Strategic Estate Planning

Many people think their will is their estate plan. It is not and cannot be. Estate planning covers a continuum from now to about a year after the second death of a couple. Your lifestyle and what you have to leave to your heirs depends on the decisions you make.

If the decisions are poorly considered, losses result. You cannot spend or leave what you lose.

Most people don’t like losing

It is possible to avoid some of the ones you notice.

The biggest losses are income taxes. Both while living and in the estate. There are others. One common one is failing to provide enough liquid assets so the executors can pay the bills they encounter, and equalize shares.

An easy one to fix is in the realm of succession agreements. Suppose you have a business and your children don’t want to be involved, or maybe have not yet decided. It is not smart to run it yourself to the very end because businesses with no management are not valuable. Continuing is important. There are possibilities. A common one is to sell to the employees at your death. Middle management is the key to ongoing value. Be sure you have a strong structure.

Dynamic Estate Planning

It’s easier to avoid mistakes you can anticipate.

One of the good things about planning with people who reached retirement is their future is reasonably predictable. Much of their income comes from pensions and government benefits. Their lifestyle is set. They tend to have sound decision making skills.  Some have investments in many forms. Those that have rental properties or businesses have more options.

You can learn quite a lot about your income choices and timing, by just projecting the future based on what you know. You’ll have to make some guesses abut future inflation and future investment yield. If you do it well you will be able to test combinations of yield, inflation, cost of living and taxes, to find the edges of your estate possibilities. You can build in medical costs like long term care. You could see what happens if you sell the Florida condo later in life. You could find out what happens if one of a couple dies. Spoiler alert – Total income will fall and your tax bill will not. It might even go up.

When the final estate is probated there will be many costs you may not have anticipated. A common one is the loss in value when people realize it is an “estate sale” Executors have many problems and not the least of which is a tax concept called the “executor year” .

When you pass on, all of your accumulated capital gains and all of the commuted value of pensions plans and RRSPs are taxed in your final return. The asset then becomes estate property with their cost being what you were deemed to dispose of the property for. If the estate sells an asset at a loss from their value, the loss can be used to reduce the deceased’s final tax. – BUT only if it the sale is completed within one year from the date of death.

For some things that’s not a problem. For complex assets like a business or some rental properties it could be a challenge. It could be several months for the executors to decide they must sell some of these assets. Given negotiating and due diligence, the year may come up suddenly. A hard question. Do you sell for a discount to get some taxes back or do you hold out and hope for more later?

Holding out lengthens the time it will take to resolve the estate.

Models are their own little world.

They are an important tool in finding efficiencies and taking corrective action sooner.

It is like jumping into the future and looking back to see what could have been done to repair a discovered problem. Test your will. Usually by the time an estate plan is found defective, the owner has passed on and their is little to do to correct things.

I have spent about the last 60 hours building a template for an estate and income model for 2022. So far it is reasonably simple. More like the kind of estate people who had jobs all their life. Still to come is adding corporations and rental properties and other options.

One thing I learned and did not expect. When testing the tax calculations with pension splitting, I found it doesn’t always pay to split pension income. The condition that confounds it is the OAS clawback. Splitting income when both spouses are subject to it can sometimes add cost. Not intuitive.

I am sure there will be more to find yet.

I have been building these models since the mid 80s. No one has found their situation to be free of possible improvements. I am looking forward to doing more than the usual one or two this year. Be in touch if you can see an opportunity here.

The bit to take away

You can influence the future if you can anticipate it.

Help me please. If you have found this useful, please subscribe and forward it to others.

I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email to

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