Estate Needs Calculator

A snapshot is taken of the client’s current assets and liabilities in order to project what these will evolve to over time. The list of assets and liabilities can include:

  • Investment portfolios, both registered and non-registered
  • Real Estate assets, including primary residences, vacation properties, and investment properties
  • Tangible assets such as artwork, jewelry, and collectables
  • Mortgages and home equity line of credits
  • Other liabilities

Projections are made given the anticipated growth rate of each asset, payment rates of the liabilities, and any income draws that will come from the investment portfolios. This provides the means to generate a value of the estate at life expectancy. Furthermore, by including details regarding the adjusted cost base (ACB) of assets and capital cost allowance (CCA) of investment properties, the future costs to the estate can be determined. These costs can include:

  1. Income tax on the value of the registered investments (excluding TFSAs and DB RPP), capital gains and the recaptured depreciation where applicable
  2. Probate costs determined based on the value of the estate as well as the province or territory in which each asset is held.
    • Note: This has been excluded from assets in the province of Quebec as the client has the option of preparing a notarial will to bypass probate.
  3. Estate administration costs estimated as a percentage of the value of the estate.
  4. Legal fees based on an anticipated set fee.
  5. Final expenses burial, cremation, or other disposition costs, including funeral expenses.

Advantages

  • Clearly identifies needs that can be addressed with life insurance solutions
  • Incorporation of multiple investment types for complex tax and probate cost calculations
  • Provides a clear and concise report for review with your client

The Estate Needs Calculator is ideal for clients who have multiple types of investments and are beginning to plan for their estate. Whether they wish to leave a significant inheritance to their heirs or make a substantial donation to an important cause, understand what will be available at the end of the day is important. By utilizing this tool, you’ll be able to demonstrate to your clients what the taxes, probate costs, and other fees will be to their estate. This allows you to put a plan in place to cover these expenses, which is often ideally accomplished though permanent life insurance products.

This concept can also help clients realize the value of working with an advisor as you will be able to update their projections as their life situation evolves.

Target market

  • Retirees or pre-retirees
    • Couple or single
    • Substantial investments in real estate and/or traditional portfolios
  • People with the following wishes
    • Transferring their estate to loved ones or chosen charities
    • Understanding the tax liabilities after their death
    • Planning for estate expenses such as probate costs and administration fees

Procedure to utilize the Estate Needs Calculator which can be found in the Desjardins Insurance illustration software.

  1. In the Concept drop down, select Estate Needs Calculator and download the Excel file. When the file is opened, ensure that Macros are enabled.
  2. There are 2 main sections of this tool, General information and Assets/Liabilities
  3. The client’s personal details are entered in the General information tab. The Age of analysis can be based on insurance life expectancy (calculated as sex, age and insurance rating (smoker vs. non-smoker)), or any age of your choosing (up to 105).
  4. The province selected with auto-populate the tax table. it is important to note that maximum marginal tax rates are used for analysis purposes as this is typically the case for the majority of estate assets.
  5. For a joint analysis, switch the toggle button and input the information for Client 2. The analysis will be done for the same calendar year (based on the age of analysis selected for client 1) and it will be assumed that both clients reside in the same province.
  6. Estate costs provide defaulted rates for Legal and Accounting fees, Final Expenses, Estate Administration, and Other Expenses. These values, as well as the applicable indexation rates, may be modified as per your client’s specific scenario. Other Expenses should be used to indicate specific planned costs that you wish to illustrate as a cost to the estate.
  7. Next step involves moving to the Assets/Liabilities tab. There you will be able to select the asset type to add. There are 5 classes of assets and one selection for liabilities. Be sure to press the "+" button in order to add the asset.
    • Real estate – Personal use (primary residence, vacation home, cottage, etc.)
      • Indicate:
        • Ownership percentage
        • Province of the property – will default to the province of residence
        • Toggle options for:
          • Secondary residence (select if this is not the Primary residence for tax purposes)
          • Roll over to spouse at death (for taxation at 2nd death only)
            • If the ownership percentage is split 50/50 and the toggle to rollover to spouse at death has been selected, it will be assumed that the property is owned jointly with rights of survivorship. This means that the tax liability, asset value and associated probate cost will only appear on the combined report.
          • Loan attached (if loan or mortgage is on title)
        • Fair market value (FMV) and Adjusted cost base (ACB)
        • Assumed growth rate
        • If the home has multiple units and some are being rented out, indicate the percentage that is being rented. This will allow for the inclusion of depreciation, if applicable
        • Press Save
    • Loans associated with Real Estate
      • To be included here, the loan/mortgage must be on title
      • Indicate the loan balance, interest rate and number of payments remaining
      • There is a drop down menu for the payment term and type of payments
      • Select the toggle if the loan is insured for life insurance and it will not be included as a debt for calculation purposes
      • Press Save
    • Investment Real Estate
      • Confirm the "%" of ownership for each client as well as the province where the real estate is located. This will default to the client’s province of residence but may be modified
      • Indicate fair market value, adjusted cost base and assumed growth rate of the real estate
      • If the property is being depreciated for tax purposes, it is important to indicate the undepreciated capital cost to date. The default value will be the adjusted cost base
      • The depreciation rate is set at 4%, which is applicable to class 1 properties, should the actual rate used be different, this value can be modified. If the property is not being depreciated for tax purposed, please indicate 0% as the depreciation rate and indicate the adjusted cost base in the undepreciated capital cost field
      • Press Save
    • RRSP and RRIF investments
      • Indicate which client owns the plan, one owner maximum per registered plan
      • Enter the assumed growth rate and if the plan is to be rolled over to a spouse at death, this will exclude it from the 1st to die analysis
      • The mandatory fields are marked in red above: fair market value, assumed growth rate and age at which the RRSP will be converted into a RRIF
        • Basic RRIF withdrawals will be calculated as per regulated percentages starting in the year selected
        • Additional withdrawals can be indicated as $ and/or %
      • If regular contributions are being made, indicate the annual deposit and associated details.
      • Press Save
    • TFSA investments
      • Indicate which client owns the plan, one owner maximum per registered plan
      • Entered the fair market value and assumed growth rate
      • If regular contributions are being made, indicate the annual deposit and additional fields will appear for details
      • Should additional withdrawal amounts be required, indicate the annual "$" and/or "%". Additional fields will appear for the specifics
      • Press Save
    • Non-registered Portfolio investments
      • Non-registered portfolios can be owned individually or jointly, indicate the details in the ownership section
      • The mandatory sections have been outlined in red and include the total portfolio value (fair market value at time of analysis) and the Equity ACB. The ACB is important to provide for the calculation of anticipated future tax liabilities
      • The components of the portfolio can be split between Short-term investments (earning interest), Fixed income investments (earning interest) and Equity investments (earning dividends and deferred capital gains). Adjust the allocation accordingly
        • Rates of return, as per the FP Canada 2022 guidelines, will appear, these can be adjusted as required
        • The annual turnover will trigger capital gains for tax purposes as the policy is rebalanced
        • The Dividend portion provides a drop down to select the percentage of Equity return that is received in the form of dividends
        • The after-tax proceeds of the investments will be reinvested, and the portfolio will be rebalanced every 3 years to maintain the targeted investment ratios
      • Annual deposits and/or withdrawals can also be indicated.
      • Press Save
    • Loans and other liabilities
      • Liabilities that are not tied to real estate assets are to be entered in this section. Ownership can be individual or joint
      • The loan balance, interest rate, payment time, frequency of payments and payments remaining will all determine the duration that this loan will remain in the analysis
        • For loans that are anticipated to remain indefinitely, switch the type of payment to Interest only
      • Select the toggle button if the loan is insured for life. This will prevent the loan from appearing as an outstanding debt on the estate analysis
      • Press Save
  8. A summary of the assets and liabilities entered will appear at the bottom of the page. This provides a snapshot of the client’s net worth.
    • Should any details require modification, highlight the asset or liability and press the pencil icon to the right. After changes have been completed, be sure to press Save
    • If an asset or liabilities needs to be removed, highlight the item in the list and press the garbage pale icon to the right
  9. The data entered can be saved by using the Save or Save As icons at the top of the user form.
  10. Once all data is entered correctly, press the PDF icon to produce the report.

    For a joint analysis, options will appear to select which type of report to run. Individual or a combined report can be selected.