The Benefits of a Comprehensive Life Map

No one knows what the future holds. The best we can do is to have a plan. Today, even those who developed a personal plan are asking themselves how recent events will impact their business, their investments and their financial security today and in the future.

The key to your success is in developing a comprehensive life map and effectively implementing the various components over your lifetime. The life map is a dynamic, ongoing process that requires regular oversight and adjustments to reflect current realities.

Creating or updating your financial plan is the starting point of the life map as it illustrates the outcomes of certain decisions and actions and address questions such as:

• Are our financial strategies on track to achieve our goals. What needs to be reset?
• How will my net worth be impacted if I am unable to or decide not to work for (six months, eight months or longer)?
• Can I retire as planned or do I need to work longer? Delaying retirement even a year or two can make a significant difference.
• Where will retirement income come from – is it guaranteed for life?
• What assets can be sold to create additional cash flow?

ESTATE PLANNING

Having a plan in place for your estate is an integral part of any comprehensive life map. Estate planning involves determining how, when and to whom you wish your assets to be distributed, who you would like to administer your estate upon death, putting in place strategies to minimize income tax and other fees, planning and communicating your wishes for end of life and final resting. Below you’ll find some important steps that will guide you in getting your estate in order. 

1. Calculate the value of your financial estate and inventory your personal effects (especially those that have historical or sentimental value). Now you will have a clearer view on what you need to consider when you begin to draft your will and decide on beneficiaries.
2. Consider opportunities to re-organize your assets to be more tax efficient, and to simplify the distribution on death. Strategies such as an estate freeze, family trust or alter-ego/joint partner trusts or amalgamating holding companies may help to achieve your goals.
3. The will is an important document as it holds the instructions for the executor / executrix for the administration of the estate. It should be reviewed annually and updated where personal and family circumstances change or as tax and legal rules evolve.
4. If you own a private corporation and are in Ontario, you may benefit from having a separate will that deals only with those shares and avoid probate fees on the value of those shares.
5. Review all beneficiary designations for registered accounts such as RRSPs, RRIFs, Locked-in Plans, Deferred Profit Sharing Plans and TFSAs and life insurance policies to ensure they are still appropriate. Naming a beneficiary other than your estate has the benefit of passing outside of your will and can reduce probate fees.Organize your financial affairs so that your family, power of attorney or executor / executrix can efficiently and effectively deal with your assets and understand your wishes.

RISK MANAGEMENT

It is important to incorporate risk management strategies into a life map to protect you, your family and your private corporation in the event of death and disability. Life insurance can be used to:

• Create liquidity in your estate.
• Pay a tax liability leaving your estate intact for beneficiaries.
• Increase the value of your estate for beneficiaries or charities.
• Redeem shares of a private corporation in a tax-efficient manner.

Disability and critical illness insurance provides cash flow in situations where you are unable to work or are facing a serious health event.

It’s important to review your life insurance policies annually and understand:

• The type of policies you have in place and the annual premiums.
• When they expire and if they can be renewed.
• If the coverage amount sufficient to meet your needs.

In addition to having a will, it is just as important to have legal documents in place that allow someone to make financial and healthcare decisions on your behalf if you are incapable of acting.

There’s a Chinese proverb that says ”the best time to plant a tree was 20 years ago, the next best time is now.” The same applies to your life map.

MNP’s Family Office Services provides a personalized, holistic approach to our clients who are business families or families of wealth. The result is greater clarity, control, peace of mind and family harmony – to navigate through key financial decisions and life events – and achieve their goals.