Assignment
Frederick and Wilma Stone
It is August 2022, Frederick and Wilma Stone meet with you to review their family financial situation. They had a friend that recently passed away in their 50's and this has made them start to think about their own estate plan. They have completed a detailed questionnaire and the following summaries have been prepared:
Personal Information
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Client
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Age
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Health
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Occupation
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Frederick Stone
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69
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Excellent
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Sales Manager
|
|
Wilma Stone
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64
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Excellent
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Engineer
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|
Owen Stone (Son)
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47
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Poor
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Unemployed
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Melanie Stone (Daughter)
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40
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Excellent
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Marketing
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|
Grandchildren
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15, 12 & 9
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|
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Employment
Frederick and Wilma are happily married and are actively planning their retirement in 6 months. Frederick has spent his career in sales and Wilma as an engineer at a robotics manufacturing company.
When Frederick and Wilma retire in 6 months, they are planning on spending the winters travelling and their summers at their cottage.
Financial Position
The couple has a home worth $1,700,000, which is mortgage free. They purchased it in 1995 for $300,000. They also have a cottage in the Kawartha's worth about $500,000, which they bought for $75,000 cash 25 years ago. Both properties are held in joint tenancy.
Frederick has accumulated $905,000 in RRSP assets and he has not named a beneficiary. Wilma has $850,000 in RRSP assets and she has named Frederick as her beneficiary. Both Frederick and Wilma have fully maximized their TFSA contributions, contributing $81,500 total. Frederick's TFSA is valued at $100,000 today and Wilma's is valued at $105,000. Neither of them has named a beneficiary or a successor annuitant on their TFSA accounts.
Wilma used to actively trade stocks in a non-registered account. She stopped after the market crash in 2000 and realized $110,000 capital loss that she has been carrying forward since then.
Last year, Wilma inherited $550,000 from her mother's estate. She was unsure of what to do with this money and decided she wasn't ready to decide because of her grief. She put her inheritance in a non-registered account and invested the money in a money market fund.
Children
A major concern is their son, Owen. He has been in and out of trouble with the authorities since high school. He has never held a job for any length of time. He has been treated for substance abuse. Owen has been living with his parents and they have been helping him financially.
Melanie is very successful in her field and is comfortable financially. She has three children who will almost certainly go to college or university. Frederick and Wilma have stated that they want to help pay for their grandchildren's post-secondary education but have not started saving for them yet.
Life Insurance
Frederick and Wilma have $500,000 joint-life, last-to-die, term-to-100 policy, which they took out 10 years ago. The estate is named as the beneficiary. Wilma and Frederick want to ensure that the assets they have worked hard for are passed on to their heirs. They want to minimize any taxes owing when they die.
Goals & Objectives
Frederick and Wilma realize that the amount of money they have managed to accumulate is more than adequate for their lifetime needs and they want to provide for their children and grandchildren through their estate.
They are aware that they will have to support Owen. They can control how much he gets while they are living but they are concerned that Owen would squander any inheritance and ask how they can structure his legacy to meet his needs for life.
They would like to set aside funds for their grandchildren's education as tax efficiently as possible. They would also like to leave some funds to their local hospital.
Wills & POAs
They had drawn up wills and POAs when their kids were small. They destroyed these documents 5 years ago because they were outdated and did not represent their current wishes. They have been meaning to see their lawyer to get new documents drawn up but have been focused on their upcoming retirement and have not gotten them done.
Task
A. Prepare Wilma and Frederick's net worth statement. Mote the adjusted cost base below the name of the asset.
B. If Frederick were to die today, how would his estate be distributed? Assume that Frederick and Wilma live in Ontario.