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wills & estates preserving the estate reducing the risks to your loved ones anTonio P. Raviele Raviele Vaccaro LLP e state planning is to preservation of estate value what love is to marriage — you can't have one without the other. absent an estate plan, estate assets are almost certain to be eroded by taxation, primarily, and secondly by a multitude of fees charged to and paid out of the estate. Taxation consider the following tax implications. Estate Administration Tax (EAT) eat is charged on the value of the estate; calculated as follows: • $5 for each thousand dollars, or part thereof, on the first $50,000; and • $15 for each thousand, or part thereof, on the value of the estate beyond the first $50,000. Capital Gains Tax (CGT) the income tax act (ita) stipulates that a taxpayer is "deemed to have disposed of all capital property immediately prior to death at fair market value." the effect of the deemed disposition rule is as follows: • unrealized capital gains are taxable; • capital cost allowances are subject to recapture; and • registered investments are collapsed and taxed. consider the following kinds of capital property subject to cgt: • mutual funds or stocks are subject to cgt on 50% of the gain. • depreciable capital property is subject to 8 recapture of any capital cost allowance (cca), that is, the depreciation claimed over the lifespan of the property. • investments such as rrsps, rrifs, and liras are deregistered on death; the result being that the savings, together with the accrued growth are realized as income and taxed in the year of death to the deceased taxpayer. fees fees also contribute to erosion of an estate, albeit certain fees are unavoidable. consider administering an estate without the assistance of a lawyer without whom an estate administration would not be carried out competently. simplification of the estate plan will minimize the fees associated with the administration thereof. for example, executor fees - often ranging between 2-5% of the estate - can be eliminated by naming, as executor in a will, a spouse or other major beneficiary. By avoiding the payment of executor fees and the taxes exigible thereon, more of the estate is ultimately preserved for the beneficiaries. where executor fees are unavoidable due to the complexity of the estate or in order to avoid conflict which might arise by appointing a beneficiary to serve as executor, fees may all the same be minimized. whether executor fees are to be paid to an arm's length individual or a corporate/institutional trustee, such fees can be reduced through efficient disposition of estate assets as opposed to distributions carried out pursuant to long term testamentary trusts. achieving Tax efficiency one way to achieve tax efficiency is to opt for joint ownership of property. joint ownership offers a right of survivorship to the surviving owner(s) such that assets pass to the survivors outside of the estate thereby avoiding tax implications. investments allowing for beneficiary designations can be paid out on an eat free basis. furthermore, such investments (and capital property generally) can pass between spouses on a tax deferred basis by way of a "spousal rollover", an exception to the deemed disposition rule, thereby permitting a deferral of any capital gains as well as recaptured depreciation until such time as the surviving spouse deceases or the capital property is disposed of by the spouse or qualifying spousal trust. the importance of estate planning cannot be overstated and the lawyers at raviele vaccaro llp are available for consultation in order to assist with the planning of your estate.