Case Study: Steps in estate planning

Imagine spending decades building a life and legacy, only to have your wishes sidelined or misunderstood after you’re gone.

This was the challenge Phillip and Martha, a retired couple, faced in their golden years. With assets and differing opinions on how to divide them, the couple needed an estate plan that respected their wishes and maintained the family dynamic, while being as efficient as possible from a tax perspective.

When it comes to meeting family goals, there are a number of factors to consider. We’ll return to this family and explore their challenges over a series of articles.

Meet the Johnsons

Phillip, a retired physician, is 82 years old. His wife Martha, also a retired physician, is 78 years old with mobility issues. Through years of hard work in their professional practices, they have accumulated significant assets over their lifetime together.

They have three children. Johnathon, 48, is married with three children and lives nearby, regularly assisting with household chores and Martha’s declining health. Marcia, 46, lives in France and is estranged from the family. Michael, 40, lives five hours away and visits occasionally. He has one adopted son.

Their assets include:

• The family home in Dryden, ON, currently valued at $560,000
• A vacation property in Kenora, ON, currently valued at $600,000
• An investment account holding about $5 million, with unrealized capital gains of $400,000
• A cash and a TFSA account, holding about $300,000
• An art collection appraised at $500,000

The challenge

Phillip and Martha faced the challenge of ensuring their wishes would be honoured after their deaths, particularly concerning the division of their assists. Phillip wanted equal distribution among their three children and smaller equal distributions to their four grandchildren.

Martha, however, preferred to exclude Marcia from the will due to her estrangement. She wanted Johnathon to receive a larger share because he’s been so supportive over the years. She also didn’t consider the adopted grandchild in her estate planning, focusing only on her biological grandchildren.

Phillip was worried that his wishes would be overridden if he predeceased Martha. It was important to him to have all the children and grandchildren included in the division of assets. And it was important that both parties had the opportunity to express their concerns and come to a mutual agreement. Martha and Phillip considered each other's concerns and decided to first amend their wills to include a spousal trust and will next consider gifting opportunities during their lifetime.

Please note this is not an uncommon occurrence. There are many families with differing opinions on how assets should be divided. For instance, if you’ve gifted one child with money during your lifetime but not the other, you may disagree on how to distribute their inheritance. Perhaps you want to give a larger portion to your child who wasn’t gifted money, and a smaller portion to the one who received the monetary gift earlier in life.

The solution

To address these challenges, we first initiated a thorough estate planning process. We reviewed the client’s wishes, developed an estimate of anticipated estate taxes, and discussed the impact of various options with the couple. A consultation with an estate lawyer was greatly encouraged, to make sure the couple’s wishes were carefully considered and to ensure compliance with Ontario’s provincial regulations.

The key steps included: