Imagine a family with a principal residence, a rental property, a private corporation, RRSP and TFSA accounts, investment accounts and life insurance.
They have also carefully prepared a will. But one important question remains:
Through what path will each of these assets eventually transfer?
Some assets may enter the estate and then be handled under the will. Others may transfer through a different arrangement because of the way title is held or because a beneficiary has been designated.
Estate planning therefore requires more than asking, “What does the will say?” It also requires asking:
Which assets will enter the estate?
The answer may differ from one asset to another.
Real estate: begin with how title is held
For a principal residence or rental property, the transfer path begins with the title registration and ownership structure.
For example, when two people own a property as joint tenants with a right of survivorship, one owner’s interest may pass directly to the surviving joint owner on death rather than entering the estate for distribution under the will.
Other ownership structures may lead to different results.
For the same property:
The way title is held can affect whether the property enters the estate and how the will applies.
A private corporation: if the company is mine, are its assets part of my estate?
This is an easy point for business owners to misunderstand.
- An individual owns shares of the corporation.
- Cash in corporate accounts, real estate and investments held by the company belong to the corporation itself.
Owning the company therefore does not mean every asset inside the company forms part of the owner’s personal estate.
For a business owner, estate planning may also need to consider:
- How will the shares be handled?
- Is there a shareholder agreement?
- If one shareholder leaves, how will the business continue operating?
Business succession therefore involves more than a will. It also involves the shares, the corporate structure and business continuity.
RRSPs, RRIFs and TFSAs: start with the beneficiary
For registered accounts such as RRSPs, RRIFs and TFSAs, beneficiary designations require particular attention.
When a valid beneficiary designation is in place, the asset may transfer under that arrangement rather than entering the estate.
The key questions for these accounts are:
- Who is currently named as the beneficiary?
- Does that designation still fit the family’s circumstances and overall estate plan today?
Life insurance: the beneficiary also matters
Life insurance follows a similar principle.
When a policy has a valid beneficiary designation, the insurance proceeds are generally handled according to that designation.
Estate planning should therefore review more than the will.
The beneficiary arrangements recorded on insurance policies should be reviewed as well.
Bank and investment accounts: begin with “Who owns it?”
For bank and non-registered investment accounts, begin with ownership.
- Is the account individually owned?
- Is it a joint account?
- Is it held by a corporation?
Different forms of ownership may lead to different transfer paths.
When reviewing a family balance sheet, it can be more useful to clarify each asset’s ownership and transfer path before focusing on its value.
A different way to look at estate planning
When these assets are viewed together, it becomes clear that estate planning cannot be organized only by categories such as real estate, investments, insurance and cash.
For every asset, begin with three questions:
- Who owns it?
- Who is the beneficiary?
- Does it enter the estate?
Once these questions are clear, the family can determine which assets transfer through other arrangements, which enter the estate, and how assets that enter the estate and can be disposed of by will are to be handled under that will.
Guaranti perspective
A will is important.
But a complete estate plan involves more than completing a will.
Families often plan real estate, a business, investments and insurance separately. When wealth eventually transfers, however, all of those arrangements return to the same family.
The question is therefore not only “Who will receive my assets?” More importantly:
Through what path will each asset reach them?
Some assets pass under a will, some through beneficiary designations, and others according to title and ownership structure.
As the family’s assets grow, genuine estate planning brings these different paths back together and asks whether they connect properly and still reflect the family’s circumstances today.
Estate planning is not only a document. It is a review of the family’s entire wealth structure.
— Guaranti Group
This article provides general educational information based on common circumstances in British Columbia, Canada. It is not legal, tax, insurance or investment advice. Specific estate arrangements may vary depending on asset ownership, beneficiary designations and individual circumstances. Consult a qualified estate lawyer and the appropriate professional advisers.
First published on Guaranti’s WeChat account.