Advisor Opportunities Using Trusts
Sandy Cardy
Mackenzie Financial Corporation
)Strategic use of trusts
Initiate tax and estate planning discussions
Customize basic strategies
RESULT:
Increased satisfaction with your value
Opportunities for business building
Topics to cover today:
Why trusts?
Basics of taxation
Case studies:
Asset protection
Handicapped beneficiaries
Business Succession
Income-splitting testamentary trusts
Insurance Trusts
Trusts – Who is a prospect?
Minor children
Special-needs dependents
Family members who are not “financially astute”
Income-splitting
Retirement planning
Charitable giving
Inheritances
Marriage
Divorce
Confidentiality
Probate
Family law property claims
Trusts
Testamentary Trusts
Taxed at graduated rates Flexible year end
No attribution
Inter-vivos Trusts
Top tax rates Calendar year end
Attribution
Case Studies
Trusts - inheritance planning- The Evans family
Sam (22)Son
Heather (20)Daughter
Robert (85) + Emma Evans
John’s Parents
John (56)
Kate (55)
Robert’s ins. policy: $500,000
Robert’s will: $1,000,000 to John
Case #1-Testamentary trusts
Testamentary Trusts
(created after death)
Delay distribution of assets
Control over assets
Save on income tax
Direct Inheritance@ MTR of 45%
Mackenzie Sentinel Corporate Bond Fund $1,000,000
6% interest income $60,000
Taxes payable $27,000
Income retained $33,000
Net annual savings through a testamentary trust
Testamentary Trust@ graduated rates
$1,000,000
$60,000
$16,000
$44,000
$11,000
John’s inheritance of $1,000,000
John’s inheritance
John - ? Kate - $8,000 Heather - $8,000Sam - $8,000
Evans Family Trust
$60,000 Income$24,000 paid to beneficiaries $36,000
Total Taxes = $8,000
The Power of Testamentary Trusts
Direct Testamentary Trust
(Joan as beneficiary)
Testamentary Trust (including
spouse and children as
beneficiaries)
Taxes payable $27,000 $16,000 $8,000
Net annual savings
N/A $11,000 $19,000
Joan’s $1,000,000 inheritance from his parents is generating
$60,000 interest income annually.
Testamentary trusts - planning opportunities
Income splitting for high income beneficiaries
Income sprinkling for beneficiaries with dependant children
Designated income
Case #2 – Insurance trust
Vivian (68)
Widowed but well off
4 children 3 successfully independent
1 dependent on Vivian at age 36
Vivian dies?
Issue Unequal sharing
Legal wrangling
Family discord
Possible solution Will planning
Gifting
Alter Ego trust
Insurance trust
Insurance trusts
Funded with the proceeds of life insurance policy
Established outside estate as separate trust
Beneficiary designation pays proceeds of policy to individual - receives proceeds as trustee
Documentation to establish an insurance trust:
Last Will and Testament
Trust Declaration or Trust Agreement
Insurance trusts – advantages
Taxed as testamentary trust
Probate avoidance
Creditor proof
Confidentiality
Case # 3 - Handicapped beneficiaries
Amanda, age 6
Father
Life insurance proceeds $250,000
Designated beneficiary
Options available
In trust for account
Annuity
Formal trust
“Henson” trust
Trustee
$250,000
•Fully discretionary
•Control of assets
•Prescribed
beneficiary election
Case #4 - Jackson Tool & Die
Age 56
Wife Joan (55)
Children
Eric (27)
Cody (22)
Joanne (17)
Bill Jackson
Owner/Manager
Jackson Tool
& Die
$5 million
Estate freeze - trust
Operating Company
Trust
Family
Debt andpreferred
Commonshares
Bill
Estate freeze - strategies to consider
Use the capital gains exemption now
Recommend multiple wills
Estate Freeze - The real nitty gritty
When to freeze – will owner have enough value to live on in the future?
How do you protect children’s shares from matrimonial claims?
Case #5 – Asset protection
Lou (70)
Divorced – married Anna Nicole 2 years ago
3 children
2 grandchildren
Anna Nicole (32)
Divorced
1 son
Lou dies first?Issue
Family law issues
Estate depletion
Lou’s children disinherited
Legal wrangling
Family discord
Possible solution
Will planning
Gifting
Alter-ego trust
Spousal trust
Alter Ego trust
Protection of assets
Control of capital
Confidentiality
Jurisdiction shopping
Probate avoidance
Assets
Lou and/or Anna Nicole
Lou and/or Anna Nicole
Children
Mackenzie is here to help
Client Service Group
Sales Reps
Private Client Group
Tax and Estate Planning
Mackenzie University