FINA6009: Trust & Estate Planning
Trust & Estate Planning
Trust and estate planning is the process of organizing and managing your assets in order to protect them and ensure that they are distributed according to your wishes after you die. This can include creating a will, establishing trusts, and making other arrangements to manage your financial affairs.
There are several key considerations in trust and estate planning, including:
Asset protection: Trust and estate planning can help to protect your assets from creditors, lawsuits, and other potential risks.
Tax planning: Trust and estate planning can help to minimize the tax burden on your assets, both during your lifetime and after you die.
Distribution of assets: Trust and estate planning can help you to specify who will receive your assets after you die, and in what proportions.
Guardianship of minor children: If you have minor children, trust and estate planning can help you to specify who will care for them in the event of your death.
Care for yourself in the event of incapacity: Trust and estate planning can help to ensure that you are cared for in the event that you become incapacitated and unable to make decisions for yourself.
Trust and estate planning is an important aspect of financial planning that can help you to protect your assets and ensure that they are distributed according to your wishes after you die.
Assignment Task
Read the case and then answer ONLY the questions that follow:
Arthur Read and Francine Frensky (CASE B): Francine is the client
Arthur Read and Francine Frensky have been living in a common law relationship for the last ten years. Arthur is forty-four and Francine is also thirty-four. They live in London, Ontario. They have one child together – Buster (6).
Arthur owns all the common shares of his private company – Compu-Global-Hyper MegaNet. The company is growing rapidly and he may sell it in the next few years. It is a Canadian controlled private corporation.
Arthur was married right out of college to Dora. They were young, in love and soon found themselves with a family – Zack (20) and Cody (20) (the “twins”). However, over a couple of years it became obvious the marriage would not be successful and they divorced. Dora has since remarried Alan Powers. Alan and Dora also have three children of their own.
Francine has no children or grandchildren from any previous relationships. Her father died several years ago and her mother is now legally incompetent. Francine’s parents owned a successful car dealership chain and are quite wealthy. These assets are all owned by Francine’s mother, who has never done a will.
Francine has two siblings – Mark (40) and Ellen. Ellen was killed in a car accident several years ago. She had two children – Anna (16) and Elsa (18). Mark is married to Esther. They have one child – Nico (18). Nico was born with cerebral palsy and is eligible to claim the Disability Tax Credit and is on ODSP. They live in Toronto. Francine has a close relationship with Nico and wants his best interests to be protected by any planning steps she takes in the future.
Arthur and Francine have decided to do some estate planning. Neither have ever done a will. Arthur’s best friend, Jay, is also his lawyer. Jay recently advised he had been diagnosed with cancer and would be reducing his practice as he takes chemotherapy. Arthur and Dora are better friends now than when they were married and he trusts her judgement as a parent to their children. Dora is a tax accountant and lives in Windsor with Alan.
Neither of Francine nor Arthur have done Powers of Attorney for Personal Care or for Property. They don’t understand the function and need of these documents. Arthur wants Francine to inherit income and access to capital from his estate to maintain her lifestyle. However, when she dies he wants the remainder of his estate to pass to his children. Francine has similar goals but she is most concerned about Nico as his family has few resources to care for his significant financial needs.
Their goals are:
As much as possible, to ensure that the lifestyle of the survivor is maintained should one partner pass away;
Francine wants the inherited ski chalet in Lake Tahoe to stay in her family but also wants Arthur to be able to use the property in his lifetime;
Minimize taxation at death (including probate);
Their assets are as follows:
Required:
Case B – Francine is the Client
Questions:
1. Show the estate asset distribution and discuss the implications of the estate if Francine dies without a will as provided for under the Succession Law Reform Act in Ontario (ignore any Family Law Act issues);
2. In this question, you are only to discuss the present facts as they related to the client goals. Do not discuss specific solutions (such as a trust or life insurance) – that is the next question. You are doing a gap analysis (where they are versus where they want to go). Review the overall planning to date and thoroughly discuss 5 issues and/or opportunities revealed by the client’s current planning.
3. In this question, you are identifying solutions for issues/opportunities you identified in Question 2. Identify and explain 3 estate planning options and/or strategies for the client to consider that address the issues or take advantage of the opportunities you identified in question #2. You must consider quantitative and qualitative factors and the potential implications of your strategy suggestion across other areas of financial planning. You must discuss the advantages and disadvantages of each option presented.
4. Identify one option the client must choose from Question 3, as a specific, actionable estate planning recommendation that is the most important, in your opinion, to do first. Be sure to explain why it is the most important by comparing it to the next most important solution you identified. Discuss the timeline to execute on your suggestion and what additional parties (lawyer, accountant etc.) will be required. Explain how your choice is consistent with the client’s goals and attitudes reflected in your analysis above.
