Now’s the time to review estate plans

(May 6, 2005) With tax season over for another year, now is the time advisors should be contacting their clients to review their estate plan, according to one of Canada’s leading personal tax experts.

“April is the time when people have all of their investment files open, they’re reviewing accounts with brokers, they’re reviewing their registered accounts and making plans for RSP contributions,” says Evelyn Jacks, President of The Knowledge Bureau and author of Essential Tax Facts.

People with sophisticated investments generally finish their taxes in April, because they have to wait for their trust slips at the end of March.

“They’ve also done their intergenerational look, because when we file tax returns, we always start with the lowest income earner and work our way up to the highest income earner,” Jacks says. “This way we can transfer amounts appropriately, including tuition amounts and medical expenses. By virtue of the tax preparation process, you have to take a future look at your affairs.”

Advisors should take advantage of the fact these issues are top of mind with clients right now, rather than waiting and forcing the client to re-examine their position all over again.

While they are reviewing the estate plan, advisors should take this opportunity to review the tax efficiency of the client’s portfolio.

“It’s most important that advisors become knowledgeable on the tax side of the equation,” she says. “They have a bigger influence on the resulting tax consequences than they may be aware of, because of their participation in the income source creation throughout the year.”

Many financial advisors are not involved in the tax filing process, but they should ensure they have a close relationship with their client’s tax accountant.

“It’s very important that you do call all of your clients to set up a meeting,” Jacks says. “The advisor is the person who’s in charge of creating taxable income throughout the year, as it relates to the investment portfolio, so it’s important the investment advisor understands how the different sources of income that are created will fit into the rest of the tax scenario.

“A reviewed portfolio becomes updated and in sync with what is in the will.”

June 15 is only five weeks away and advisors can work with accountants to ensure their client is not overpaying their taxes.

“If we find though CRA’s billing notice that installments are out of whack and they’re billing you for a lot more than you should be paying in 2005, now is a good time to review that and take any capital we create from reduced installments and consider how that can be invested.”

With summer vacations right around the corner, the clock is ticking for advisors who don’t want to struggle tracking their clients down. Besides, wouldn’t you rather be at the cottage as well?

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com