Personal Finance, 6th Canadian
Edition by Jeff Madura
Complete Chapter Solutions Manual
are included (Ch 1 to 16)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
1.Overview of a Financial Plan
2.Applying Time Value Concepts
3.Planning with Personal Financial Statements
4.Using Tax Concepts for Planning
5.Banking Services and Managing Your Money
6.Assessing, Managing, and Securing Your Credit
7.Purchasing and Financing a Home
8.Auto and Homeowner's Insurance
9.Health and Life Insurance
10.Investing Fundamentals
11.Investing in Stocks
12.Investing in Bonds
13.Investing in Mutual Funds
14.Retirement Savings Planning
15.Retirement Income Planning
16.Estate Planning
,The Solutions Manual are organized in reverse order, with the last chapter displayed first, to
ensure that all chapters are included in this document. (Complete Chapters included Ch16-1)
Chapter 16
Estate Planning
Chapter Overview
Estate planning involves the act of planning how wealth will be distributed upon death. The most
important task in estate planning is the creation of a will. A will describes how the estate should be
distributed upon death and appoints a guardian for any surviving minor children. Without a will,
(intestate) the court will appoint an administrator for the estate and the estate will be divided according
to the laws of the province rather than the wishes of the deceased. In the case of Indigenous Peoples,
the administration of wills and intestacy laws are a federal matter and fall under section 48 of the
Indian Act. To create a valid will in most provinces, the individual must be at least the age of majority,
usually 18 or 19, be mentally competent, and not subject to undue influence. The English form will is
the most common type of will in Canada. This must be handwritten or typed, witnessed by two
individuals, dated, and signed. Normally, the witnesses are not named as beneficiaries in the will. A
notarial will is a formal type commonly used in Quebec. It is completed with a notary and only one
witness signature is required. A holograph will is a will that is written solely in the handwriting of the
testator. It does not require the signature of any witnesses. For Indigenous Peoples that live on-reserve,
a valid will only needs to be in writing, signed by the testator, state the testator’s wishes as to the
disposition of their assets, and state that the will take effect once they have died.
The key components of a will include testator identification, revocation of previous wills, appointment
of executor, appointment of guardian for minor children, authorization to pay debts, authorization to
make bequests, distribution of residue, administration of the estate, liability, signatures, and letter of
last instruction.
A will should be updated every two to three years, or as a result of the occurrence of specific events,
including: birth or adoption of a child, marriage, undertaking of a common-law relationship, separation
from a spouse or common-law partner, receipt of an inheritance, death of a child, relocation to a new
province of residence, changes to provincial legislation, illness or death of an executor or trustee named
in the will, and illness or death of a significant beneficiary. In all provinces except Quebec, the act of
marriage will automatically cancel all wills dated before the date. Major changes in a will are executed
by creating a new will. Minor changes are made by writing a codicil to the will. A will is executed
through probate. The purpose of the probate process is for the court to declare the will valid. The
executor for the estate files forms with the court, provides copies of the will, and provides a list of the
assets and debts of the deceased. The executor usually opens a bank account for the estate to pay the
debts of the deceased and to deposit the proceeds from liquidating assets. In addition to filing a final
tax return, the executor may file up to three optional tax returns on behalf of the deceased and/or their
estate. There are three types of optional returns: rights or things, business income, and income from a
testamentary trust. As a result of the principal residence exemption, RRSP rollover provisions, and
optional tax returns, the amount of estate tax paid by the average Canadian could be low.
There are several estate planning strategies that can be used to plan your estate. Joint tenancy with
rights of survivorship (JTWROS) is a form of joint ownership where the death of one joint owner
results in an asset being transferred directly to the surviving joint owner. This allows the asset to pass
around the estate, which eliminates any probate fees associated with the asset. However, there are some
16-1
, disadvantages to a JTWROS, including: a loss of control over the asset, the possibility that someone
may contest the arrangement after the death of the original owner, a capital gain may be triggered when
the asset is transferred to a joint tenancy arrangement, and the asset(s) may now be exposed to the
creditors of the joint owners.
Policies and accounts for which you have named a beneficiary do not form part of your estate, thereby
reducing the value of your estate subject to probate fees. This includes your insurance policies, RRSPs,
RRIFs, and pensions.
Trusts and charitable contributions are useful estate planning tools. A trust is a legal document in which
one person transfers assets to another person, called the trustee, who manages the assets for the benefit
of the beneficiaries of the trust. An inter vivos trust assigns the assets of an individual to a trustee while
the individual is still alive. Since income earned by an inter vivos trust is taxed at the highest combined
federal and provincial marginal tax rate, trust income is normally distributed to beneficiaries. A
revocable inter vivos trust can be dissolved by the settlor, whereas an irrevocable trust cannot be
changed. An alter ego trust is a trust that contains assets that have not been subject to immediate
deemed disposition, thereby deferring any capital gains tax. To qualify as an alter ego trust, the settlor
must be at least 65 years of age, a resident of Canada, and the income and capital beneficiary of the
trust during his or her lifetime. Testamentary trusts are created by a will. They are popular because they
can be used to provide for the needs of dependent children after the settlor has died. Many individuals
leave a portion of their estate to charitable organizations. Contributions to charitable organizations
made in the year a taxpayer dies may be claimed against 100 percent of net income. In addition, any –
unused contributions may be used to write off up to 100 percent of the previous year’s net income.
Other aspects of estate planning include preparing a living will and a power of attorney. A living will is
a simple legal document in which individuals specify their preferences if they become mentally or
physically disabled. Many individuals express a desire not to be placed on life support if they become
terminally ill. A limited (non-continuing) power of attorney allows someone to make specific decisions
for an individual if the individual is temporarily incapacitated (for example, on vacation). A general
power of attorney allows someone to make any decisions for an individual. Both of these types of
powers of attorney are subject to expiry. On the other hand, an enduring (continuing) power of attorney
continues, even if the grantor is mentally incapacitated. Finally, a durable power of attorney for health
care grants a person the right to make specific health care decisions for another individual. Key estate
planning documents should be kept in a safe and accessible place.
Chapter Objectives
The objectives of this chapter are to:
1. Explain the use of a will
2. Describe the common types of wills
3. Describe the key components of a will
4. Describe probate fees and taxes at death
5. Explain the types of estate planning strategies
6. Introduce other aspects of estate planning
16-2
Edition by Jeff Madura
Complete Chapter Solutions Manual
are included (Ch 1 to 16)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
1.Overview of a Financial Plan
2.Applying Time Value Concepts
3.Planning with Personal Financial Statements
4.Using Tax Concepts for Planning
5.Banking Services and Managing Your Money
6.Assessing, Managing, and Securing Your Credit
7.Purchasing and Financing a Home
8.Auto and Homeowner's Insurance
9.Health and Life Insurance
10.Investing Fundamentals
11.Investing in Stocks
12.Investing in Bonds
13.Investing in Mutual Funds
14.Retirement Savings Planning
15.Retirement Income Planning
16.Estate Planning
,The Solutions Manual are organized in reverse order, with the last chapter displayed first, to
ensure that all chapters are included in this document. (Complete Chapters included Ch16-1)
Chapter 16
Estate Planning
Chapter Overview
Estate planning involves the act of planning how wealth will be distributed upon death. The most
important task in estate planning is the creation of a will. A will describes how the estate should be
distributed upon death and appoints a guardian for any surviving minor children. Without a will,
(intestate) the court will appoint an administrator for the estate and the estate will be divided according
to the laws of the province rather than the wishes of the deceased. In the case of Indigenous Peoples,
the administration of wills and intestacy laws are a federal matter and fall under section 48 of the
Indian Act. To create a valid will in most provinces, the individual must be at least the age of majority,
usually 18 or 19, be mentally competent, and not subject to undue influence. The English form will is
the most common type of will in Canada. This must be handwritten or typed, witnessed by two
individuals, dated, and signed. Normally, the witnesses are not named as beneficiaries in the will. A
notarial will is a formal type commonly used in Quebec. It is completed with a notary and only one
witness signature is required. A holograph will is a will that is written solely in the handwriting of the
testator. It does not require the signature of any witnesses. For Indigenous Peoples that live on-reserve,
a valid will only needs to be in writing, signed by the testator, state the testator’s wishes as to the
disposition of their assets, and state that the will take effect once they have died.
The key components of a will include testator identification, revocation of previous wills, appointment
of executor, appointment of guardian for minor children, authorization to pay debts, authorization to
make bequests, distribution of residue, administration of the estate, liability, signatures, and letter of
last instruction.
A will should be updated every two to three years, or as a result of the occurrence of specific events,
including: birth or adoption of a child, marriage, undertaking of a common-law relationship, separation
from a spouse or common-law partner, receipt of an inheritance, death of a child, relocation to a new
province of residence, changes to provincial legislation, illness or death of an executor or trustee named
in the will, and illness or death of a significant beneficiary. In all provinces except Quebec, the act of
marriage will automatically cancel all wills dated before the date. Major changes in a will are executed
by creating a new will. Minor changes are made by writing a codicil to the will. A will is executed
through probate. The purpose of the probate process is for the court to declare the will valid. The
executor for the estate files forms with the court, provides copies of the will, and provides a list of the
assets and debts of the deceased. The executor usually opens a bank account for the estate to pay the
debts of the deceased and to deposit the proceeds from liquidating assets. In addition to filing a final
tax return, the executor may file up to three optional tax returns on behalf of the deceased and/or their
estate. There are three types of optional returns: rights or things, business income, and income from a
testamentary trust. As a result of the principal residence exemption, RRSP rollover provisions, and
optional tax returns, the amount of estate tax paid by the average Canadian could be low.
There are several estate planning strategies that can be used to plan your estate. Joint tenancy with
rights of survivorship (JTWROS) is a form of joint ownership where the death of one joint owner
results in an asset being transferred directly to the surviving joint owner. This allows the asset to pass
around the estate, which eliminates any probate fees associated with the asset. However, there are some
16-1
, disadvantages to a JTWROS, including: a loss of control over the asset, the possibility that someone
may contest the arrangement after the death of the original owner, a capital gain may be triggered when
the asset is transferred to a joint tenancy arrangement, and the asset(s) may now be exposed to the
creditors of the joint owners.
Policies and accounts for which you have named a beneficiary do not form part of your estate, thereby
reducing the value of your estate subject to probate fees. This includes your insurance policies, RRSPs,
RRIFs, and pensions.
Trusts and charitable contributions are useful estate planning tools. A trust is a legal document in which
one person transfers assets to another person, called the trustee, who manages the assets for the benefit
of the beneficiaries of the trust. An inter vivos trust assigns the assets of an individual to a trustee while
the individual is still alive. Since income earned by an inter vivos trust is taxed at the highest combined
federal and provincial marginal tax rate, trust income is normally distributed to beneficiaries. A
revocable inter vivos trust can be dissolved by the settlor, whereas an irrevocable trust cannot be
changed. An alter ego trust is a trust that contains assets that have not been subject to immediate
deemed disposition, thereby deferring any capital gains tax. To qualify as an alter ego trust, the settlor
must be at least 65 years of age, a resident of Canada, and the income and capital beneficiary of the
trust during his or her lifetime. Testamentary trusts are created by a will. They are popular because they
can be used to provide for the needs of dependent children after the settlor has died. Many individuals
leave a portion of their estate to charitable organizations. Contributions to charitable organizations
made in the year a taxpayer dies may be claimed against 100 percent of net income. In addition, any –
unused contributions may be used to write off up to 100 percent of the previous year’s net income.
Other aspects of estate planning include preparing a living will and a power of attorney. A living will is
a simple legal document in which individuals specify their preferences if they become mentally or
physically disabled. Many individuals express a desire not to be placed on life support if they become
terminally ill. A limited (non-continuing) power of attorney allows someone to make specific decisions
for an individual if the individual is temporarily incapacitated (for example, on vacation). A general
power of attorney allows someone to make any decisions for an individual. Both of these types of
powers of attorney are subject to expiry. On the other hand, an enduring (continuing) power of attorney
continues, even if the grantor is mentally incapacitated. Finally, a durable power of attorney for health
care grants a person the right to make specific health care decisions for another individual. Key estate
planning documents should be kept in a safe and accessible place.
Chapter Objectives
The objectives of this chapter are to:
1. Explain the use of a will
2. Describe the common types of wills
3. Describe the key components of a will
4. Describe probate fees and taxes at death
5. Explain the types of estate planning strategies
6. Introduce other aspects of estate planning
16-2
