Understanding the Importance of Estate Planning

By Kim Toskovich, CPA, CGA, CFP, TEP, Partner, Grant Thornton, LLP

Many of us have experienced the devastating loss of a loved one, and we know that our responsibilities often don’t end at the time of their death. In most cases, we rely on family members, friends or caregivers to act on our behalf as executor. While this can be an onerous task, planning is valuable, including reviewing and planning for the transition of the ownership of your assets and considering the related tax consequences.

As the executor of an estate, the main responsibility is to “find and gather” all the deceased’s assets and manage the distribution process amongst the beneficiaries Of course, this is easier to accomplish if there is documentation to follow.

Working with your tax advisor is an important part of the estate planning process for several reasons, including:

· You can review and document what assets are to be dealt with together.

· Your tax advisor can work with you to estimate what tax liability might be present upon your passing and assist in determining the best way to fund that liability.

· This may lead to refreshing or updating your need for life insurance to ensure sufficient liquid assets are available to fund the income tax.

· In most cases, you will then update your will to ensure that it accurately documents your testamentary intentions.

· Your will is only one part of documenting your testamentary intentions. Working together with your legal and investment advisors, there may be opportunities to allow for a simpler and more tax efficient post-mortem transition of ownership. Naming designated beneficiaries, the use of dual wills, or joint registrations are some options to consider.

· In some cases, it may be prudent to embark on some more complex estate planning strategies. This could include the use of inter vivos trusts, or current planning to dispose of assets to family members now as a means of avoiding additional appreciation and future tax consequences.

· A trusted tax advisor can help you navigate complex rules and may be able to find ways to minimize tax rule impacts and reduce overall tax liability. This is especially critical if there is a cross-border component, for individuals with blended families, or if an individual plans to have an ongoing testamentary trust following their death.

· When it comes to this complicated part of life, it’s important to balance your wishes with your future executor’s responsibilities, and getting the right tax advice can help ensure that no unnecessary complications arise.

Kim Toskovich is a Partner and a Chartered Professional Accountant at Grant Thornton LLP providing accounting, tax and business advisory series.  She can be reached at kim.toskovich@ca.gt.com or (807)346-7206.