Pass on Your Wealth, Not Just Taxes: Effective Estate Planning Strategies

By Laura Fitzsimons

In 2024, the average Canadian household will face a substantial tax burden, paying approximately $34,408 in payroll, income, and health taxes, alongside $9,164 in sales tax and $4,664 in property tax. Enjoying life's simple pleasures, like the occasional glass of wine, also adds roughly $2,359 in excise and liquor taxes annually. Taxes truly seem endless, but the most significant tax bill you might ever encounter hasn't even happened yet—it occurs when you pass away.

Understanding the Deemed Disposition

Upon death, your estate faces what's known as a deemed disposition. Essentially, this means your assets are considered sold at their current market value, and any gains are immediately subject to capital gains tax. The amount your estate owes depends significantly on how carefully and effectively you've structured your estate plan. Unfortunately, many Canadians aren't prepared; approximately 50% die without even having a will.

Two Common Estate Planning Mistakes

1. Ignoring Tax Efficiency

Without professional guidance, you might overlook critical opportunities to optimize your assets' tax positions through trusts, corporate structures, or strategic planning outlined by Canadian tax laws. Neglecting these steps inevitably results in paying unnecessary taxes both during your lifetime and after death, leaving significant wealth unclaimed.

2. Forced Liquidation Events

Because capital gains taxes are due upon death, your heirs may need to quickly raise substantial funds. Often, this urgency forces families into distress sales of assets or businesses or leads them to secure unfavorable loans. Such financial stress frequently causes familial disputes—studies show that around 58% of American families experience inheritance-related conflicts severe enough to involve court intervention.

Protecting Your Legacy with Life Insurance

Life insurance is a strategic solution for managing the financial impact of estate taxes. A life insurance policy can provide immediate, tax-free liquidity to cover capital gains and other estate-related taxes. Integrating life insurance into your comprehensive financial plan offers multiple advantages, including:

• Immediate cash availability upon death

• Preservation of family wealth without forced asset liquidation

• Potential living benefits during your lifetime

  
  

Plan Ahead to Protect Your Estate

Effective estate planning ensures your wealth goes to your loved ones—not the tax collector. By proactively addressing potential tax liabilities through strategic use of life insurance and other estate planning tools, you protect your legacy and provide peace of mind for your family.

Ensure your estate passes seamlessly and tax-efficiently to future generations. Make a plan today to secure tomorrow.

Sources:

1. Fraser Institute – Tax Freedom Day 2023

2. Targeted Strategies – Don’t Die Without a Will

3. Investment News – Family Feuds and Poor Estate Planning

This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Many factors unknown to us may affect the applicability of any statement or comment made in this publication to your particular circumstances. Hence, you should not rely on the information in this publication for investment, financial, legal tax or accounting advice. You should consult your financial advisor or other professionals before acting on any information in this communication.