Do-it-yourself estate planning leaves heirs exposed to
potential financial and legal challenges
TORONTO, Aug. 31, 2015 /CNW/ - CIBC (TSX: CM)
(NYSE: CM) -- When it comes to the transfer of assets from one
generation to the next, having a will is the most fundamental
component in your estate plan.
"It's surprising how many people either don't have a will or
think they don't need one," says Jamie
Golombek, Managing Director, Tax and Estate Planning, CIBC.
"If you have no will, you have no say in who will manage the
estate, who will inherit your assets or what steps could be taken
to minimize taxes. Without proper planning and a written will, you
are leaving it to the legislation as to who ends up with your
assets and could be exposing your heirs to all sorts of potential
problems."
A recent CIBC poll finds that more than half (51 per
cent) of Canadians expect to leave assets upon their death. The
poll also finds that Canadians on average plan to leave their heirs
nearly $380,000.
Mr. Golombek outlines the common mistakes Canadians make in
estate planning and tips on how to avoid them in his report, "Your
Estate Matters", which is the first of a five-part series of
reports on estate planning that are available in CIBC's Advice
Centre.
Mistake #1: Misconceptions of what an estate is
While the term "estate" often evokes images of sprawling
mansions or luxurious lakeside cottages, almost every adult has an
estate.
"If you have retirement savings or real estate such as a family
home, then you have an estate," Mr. Golombek says. Estate planning
is the process of making arrangements for the management and
transfer of your estate. "An estate plan is always recommended if
you have any assets at all, but it is essential if you plan to take
care of any dependents, such as a spouse, partner or children."
Mistake #2: Letting the government write your will
A written will is at the heart of any estate plan. It records
your intentions for the management and transfer of your assets. One
of the most common mistakes in estate planning is not having a will
at all. The estate is then administered according to provincial
law, leaving crucial aspects to be decided by the government.
"To allow for your estate to be passed on to loved ones
according to your wishes and with minimized delays and costs, you
should have an estate plan and a written will," says Mr.
Golombek.
Here's what might happen if you don't have a will:
- The surviving spouse or partner might not be entitled to all
assets. In most provinces, after granting a preferential share of
the estate to the spouse, the balance will be split between the
spouse and any children.
- The surviving spouse might not be able to obtain ownership of
the family home. If the children's share of the estate exceeds the
value of the real estate, the spouse might be forced to sell and
pay out the remaining balance.
- Children under the legal age may not have access to their share
of the estate. Their inheritance might have to be paid into court
to be managed by a government office until they reach the age of
majority.
- The surviving spouse might not automatically be named as the
estate administrator. They would have to apply to the court
for this role.
- And - most important - the value of the inheritance might be
significantly eroded by taxes. Income taxes can often be deferred
by taking advantage of various spousal or partner rollovers.
Mistake #3: Do-it-yourself planning
When it comes to making arrangements for the management and
transfer of their estate, Canadians should not resort to
do-it-yourself planning.
"Many estate planning mistakes are made through inexperience and
lack of knowledge," says Mr. Golombek. "Family, succession and
income tax laws are very complex and vary from province to
province. These laws also change frequently."
"You should obtain professional advice to avoid estate erosion
and complications for the next generation," urges Mr. Golombek.
"The cost of proper advice is often less than the cost of
unnecessary taxes and fees if you don't have an estate plan in
place."
Key Poll Findings:
Percentage of Canadians expecting to leave assets to someone
upon their death:
Yes |
51% |
No |
16% |
Undecided/Don't know |
33% |
Overall value of assets expected to be passed on:
< $49,999 |
11% |
$50,000 - 99,999 |
6% |
$100,000 - 249,999 |
18% |
$250,000 - 499,999 |
18% |
$500,000 - 999,999 |
11% |
> $ 1,000,000 |
7% |
Don't know |
30% |
Mean |
$377,950 |
From May 19 to May 20, 2015, an
online survey was conducted among 1,504 randomly selected Canadian
adults who are Angus Reid Forum panelists. The margin of error -
which measures sampling variability - is +/- 2.53 per cent, 19
times out of 20. The results have been statistically weighted
according to education, age, gender and region (and in Quebec language) Census data to ensure a
sample representative of the entire adult population of
Canada. Discrepancies in or
between totals are due to rounding.
About CIBC
CIBC is a leading Canadian-based global financial institution
with 11 million personal banking and business clients. Through our
three major business units - Retail and Business Banking, Wealth
Management and Wholesale Banking - CIBC offers a full range of
products and services through its comprehensive electronic banking
network, branches and offices across Canada with offices in the United States and around the world. You
can find other news releases and information about CIBC on our
corporate website at www.cibc.com/ca/media-centre/
SOURCE Canadian Imperial Bank of Commerce