Planning in advance to transfer wealth, and fund your estate goals

By Raymond Letendre, CPA, CGA, CFP® 14 February 2023 6 min read

When you think of financial planning, perhaps you envision saving for a major purchase, education costs, or retirement. Indeed, good planning with the right advice can be an excellent way to help achieve your financial goals. And while planning for individual financial goals is important, taking a more comprehensive approach to planning seeks to integrate all areas of your financial well-being to ensure goals do not conflict with one another. In this article, we discuss how planning to fund specific estate goals can be considered in an overall wealth strategy to realize goals during your lifetime, and on your final estate.


Estate planning: more than just a will

Planning in advance is vital to ensure your finances are administered appropriately, and that your assets are distributed according to your wishes. It’s a common notion, however, that estate planning simply involves creating a will that distributes remaining assets. For some this might be simply leaving the remaining balance of assets to beneficiaries; for others there may be a desire to leave a specific amount to fund needs for dependents, gifts for family and friends, philanthropic intentions, or a combination thereof.

With many families’ net worth consisting of a combination of assets, one of the most common questions asked in a financial planning conversation is how to access wealth in the most efficient manner. “Efficient” to some may mean paying the least amount of taxes in one’s lifetime in order to maximize funds available for their lifestyle. Or maybe it's being able to maximize the value of the estate. In an ideal case, it’s both if you intend to fund goals during your lifetime, as well as leave gifts to others. Knowing and understanding what your final estate could be worth is one of the many benefits of a financial plan.


Funding your estate goals

Have you considered what your estate goals might be? Perhaps you have dependents that would struggle financially without you, family and friends that you would like to leave gifts to, or a certain charity that is important to you. Your finances and goals are as unique as you are, including what your net worth is made up of, lifestyle needs, wants, and your family situation, in addition to your individual values, beliefs, and wishes.

If you have goals to transfer wealth upon your final estate, you will need to determine how that goal is balanced with your own needs during your lifetime. A financial plan can help you assess the possibilities and consider your options in order to determine how you could achieve financial goals during your lifetime and, if possible, your final estate.

Jim and Judy

Both age 65, Jim and Judy have worked hard and saved diligently over many years. Now, in retirement, they are considering how they will use their wealth to fund their goals. Assuming we want to plan for funds to last until age 95, a long-term inflation of 2.10%1, and a 5% net long-term rate of return on their investment savings, we can assess scenarios according to their stated goals. Their net worth is illustrated below:

Assets Jim Judy Joint Total
Non-registered - - $300,000 $300,000
Registered $500,000 $500,000 - $1,000,000
TFSA $100,000 $100,000 - $200,000
Principal residence - - $500,000 $500,000
Net Worth $600,000 $600,000 $800,000 $2,000,000

Let’s consider Jim and Judy under two common goal-planning scenarios:

  1. No specific need or desire to leave assets in their final estate. All resources will be used to maximize spending available during their lifetime.
  2. Goals to leave specific assets to family and charity from their final estate.

Maximizing lifestyle spending

In the first scenario, planning can be relatively straight forward. With no specific estate goals, Jim and Judy simply want to determine how much they could spend during their lifetimes to exhaust their savings, but not run out of funds. Under the current assumptions, their financial analysis illustrates the following results:

Available cash flow
Government benefits
- Current CPP benefits at age 65
- Current OAS benefits at age 652

- CPP assumed at 60% eligibility each
- OAS assumed 100% eligibility each
Non-registered savings withdrawals Supplemental withdrawals through their lifetime
RRSP withdrawals Supplemental withdrawals before age 72
RRIF withdrawals (when converted) Minimum required withdrawals, plus additional amounts as needed
TFSA withdrawals Non-taxable, withdrawn as needed
Lifestyle spending, after tax
(in today’s $$, inflated each year)
Projected value of remaining final estate
(at mortality, age 95)
Financial assets:
- Registered savings

Insurance proceeds $0
Total financial assets $12,922
Principal residence3
(No tax applicable on principal residence)
Less: Final taxes ($6,138)
Total final estate4 $957,439

In this scenario, Jim and Judy exhaust nearly all of their financial wealth. However, they still leave behind real estate by way of the projected value of their home, assuming they had not sold it, purchased other real estate, or otherwise accessed the equity.


Specific estate goals

In this scenario we assume that Jim and Judy have specific estate goals:

  • Leave the value of their home, with the proceeds to be split among their two children.
  • Fund a testamentary trust in the amount of $100,000 for their grandchildren.
  • If possible, establish a legacy fund for charity after they are gone.

Leaving a charitable legacy is important to Jim and Judy. But knowing that funding a testamentary trust for their grandchildren will consume a large portion of their final estate, they wonder what amount, if any, could be available to also fund their philanthropic goal. With these specific estate goals, Jim and Judy need to assess what amount they can afford to spend compared to the previous scenario.

Assuming they don’t wish to sell their home, or otherwise use it for other lifestyle goals (downsizing, or accessing equity for instance), they can easily allocate the house to the children in their wills, with no financial impact to themselves during their lifetime. They will, however, need to adjust their spending in order to account for the financial gifts, so Jim and Judy agree that they have some flexibility in their desired lifestyle spending. With this in mind, assuming all other factors constant, their cash flow and final estate are as follows:

Cash flow and resources available Total
Lifestyle spending, after tax
(in today’s $$, inflated each year)
Projected value of remaining final estate
(at mortality, age 95)
Financial assets:
- Registered

Insurance $0
Total financial assets: $422,486
Principal residence3
(No tax applicable on principal residence)
Less: final taxes
(does not include donation tax credit resulting from charitable gift)
Total final estate4
1. To children (house)
2. Testamentary trust
3. Available for charity5

With these specific estate goals. Jim and Judy will need to reduce their spending slightly, and are comfortable with planning for $8,000 per month, after tax. Under the structure of their financial plan, they can reduce taxes payable during their lifetimes, and leave a tax-efficient estate with their children inheriting the house, and financial assets to establish a legacy fund for their favourite charity.


Planning takeaways

Whatever your goals may be, it’s important to consider how your assets can be used to provide for your own needs during your lifetime. Then, how can your estate goals be funded with your remaining assets? Are there enough assets for both? Can you afford your lifestyle if you decide to allocate assets to other goals?

Beyond the examples for Jim and Judy, other strategies may be appropriate that address goals for your lifetime, as well as your estate. Below are some planning points you may want to consider for your own situation.

  • First, consider what estate goals might be important to you. What are the required amounts, timing, and purpose of gifts that you would consider? What specific need or desire is there to provide for dependents, gifts to family and friends, or leave a legacy in your name?
  • Identify the resources available. Leaving specific gifts and bequests in your estate are admirable goals, but if they may come at the expense of sacrificing your own lifestyle goals, it may be worth reviewing what is possible, and/or what compromises might be required.
  • Determine your flexibility in either adapting your lifestyle spending, adjusting your estate goals, or both. Variability in investment returns, inflation, and unforeseen expenses over time can change projected expectations. It’s a good idea to review and update your financial plan roughly every three years, or as your life circumstances change.
  • Gifting assets during your lifetime may be an alternative to leaving assets through your estate. Care should be given to this strategy to ensure that you have fully considered the impact of such gifts. For this and other important considerations, refer to our article, Gifting to adult children.
  • For those considering charitable giving, planning considerations may include donating appreciated capital property or giving using life insurance. For more information on these topics, refer to our Planned Philanthropic Giving Guide.

Wealth can exist in many forms, from bank accounts, Tax-Free Savings Accounts, and retirement savings plans, to pensions, real estate, and ownership in private corporations, among others. How you access your wealth, along with the various strategies available, could mean the difference between achieving some or all of your goals. A financial plan can help identify an optimal approach.

You might be interested in

ATB Wealth experts are ready to listen.

Whether you're a beginner or an experienced investor, we can help.

Chat now
ATB Virtual Assistant
The ATB Virtual Assistant doesn't support landscape mode. Please tilt your device vertically to portrait mode.