Reference no: EM132494582

The following has 2 Scenarios:

1) In Scenario One Thomas and Sari are killed

2) In Scenario Two Thomas and Sari are still living and looking for detailed estate planning

3) Each scenario requires analysis and recommendations (focusing on the question). You need to make 2 sets of responses/recommendations (one as to how the estate will be treated at time of their death and another as they plan to potentially utilize an estate freeze (still alive))

In Scenario One Thomas and Sari are killed

Background

Point 1: Thomas, age 58, immigrated to Canada from Greece in his 20s. Over the years, he built a small chain of budget-rate hotels in the GTA and has become wealthy beyond his dreams. His private corporation, Apollo Inc., owns the hotels and, in some cases, the land on which the hotels are built. Two years ago Apollo purchased a $5,000,000 Aetna term insurance policy on Thomas's life. Apollo is both the owner and beneficiary of this policy.

Point 2: Thomas and his first wife divorced years ago and she returned to Greece. He has no ongoing obligations toward his first wife and is now happily married to Sari, 45. He has a son Tony, 28, from his first marriage and a daughter Lisa, 17, with Sari. Tony is actively involved in his father's business and Sari wants Lisa to become involved also.

Information Gathering Meeting

At your first meeting with Thomas, you gathered the following information:

Thomas

• Personal Assets FMV ACB
• Home owned jointly with Sari $ 3,000,000 $ 1,600,000
• RRSPs (portfolio of segregated funds) $ 800,000 n/a
• Corporate Assets/Liabilities FMV ACB
• 1000 common shares of Apollo Inc. $ 7,100,000 $ 0

Sari

Not employed

• Serves on the board of the North York General Hospital Foundation

Home jointly owned with Thomas

• Non-registered portfolio of investments purchased with funds from an inheritance: FMV $650,000, ACB $610,000

Tony

• Employed by Apollo; reports to a General Manager who reports to Thomas

Lisa

• Full-time student

Planning to Date

Point 3: On her marriage to Thomas, Sari purchased a Universal Life policy with a death benefit of $100,000 and named Thomas beneficiary. She did not name a contingent beneficiary. Thomas and Sari recently purchased a joint and last-to-die Term-to-100 insurance policy with a death benefit of $2,000,000. Their respective estates are beneficiary. This is their only personal life insurance.

Thomas has named Sari the beneficiary of his RRSPs.

Point 4: Thomas plans to expand his business and projects that Apollo will continue to grow at 10 - 15% per year. He expects that Tony will take over the business eventually, as long as he proves himself capable. He hasn't given any thought as to whether Lisa will eventually join Apollo.

Point 5: Thomas and Sari have met with their lawyer to discuss their wills but the wills haven't been drawn up yet.

Doom's Day

Point 6: On January 15, 2015, Thomas and Sari were in a terrible car crash. Thomas died at the scene. Sari died in hospital a week later. Lisa has a new boyfriend, 25, who the family thinks is a drug dealer.

Instructions follow

Question 1. Thomas and Sari need to execute wills. What "special" clauses should Thomas consider inserting in his will that will help avoid the problems identified in the first part of the assignment?

Question 2. Aside from executing their wills, what other steps should Thomas and Sari take with regard to their estate plan?

Question 3. What steps should Thomas take to further facilitate the viability of Apollo in the event of his sudden death?

Question 4. Do you think Thomas is a good candidate for an estate freeze? Why or why not? Illustrate the process Thomas would go through to freeze his shares in Apollo.