Lambe & Associates, Inc.

Sharing Your Wealth With the Next Generation

Planning for the transition of wealth to your children and grandchildren doesn’t have to be a daunting task. It’s important to start discussing this now so you can understand the impact of tax on your estate assets and what steps you can take to plan for the future.

Let’s consider some of the tax implications. Upon death, a person is deemed to dispose of all their assets at fair market value which can result in tax (excludes your principle residence). However, there is an exception for assets rolled to a spouse. Assets that pass through the estate before being distributed to your beneficiaries are subject to probate fees. As well, there could be will challenges and known or unknown creditors that could reduce the assets and impact of your estate goal.

If you are concerned about the overall impact to your estate and objectives related to the disposition of your assets upon death, a life insurance policy with a named beneficiary can help alleviate many of those concerns. As well, investment assets can be transferred into an exempt life insurance policy and investment growth during your lifetime would not be subject to tax unless funds were withdrawn. This would allow capital to grow in a more effective manner and the insurance proceeds would add to the amount of capital available for your family.

Did you know that insurance proceeds are not subject to income tax? In addition, by designating a beneficiary (other than the estate) of the policy, the proceeds pass outside of the estate and therefore are not subject to probate fees. Additional benefits of designating a beneficiary are creditor protection and the beneficiary designation cannot be disputed through a will challenge.

Please note that new rules, coming into effect January 1, 2017, will not offer the same savings as policies issued before 2017 would so it’s important to take action now.