autonomy to the point of wanting to bequeath sums to heirs. They are concerned about being able to maintain their income until death after reaching retirement age. The themes of death, disability and critical illness risk management concern this group.
Goal of preserving and maximizing the legacy value: this goal concerns people who have already accumulated assets in excess of their personal needs, or who intend to do so. It is clear to them that large sums or assets will be bequeathed to the heirs. Strategies for preserving and maximizing the estate value and funding financial obligations upon death apply to this group.
Two estate planning components: legal/tax and financial
An integrated estate planning mandate has two important components: the legal and tax component, based on the advice of the client's tax specialists, accountants, lawyers and/or notaries, and the financial component in which we intervene. The two components are important and should ideally be worked together as the solutions proposed in the financial component can contribute to the optimization of the tax component.
The goal of the tax component is the minimization of taxes. Several strategies may be put in place before death, at the time of death and after death. The estate freeze, the gradual redemption of freeze shares and the choice of post-mortem planning strategies to avoid double taxation issues for shareholders of private corporations are some examples.
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, redemption of shares of children not involved in the business, etc.). Then, preserve the family capital, ensure the sustainability of wealth and avoid the erosion of intergenerational wealth. Finally, for some, carry out a philanthropic project. Of the possible strategies to achieve these goals, buying permanent life insurance is often the most effective way.
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