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