Fred Stone and Wilma Gravelle have been together as a couple for almost twenty years. They are

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Question:

Fred Stone and Wilma Gravelle have been together as a couple for almost twenty years. They are not married

and have no intention of marrying. Fred was previously married to Betty and they had two children – Emma (25) and Roger (21). Betty passed away when Roger was one year old. Fred is now 52 years of age and Wilma is 45

years of age. They had two children together –alph (16) and Uter (14). Ralph has some cognitive and physical disabilities. He is eligible for the Federal disability tax credit.

Fred and Wilma’s assets are summarized in the table below.

They have never done wills or Powers of Attorney.

When Betty passed away, she owned a cottage that was inherited from her mother. The cottage is very valuable and extremely important to the Stone family as a legacy item. She wanted it preserved for Emma and Roger and their eventual families. Betty also had her life insured for $1 million. This was paid to Fred when she died (see the TD Wealth account). Fred uses and needs the income from that money for his lifestyle with Wilma. He wants

the capital preserved for Emma & Roger.

Wilma is an entrepreneur and owns 75% of her own business, “Bedrock Pool & Paving Stone”. Fred owns 25% of the shares of the company. Bedrock installs pools, decks, driveways and sidewalks. Emma is the general manager of the company. The business is growing very quickly in value. It has doubled in value in the last five years and the projections are that it will be worth nearly $2 million by the end of 2021.

Additionally, their goals are:

As much as possible, to ensure that the lifestyle of the survivor is maintained should one partner away.

ESTATE PLANNING CASE – WINTER 2021

Protect Ralph’s interests in the estate plan;

Maintain family assets as mentioned in the description above;

Minimize taxation at death (including probate) but not at the expense of their other goals;

Fred & Wilma’s assets are as follows:

Asset Owner Valuation Comments

Asset: London, Ontario home

Owner: Fred & Wilma as

tenants in common

(50/50)

Valuation: FMV $800,000

ACB $250,000

Comments: Principal residence, no

mortgage. Each party

contributed equally to

purchase price

Asset: RRSP at RBC

Owner: Fred

Valuation: FMV $700,000

ACB $230,000

Comment: No beneficiary named

Asset: RRSP at RBC

Owner: Wilma

Valuation: FMV $400,000

ACB $210,000

Comments: Uter & Ralph named as equal. beneficiaries

Asset: MoonLife Insurance Policy

Owner: Fred is the policy owner, Wilma is the life insured

Valuation: T-100 Policy

Face amount $450,000

Comments: No beneficiary named

Asset: Cottage in Muskoka

Owner: Fred

Valuation: FMV $3 million

ACB $250,000

Comments: Inherited from Betty’s mother when she died

Asset: Non-registered investment account at

TD Wealth

Owner: Fred

Valuation: FMV $2.5 million

ACB $1 million

Comments: Insurance proceeds from Betty’s death

Asset: Non-registered investment account at

CIBC

Owner: Wilma & Joe Gravelle, as joint tenants

Valuation: FMV $550,000

ACB $100,000

Comments: Inherited from their Grandmother when she passed away. Joe isWilma’s brother

Asset: 2019 Lexus SUV

Owner: Wilma

Valuation: FMV $45,000

Asset: Western Duplex

Owner: Wilma

Valuation: FMV $450,000

ACB $225,000

Comments: Property is rented to students and nets about $1,400 month in

taxable income

Asset: Bedrock Pool and Patio Ltd.

Owner: Fred (25%) and Wilma (75%) common

Valuation: FMV $2 million

ACB $50,000

Comments: No shareholders agreement, buy sell, or life insurance

Required:

Assume no changes to their current planning. Clearly explain and demonstrate the client’s estate situation today where Fred & Wilma are in a common accident and:

Fred dies and Wilma survives;

Wilma dies and Fred survives;

Be sure to discuss estate asset distribution and income taxation (not probate) caused by the deaths. (Assume they are both in a 50% MTR at death).

Fred and Wilma’s tax advisor has suggested they may benefit from an estate freeze. Explain the concept and benefits of an estate freeze for the Bedrock Pool and Patio Ltd. Shares to the clients (5 marks)

Given how they currently own their various assets, what is the Ontario Estate Administration Tax

(probate) where:

Fred dies and Wilma survives (2.5 marks)

Wilma dies and Fred survives (2.5 marks)

The couple has asked you to make some suggestions about their estate planning needs. They fully appreciate you are not a lawyer but also know you have some understanding of the things they need to consider and the solutions available to achieve their goals. They want you to:

Identify and fully explain 3 different things they can do with a Will that will achieve their planning goals (15 marks);

Wilma has indicated she feels no need to do either a Power of Attorney for Personal Care or Power of Attorney for Property. Using examples from her situation, discuss the merits of each document