Tips for blended-family estate planning: IAFP

Today, tax and estate planning expert Terry Ritchie live-tweeted from the IAFP Symposium in Ottawa (using the handle @tfritchie).

He shared tips from a presentation by Christine Van Cauwenberghe of Investors Group, who focused on how advisors can help blended families tackle estate planning.

Read:

• Avoiding estate litigation
• An estate planning checklist

Here’s a selection of his tweets:

These tips are useful for blended families where the couple is either married or common law; important feature is the fact that there is a stepchild in family.

Many clients don’t appreciate the conflict of interest between interests of new spouse & child from previous relationship.

Children or new spouse could be disinherited without new and proper estate planning.

You can balance their needs through a spousal trust, making direct gifts to both spouse or child @ death of 1st spouse or use of life insurance.

Encroachment of capital might cause problems between spouse & children.

If client’s estate is large enough, it’s possible to leave assets to spouse & also leave a gift (trust or directly) to children.

Limitations though. Could be taxable events. No deferral of cap gains or immediate tax on registered assets to kids.

Good to have a lawyer with strong tax expertise.

Insurance solution can be useful. Do not designate children as direct beneficiaries; use an insurance trust.

Review beneficiary designations carefully, particularly group benefits that could be overlooked.

Clients need to consider whether dependants could make claim against the estate.

It’s best to leave registered assets to spouse if client has the option to leave something else to kids.

RRSPs & RRIFs DO NOT AUTOMATICALLY ROLL OVER TO THE SURVIVING SPOUSE!

Surviving spouse can CHOOSE to have the RRSPs amount in his/her return & then make a contribution to RRSP. Deferral not automatic. If spouse does not CHOOSE to make election, estate will remain liable to pay tax on RRSP/RRIF.

Need to consider TFSA & RESPs as well. May not be a good idea to have multiple beneficiary designations.

Also read:

Help clients through divorce, second marriages

When cohabitation agreements are inadequate

Testamentary trusts still useful

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