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Estate Planning vs Will

These two processes have been known to confuse many because they are quite similar and they take care of your affairs when you are alive and when you are no longer around to tend to your finances and assets. The basic difference is that one is more comprehensive than the other which makes some people go for the less comprehensive one. The complexity of estate planning sometimes discourages people from having one and choosing to have a Will instead. However, it all depends on your finances, assets and ultimately your preference. There are a lot of things to consider before choosing one over the other and going for the easy one is certainly not one of them. This article will discuss the difference between the two and the appropriate one to have depending on your financial and asset situation and your preference. You will also learn what to include in anyone you choose and the appropriate age for having either of the two.

Does Estate Planning Include Wills?

Estate planning in itself is described as the process of taking care of your finances while you are alive and also provides for how your finances will be handled according to your wishes when you are no longer alive. So, to answer the question of whether an estate plan includes a Will, the answer is yes, Wills are included in an estate plan.

A Will is a legal document that provides instructions on how a person wishes to share his assets with his/her loved ones and who takes custody of their minor children if any. So many people interchange an Estate Plan and a Will thinking that one can be substituted for the other. This is not the case. A Will is included in an Estate plan while an Estate plan cannot be included in a Will. Other things that can be included in an Estate plan include Trust, A living Will that gives healthcare and mental power of attorney to a person of your choice.  It is always advisable to seek the help of a professional to help develop your estate plan to effectively take care of your estate while alive or dead.

At What Age Should You Do Estate Planning

Estate planning is not age-specific. Experts will tell you, the earlier the better. Given the comprehensive nature of estate plans, you will be able to take care of your finances while alive and prepare for your loved ones when you are no longer around. As long as you are earning, it is advisable to have an estate plan. However, your estate plan must be adaptable to your current financial situation.

The 20s

Once you clock 18, your parents will no longer have authority over health and financial decisions. You can create an estate plan with a living Will to give healthcare and mental power of attorney to a person of your choosing who will take care of your financial and healthcare decisions in case you become incapacitated. Do not feel too young to have an estate plan, it is a smart way of putting your life in order and taking care of your welfare.

The 30s

At this stage, you should be preparing to have a family or you may already have one. You naturally will have more responsibilities at this stage as well as a reasonable income. You may have assets you wish to bequeath or you may want to set up a Trust for your family. At this stage, your estate plan should include a Will and a Trust, together with a living Will that will give healthcare and mental power of attorney to anyone you wish for when you become incapacitated.

At What Age Should You Have A Will

Like an estate plan, there is no appropriate age for having a Will. As long as you attain the majority age of 18, you are eligible to have a Will to take care of your affairs. You can create a Living Will or a Last Will and Testament. A living Will take care of your affairs while you are alive but incapacitated to make key medical and financial decisions. It will ensure your wishes are carried out to the latter. A Last Will and Testament, on the other hand, takes care of your affairs when you are no longer around. It takes care of how you want whatever assets you may have to be distributed among your loved ones. Whatever Will you decide to have must be appropriate for your current financial situation.

What Is Estate Planning?

Estate planning is the process of creating a set of wishes and instructions that will detail how your assets are used and distributed in the event of incapacitation or demise. An estate plan seeks to distribute your assets according to your wishes and minimize tax liabilities. It will comprise of different legal documents that will assign different sets of authority on how your affairs should be managed and prevent your loved ones from guessing what your wishes will be.

After a well-spent lifetime with a lot of money earned and financial goals met, an estate plan will ensure that your wealth is not distributed at the discretion of the government which may be against your wishes and principles. Therefore, an estate plan ensures that you structure your finance when you are alive and also ensures your affairs are handled by the people of your choosing after your demise. It is a comprehensive way of taking care of your money and assets. From the moment it is created, an estate plan takes care of your current and future assets and money. In other words, it helps you structure your financial affairs while you are still alive and allow you to make good decisions about your finances.

Advantages Of Having An Estate Plan

There are a lot of benefits of having an estate plan to take care of your affairs. Some of the advantages of an estate plan include:

To Provide For Your Loved Ones

‍An estate plan allows you to leave enough money for your spouse and other loved ones of your choice to include in your estate plan. You can set up a trust for your loved ones and bequeath some other assets to them to take care of them for when you are no longer around. The double advantage of an estate plan is that it also allows you to make provisions for yourself and your loved ones while you are still alive. Having various investment portfolios and Trusts can take care of you and your family while you are alive.

To Minimize Expenses and Taxes

‍Having an estate plan takes care of the expenses that may be incurred during the transfer of properties to your named beneficiaries. You can use it to set up a Trust for your children and loved ones which has its tax advantages and ensure your beneficiaries keep more money.

Plan For Decision Making During Incapacitation

‍An estate plan will create room for healthcare and mental power of attorney that will appoint someone that will make medical and financial decisions on your behalf when you become incapable of making them yourself.

Plan For Your Needs

‍An estate plan gives you the opportunity to give healthcare and mental power of attorney to a person of your choosing to make medical and financial decisions on your behalf when you are incapacitated.

To Make Donations‍

If you have philanthropic wishes, an estate plan ensures that you fulfil this goal by putting the money in a trust and donating it when you are no longer around.

What Is A Will?

A Will is a legal document that describes how you want your assets and money to be used and distributed when you are no longer around. A Will takes care of both your assets and liabilities. An up-to-date Will allow your executor to carry out your wishes according to the laws of your Province. The absence of a Will means that the government will determine how your assets and money are used and distributed. You will name an estate representative who will handle your affairs as you have listed in your Will.

There are several options for writing your Will. You can engage the services of a Will and Estate lawyer, Will kits, Will preparation sites and DIY legal forms. You no longer have an excuse for not having a Will. Some of the things you should include in your Will are:

●      Name of executor(s);

●      How you want your assets and money to be distributed;

●      Guardians for your children; and

●      Provisions for your debts and taxes.

It is important to ensure that anyone you name as your executor is someone you trust and have confidence in to execute your estate according to your wishes. For a Will to be legal in Canada, it must be:

●      In physical form;

●      Made by someone who has attained the age of 18;

●      Made by a testator of sound mind at the time of writing;

●      Signed by the testator at the end of the Will and by 2 witnesses who are not beneficiaries in the Will;

●      Notarized.

Advantages Of Making A Will

Having a Will is not a death sentence or does not mean you will die soon. There are a lot of benefits you can get from creating your Will. Some of the advantages of having a Will include:

Allows Your Wishes To Be Carried Out

‍A Will allows you to list out your wishes as to how your affairs are handled when you are no longer around. It ensures you are in control of your assets in terms of usage and distribution.

It Protects Your Loved Ones

‍A Will protects your loved ones from the exploitation of unscrupulous elements in the family. Your Will provides how your children are taken care of and how your assets and monies are taken care of.

Funeral Directives

‍You can use your Will to give additional instructions on how you want your burial arrangements to be handled.

It Helps To Keep Peace Within The Family‍

If there is an outlined instruction on how your affairs should be handled it prevents rancour among family members who may want to take your properties for themselves.

It Prevents Statutory Devolution

‍Where a person does intestate, the law says that it is the province that takes charge of the assets of the deceased and they will be used and distributed at the discretion of the province. Most times, the state will use and distribute your assets differently from how you would have loved them to be distributed. Having a Will ensures you decide who gets what in your estate.

Differences Between Estate Planning and Wills

●   Estate planning is the comprehensive process of distributing your estate which usually comprises your real estate, monies in banks, investments, cars and any other asset.
A Will is a legal document that provides instructions on how your assets and monies are  used and distributed.

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●   Estate planning can be active while you are alive and at your demise.
A Will becomes active after your demise.

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●   An estate plan includes a Will.
A Will cannot include an estate plan.

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●   Documents that make up an estate plan include Will, Inter-Vivos Trusts, Testamentary Trusts, and Power of Attorney.
Documents that make up a Will include all documents showing legal ownership of your assets.

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This month, we'd like to introduce you to Kelvin Yeung, who is the owner of 2 physiotherapy clinics - Launch Rehab in New Westminster & Kensington Square Physiotherapy in North Burnaby. Kelvin is a huge advocate of healthy body and movement, and he is on a mission to help you move freely without pain!

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Tell us a bit about yourself

Hi, I am Kelvin Yeung, a Registered Physiotherapist and owner of Launch Rehab & Kensington Square Physio.

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Tell us a few personal interests and hobbies

I love working out, cooking, all sports, and before having kids, video games.

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When and why did you choose this industry over others?

I chose this industry back when I was 15 years old. I have always been fascinated by how the human body worked and I was considering a career as a physician. At the same time, I was a competitive and injury-prone athlete, which exposed to me to the field of physiotherapy. I loved the idea of being part of someone’s recovery journey from start to finish. I felt by being a physiotherapist, I was able to create much more personal and meaningful relationships with my patients as you usually spend 4 to 6 weeks with a patient during their recovery process.

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How does a financial planner play a role in your personal and business life?

A financial planner helps me in a similar way to how I help my patients. They’re able to help set a path towards a particular goal in my life and with check-ins, are able to adapt, react, and adjust accordingly to the changes that are happening both in my personal and business life.

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As a clinic owner, how do you keep your team motivated?

Our team believes in a few simple values. Accountability, integrity, and growth.

As a clinic owner, I take full responsibility for the success and failure of my team. By keeping myself accountable and acting with integrity, I hope to set an example for my team. We create weekly and monthly “lunch and learns” to keep everyone up to date with the latest research and clinical gems. But most importantly, our clinic culture abides by the philosophy of being a family unit. Maybe cause I’m a dad, but I look at all my practitioners as my kids and I try my best to take care of them.

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What's the most fulfilling part of the job? 

The smile of a patient when they walk out of the clinic feeling 100%.

Who should be reaching out to you?

Anyone who wants to improve their quality of life through movement and exercise. We are a clinic that welcomes everyone, as long as they want to improve. No matter your age or exercise experience, we will be there alongside to help you! I encourage you to check out my website (www.launchrehab.ca)

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We encourage you to connect with Kelvin to find out more about Launch Rehab, and book a consultation with him at his beautiful brand new clinic in New Westminster!

Tax planning is a complex task that requires you to be conversant with every tax you are liable to pay as an individual. It also means you have to be conversant with the relevant tax laws and calculations to enable you to meet the requirements of the law. You must have heard that there are ways to ensure you pay the lowest taxes possible without raising the CRA's attention. Most people end up paying more than they are either because they do not want to employ the services of a tax expert or they lack knowledge on tips for effective tax planning. Tax planning for those without the requisite information is quite frustrating. This article will explain why tax planning is important and some tax planning strategies that you can adopt.

Tax Planning In Simple Terms

Tax planning in simple terms refers to the analysis of your financial plan or current situation in order to ensure that all components work together to allow you to pay the lowest taxes possible.

Tax Planning Explained

Tax is an inevitable mandatory financial charge that is imposed by the government on anyone qualified to pay them under relevant laws. Failure or resistance to paying taxes is regarded as a crime and punishable under the law. One way to ensure that you maximize all available legal methods to reduce the amount of tax you pay is through tax planning.

Tax planning is the process of arranging your financial and business affairs in such a manner that will attract the lowest tax rates under the relevant tax laws. In other words, it is the process of limiting the amount of taxes you pay without breaking any law. An efficient tax plan will minimize how much taxes you pay and is an essential part of your financial plan. Tax planning involves the optimization of marginal tax rates using different calculations and means such as Trust arrangements, charitable entities, corporations, tax exemptions, deductible expenses, profit-shifting arrangements, and some other means. One thing to note about tax planning is that while you pay reduced tax rates, it must be done within the purview of the law. Tax planning is entirely different from tax evasion which is a crime.

When developing a tax plan, some of the things to consider include the timing of your income, the size of your income, the timing of your purchases, and the plans you have for your other expenditures. Also, the types of investment portfolios and retirement plans you choose must complement your tax filing status and deductions to create an efficient tax plan.

Types of tax planning

Some of the types of individual tax planning include:

Tax Planning using Government Programs‍

This tax plan is using tax benefits offered by the government of Canada. Some of which may include registered plans such as Tax Free Savings Account (TFSA), Registered Education Savings Plan (RESP) and Registered Disability Savings Plan (RDSP). You will also get tax benefits on your charitable donations and withdrawing from your RRSPs through Home Buyers Plan.

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Retirement Tax Planning‍

This is a tax plan that allows you to enjoy your post-retirement days by reducing your tax liability and maximizing your income at that stage of your life. You can enjoy deferred taxes on your Registered Retirement Savings Plan (RRSP), Canada Pension Plan (CPP), and for some, Individual Pension Plan (IPP).

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Estate Tax Plan

‍Believe it or not, when you pass away, your estate is still subject to taxes. Yes, even the dead pay tax. You should put a tax plan in place that will preserve the value of your estate. You can enjoy the benefits of plans like Tax Free Savings Account (TFSA) or taking out life insurance to pay for those taxes.

Importance Of Tax Planning

Paying your taxes is important for so many reasons. For one, it ensures that you stay on the right side of the CRA. However, there are ways to ensure you pay less in taxes without contravening the law. With a well-prepared tax plan, you can enjoy paying taxes while you also build your financial plan and enjoy maximum benefits from your financial plan. Here are some of the importance of tax planning:

Solves Tax issues‍

Having a tax plan will help you pay up any back taxes you owe and also solve any other tax issues you may have.

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Extra Cash‍

With a tax plan, you can save some extra cash and divert it into your savings or investments. It is an opportunity to grow your wealth with a smart tax plan.

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Building An Education Fund For Your Child‍

The extra cash you get from smart tax planning can be diverted to fund your child’s education. You do not need to start sweating for cash to build an education fund when you can easily get it from paying less in taxes through your tax plan. You can take advantage of the Registered Education Savings Plan (RESP) which allows you to save for your child’s post-secondary school education and also earn tax-deferred income. On top of that, you also attract government grants that can help grow this savings faster.

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Flexible Tax Payment Schedule‍

A tax plan will inform you on when to pay up your taxes. This eliminates unnecessary stress and uncertainties when it comes to paying your taxes. It allows you to take advantage of the tax installment opportunity where you can spread the payment of the tax owed over the course of the year.

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Tax Information‍

Building a tax plan will mean you have to be up to date on the relevant tax laws and tax liabilities. In other words, tax planning is a learning opportunity about relevant information on taxes and relevant laws. You also get to learn about some tax tips and legal tricks you can use to pay less in taxes.

What Are The 3 Basic Tax Planning Strategies?

Tax planning strategies will ensure the efficiency of your tax plan to reduce your tax liability. Tax planning strategies revolve around 3 components which include reduction in income, increasing deductions, and utilizing available lower tax rates. Three basic tax planning strategies you can adopt include:

Income splitting and Shifting‍

Tax splitting is when you shift income across your family members or legal entities. When you split your income across your family unit, you enjoy reduced tax rates. You can also shift different types of income such as bonuses, dividends, and your year-end payments to a period when you will enjoy lower tax rates. You may also use a Spousal RRSP to split your retirement income in the future.

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Deferring Taxes‍

Deferring your tax payment will allow you to pay your tax at another time. You can do this by using specific investment portfolios that allow deferred tax payments. A good example is a pension plan contribution and RRSPs that allows you to defer your tax payment till a later date in the future.

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Tax-Exempt Investments‍

You can choose selective investments that will afford you exemptions from federal or provincial tax. One registered investment program is a Tax Free Savings Account (TFSA) with tax free earnings that may benefit your tax plan. Another investment with tax benefits are flow through shares.

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Tax Planning Tips

Some basic tips on tax planning will give you the benefit of enjoying tax advantages without the help of a tax expert. Here are some of the tips you can consider for your tax plan:

Investments‍

Choosing the right investment will enable you to enjoy some tax benefits. Some investments such as stock are accorded tax breaks on dividends and capital gains. You should be careful of putting your money in fixed-income investments such as GICs and Bonds because they do not have tax benefits. They are fully taxable and will cost you money.

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More Philanthropic Activities‍

Donating to charity does not only mean you get to help those in need, but you can also enjoy some tax benefits that come along with it.  Charitable donations have their fair share of tax credits or deductions which will be a good addition to your tax plans. The essence of the tax benefits on donations is to encourage people to give to the needy.

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Assess Your Deduction Strategy‍

If you have several expenses to meet up with, it is best you itemize the deductions available to you. There are deductions you can enjoy as the head of a household and there are the ones you can enjoy if you file jointly with your spouse. Itemizing them gives you clarity on the benefits that are available to you and it helps you divert the deductions for other useful purposes. For example, your Registered Retirement Savings Plan (RRSP) allows you to enjoy tax deduction and tax-free growth on your earnings until retirement.

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Start A Side Business‍

Asides from being your boss and building something for yourself, starting a business also has its tax benefits. One advantage is that you can deduct many of your expenses from the income from your business which will reduce your tax obligations. Some of the tax deductions you can enjoy as a business owner include health insurance premiums, home office tax deductions.

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Aim For Capital Gains‍

Investment is an important aspect of a financial plan because it is what determines how well and fast your wealth will grow for a financially secured future. Investment portfolios such as mutual funds, stocks, bonds, and real estate have their tax advantages if you shoot for capital gains. Capital gains have much more favourable tax treatments compared do dividends, rental and interest income.

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Borrow To Invest and Save To Buy

‍Almost everyone has one debt or the other hanging over their heads. If you are going to have one, you might as well make most of it. Taking out a loan for investment purposes has its tax advantage. The interest on loans taken out for the purpose of investing can be tax-deductible as against taking a loan to make a purchase. This is a wake-up call to change your orientation, borrow to invest and save to buy.

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Open A Tax-Free Savings Account (TFSA)‍

The investment income earned on the funds you invest in a TFSA is not subject to tax when earned or withdrawn. It is a sure way of maximizing the tax benefits available to you. Another benefit of a TFSA is that your contribution room is replenished the year following your withdrawal.  

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Tax Planning For Individuals Conclusion

Tax planning is very important and has its advantages. However, you should be careful and ensure your tax plans will not put you on the wrong side of the law. Know the limits the law provides to clearly distinguish your tax reduction from tax evasion or tax avoidance. Keep abreast of changing tax laws to maximize any benefit available to you, depending on your investment plans and your finances generally. If developing a tax plan is becoming complex for you, it is advisable to seek the help of a professional tax accountant or certified financial planner to help you out your tax plan within the ambit of the law.