Reference no: EM133058168

It is mid-November 2021, Gurpreet and Anita Sandeep would like a review of their family financial situation and estate plan. They have completed a detailed questionnaire and the following summaries have been prepared:

Personal Information

Employment

Gurpreet has owned and operated Sandeep Inc., a successful manufacturing company, for the past 25 years. He has declined opportunities to expand outside of Canada. Anita was at one time quite active in the business, but now works on a part time basis only. Each of them owns 50% of the common shares in the company. Gurpreet has negotiated the sale of the company. On closing on November 1, 2021, Gurpreet and Anita each received $925,000 for their shares. They provided the initial share capital of $2,000 each in 1996. The money from the sale of the business is currently in their joint bank account until they decide what they want to do with it. Their income from the company has been a combination of salary and dividends. 

Gurpreet and Anita are planning on travelling the world once the sale of the business is complete. 

Financial Position

The couple has a home worth $1,000,000, which is mortgage free. They purchased it in 1995 for $200,000. They also have a cottage in the Kawartha's worth about $550,000, which they bought for $150,000 cash 15 years ago. Both properties are held in joint tenancy. 

Gurpreet has accumulated $900,000 in RRSP assets and he has named the estate as his beneficiary. Anita has $700,000 in RRSP assets and she has named Gurpreet as her beneficiary. Both Gurpreet and Anita have fully maximized their TFSA contributions, and they each have $91,000 in their own accounts. Neither of them has named a successor holder or beneficiary on their TFSA accounts. 

Anita used to actively trade stocks in a non-registered account. She stopped after the market crash in 2008 and realized $100,000 capital loss that she has been carrying forward since then. They have a joint non-registered account of $200,000 invested in bonds with an adjusted cost base of $180,000. Gurpreet and Anita have never used the Lifetime Capital Gains Exemption. 

Children

A major concern is their son, Jag. He was born with a disability that limits his ability to live independently and is reliant on his parents both financially and for his care. He currently lives in an assisted living home and his parents visit him almost every day.

Diya is very successful in her field and is comfortable financially. She has three children who will almost certainly go to college or university. Gurpreet and Anita have stated that they want to help pay for their grandchildren's post secondary education, but have not started separate savings accounts for them. 

Life Insurance

Anita has a $150,000 group term, life insurance policy, which will terminate when the business is sold. Gurpreet and Anita have $1,000,000 joint-life, last-to-die, term-to-100 policy, which they took out 10 years ago when Gurpreet became concerned about the tax liability on his estate. The estate is named at the beneficiary. Anita and Gurpreet want to ensure that the assets they have worked hard for are passed on to their heirs. They want to minimize any taxes owing when they die. 

Goals & Objectives

Gurpreet and Anita realize that the amount of money they have managed to accumulate is more than adequate for their lifetime needs and they want to provide for their children and grandchildren through their estate.

They are aware that they will have to support Jag. They can control his care while they are living but they are concerned what will happen after they die. Diya has agreed to visit Jag often and over see his care.  

They would like to set aside funds for their grandchildren's education as tax efficiently as possible. They would also like to leave $100,000 to their local hospital that has taken such good care of Jag over the years. 

Wills & POAs

They had drawn up wills and POAs when their kids were small. They destroyed these documents 5 years ago because they were outdated and did not represent their current wishes. They have been meaning to see their lawyer to get new documents drawn up but have been focused on the sale of the business and have not gotten them done. 

Questions:

1) Identify Gurpreet and Anita's estate planning objectives.

2) Prepare Anita and Gurpreet's net worth statement. Please note the adjusted cost base below the name of the asset.

3) What tax liability will Gurpreet and Anita have from the sale of the business after it was completed on November 1, 2021? Calculate. Assume their MTR is 40%.

4) If Gurpreet were to die today, how would his estate be distributed?  Assume that Gurpreet and Anita live in Ontario.

5) What issues are present with not having a will? Please use your findings from part 4.

6) Gurpreet and Anita and flown off to Alaska. There is a tragic accident and both of them pass away. The proceeds from the sale of the business is currently sitting in their chequing account. They were going to invest it when they got home. 

a) Calculate their Estate Administration Taxes?

b) Calculate their taxes? Assume a MTR of 40% for both of them.

7) Provide the Sandeep's with four recommendations today to meet their goals and objectives. These recommendations need to based on their current situation (i.e. moving to Alberta is not one). Along with your recommendation explain one benefit and drawback to implementing it.