Preserving your client’s estate with estate preservation

November 2015

Estate Preservation is a financial planning tool in Diamond View designed to help your clients understand how much capital they need to fund the liabilities that occur at death, including capital gains tax, RRIF tax, probate fees and other estate costs.

Other estate costs include executor, legal and accounting fees, funeral expenses and miscellaneous expenses. Estate Preservation allows users to input these costs separately and will include them in determining the amount of capital required at death. As a result, it is important that the amounts entered for each cost are as accurate as possible to ensure the amount of capital required at death is not under or overstated.

Executor fees

When your client prepares their Will, they will name an executor whose role is to administer your client’s estate in accordance with the provisions in the Will. If the Will provides for the executor to be compensated for the work they do in administering the estate, there are a number of considerations to determine reasonable compensation, including the size and complexity of the estate and the time commitment to administer it. As well, compensation may be impacted by provincial guidelines on executor fees. For this fee consider using 5% of the total value of the estate as a starting point. While it may not be the exact fee used, it provides a starting point and basis for discussion.

Legal and accounting

Advice from professional advisors may be required to settle your client’s estate. For example, a lawyer may need to probate the will, assist in administering the estate and deal with the sale of property. An accountant may need to file final tax returns. Any costs for professional services are paid by the estate. Generally, legal fees for an application for probate may start at approximately $2,500 while accounting fees for final returns may start at $1,000. Hourly rates for professional advice may easily exceed $350 per hour. A starting point for legal and accounting fees would be roughly $5000, although the complexity of the estate could drive this amount significantly higher.

Funeral costs

Generally, your client can expect to pay somewhere in the region of $4,500 for a cremation with funeral service. Funeral and burial costs can range from $5,000 to $15,000. More elaborate funeral services can drive these costs even higher. A starting point for this field is $10,000.

Other

The “other” area allows for miscellaneous costs to be included in the analysis. This may include costs for appraisals, auctioneers, executor insurance or real estate fees. These costs will vary, so there are no guidelines. Any amount can be entered based on the facts of your client’s situation.