Advisor Opportunities Using Trusts Sandy Cardy Mackenzie Financial Corporation

) Strategic use of trusts  Initiate tax and estate planning discussions  Customize basic strategies RESULT:  Increased satisfaction with your value  Opportunities for business building

Topics to cover today:  Why trusts?  Basics of taxation  Case studies:  Asset protection  Handicapped beneficiaries  Business Succession  Income-splitting testamentary trusts  Insurance Trusts

Trusts – Who is a prospect?  Minor children  Special-needs dependents  Family members who are not “financially astute”  Income-splitting  Retirement planning  Charitable giving  Inheritances  Marriage  Divorce  Confidentiality  Probate  Family law property claims

Trusts Testamentary Trusts  Taxed at graduated rates  Flexible year end  No attribution Inter-vivos Trusts  Top tax rates  Calendar year end  Attribution

Case Studies

Trusts - inheritance planning- The Evans family Sam (22 ) Son Heather (20) Daughter Robert (85) + Emma Evans John’s Parents John (56) Kate (55) Robert’s ins. policy: $500,000 Robert’s will: $1,000,000 to John

Case #1-Testamentary trusts Testamentary Trusts (created after death)  Delay distribution of assets  Control over assets  Save on income tax

Direct MTR of 45% Mackenzie Sentinel Corporate Bond Fund $1,000,000 6% interest income$60,000 Taxes payable$27,000 Income retained$33,000 Net annual savings through a testamentary trust Testamentary graduated rates $1,000,000 $60,000 $16,000 $44,000 $11,000 John’s inheritance of $1,000,000

John’s inheritance John - ?Kate - $8,000Heather - $8,000Sam - $8,000 Evans Family Trust $60,000 Income $24,000 paid to beneficiaries $36,000 Total Taxes = $8,000

The Power of Testamentary Trusts DirectTestamentary Trust (Joan as beneficiary) Testamentary Trust (including spouse and children as beneficiaries) Taxes payable$27,000$16,000$8,000 Net annual savings N/A$11,000$19,000 Joan’s $1,000,000 inheritance from his parents is generating $60,000 interest income annually.

Testamentary trusts - planning opportunities  Income splitting for high income beneficiaries  Income sprinkling for beneficiaries with dependant children  Designated income

Case #2 – Insurance trust  Vivian (68)  Widowed but well off  4 children  3 successfully independent  1 dependent on Vivian at age 36

Vivian dies? Issue  Unequal sharing  Legal wrangling  Family discord Possible solution  Will planning  Gifting  Alter Ego trust  Insurance trust

Insurance trusts  Funded with the proceeds of life insurance policy  Established outside estate as separate trust  Beneficiary designation pays proceeds of policy to individual - receives proceeds as trustee  Documentation to establish an insurance trust:  Last Will and Testament  Trust Declaration or Trust Agreement

Insurance trusts – advantages  Taxed as testamentary trust  Probate avoidance  Creditor proof  Confidentiality

Case # 3 - Handicapped beneficiaries  Amanda, age 6  Father  Life insurance proceeds $250,000  Designated beneficiary  Options available  In trust for account  Annuity  Formal trust

“Henson” trust Trustee $250,000 Fully discretionary Control of assets Prescribed beneficiary election

Case #4 - Jackson Tool & Die  Age 56  Wife Joan (55)  Children  Eric (27)  Cody (22)  Joanne (17) Bill Jackson Owner/Manager Jackson Tool & Die $5 million

Estate freeze - trust Operating Company Trust Family Debt and preferred Common shares Bill

Estate freeze - strategies to consider  Use the capital gains exemption now  Recommend multiple wills

Estate Freeze - The real nitty gritty  When to freeze – will owner have enough value to live on in the future?  How do you protect children’s shares from matrimonial claims?

Case #5 – Asset protection  Lou (70)  Divorced – married Anna Nicole 2 years ago  3 children  2 grandchildren  Anna Nicole (32)  Divorced  1 son

Lou dies first? Issue  Family law issues  Estate depletion  Lou’s children disinherited  Legal wrangling  Family discord Possible solution  Will planning  Gifting  Alter-ego trust  Spousal trust

Alter Ego trust  Protection of assets  Control of capital  Confidentiality  Jurisdiction shopping  Probate avoidance Assets Lou and/or Anna Nicole Lou and/or Anna Nicole Children

Mackenzie is here to help  Client Service Group  Sales Reps  Private Client Group  Tax and Estate Planning  Mackenzie University