Unless you’re planning to live forever, you should come up with a plan to distribute your assets in the event of your death.
If you don’t, there is legislation that will do it for you. Who am I kidding — there is legislation that will control what happens whether you make a plan or not.
However, if you come up with a plan, then you can pick which legislation will apply and mitigate its affect on your assets.
The simplest way to control the way in which your assets are distributed is by making a will. If you don’t have a will, the Intestate Succession Act will determine how they’re distributed.
The Income Tax Act can have a drastic effect if you fail to plan for the distribution of your business assets, even if you have a will.
Planning for the transition of assets to a spouse or to the next generation can save them a significant amount money, which the estate would pay in tax.
Under the Income Tax Act, a deceased is deemed to have sold all assets immediately before death. The estate must pay tax on the profits, if any.
Most people prefer to pay as little tax as possible to maximize the size of their estate.
A will is insufficient in this case. It may be necessary to reorganize the structure and ownership of the business. The new structure or ownership may have to exist for a certain period of time for the estate to be taxed at a lower rate.
What I am trying to say is this: don’t wait until you’re on your deathbed to start planning.
Tax advantages can be locked in long before you start thinking about retirement.
The decision whether to create a partnership, corporation, joint venture, trust or other business structure depends on the situation.
When should the ownership transition take place? The answer to that question is determined by your personal situation and your desire.
You don’t have to give up any control because you have started planning or implementing a plan.
There are numerous ways available to reduce the tax payable on death and there are ways to retain control and or ownership.
Your professionals creatively working together can help you select the ownership, control and tax savings that work for you.
Legally Speaking appears every second week in LIFE. It is intended for information purposes only. Readers with a specific legal problem should consult a lawyer. This week’s column was written by Glen Cunningham, of the Red Deer law firm Duhamel Manning Feehan Warrender Glass. Cunningham can be reached at 343-0812 or at www.reddeeraltalaw.com.