Background

Thomas, age 58, immigrated to Canada from Greece in his 20s. Over the years, he built a small chain of budget-rate hotels in the GTA and has become wealthy beyond his dreams. His private corporation, Apollo Inc., owns the hotels and, in some cases, the land on which the hotels are built. Two years ago Apollo purchased a $5,000,000 Aetna term insurance policy on Thomas's life. Apollo is both the owner and beneficiary of this policy.

Thomas and his first wife divorced years ago and she returned to Greece. He has no ongoing obligations toward his first wife and is now happily married to Sari, 45. He has a son Tony, 28, from his first marriage and a daughter Lisa, 17, with Sari. Tony is actively involved in his father's business and Sari wants Lisa to become involved also.

Information Gathering Meeting

At your first meeting with Thomas, you gathered the following information:

Thomas

Personal Assets FMVACB

Home owned jointly with Sari $ 3,000,000 $ 1,600,000

RRSPs (portfolio of segregated funds) $ 800,000 n/a

Corporate Assets/Liabilities FMVACB

1000 common shares of Apollo Inc. $ 7,100,000 $ 0

Sari

Not employed

Serves on the board of the North York General Hospital Foundation

Home jointly owned with Thomas

Non-registered portfolio of investments purchased with funds from an inheritance: FMV $650,000, ACB $610,000

Tony

Employed by Apollo; reports to a General Manager who reports to Thomas

Lisa

Full-time student

Planning to Date

On her marriage to Thomas, Sari purchased a Universal Life policy with a death benefit of $100,000 and named Thomas beneficiary. She did not name a contingent beneficiary. Thomas and Sari recently purchased a joint and last-to-die Term-to-100 insurance policy with a death benefit of $2,000,000. Their respective estates are beneficiary. This is their only personal life insurance.

Thomas has named Sari the beneficiary of his RRSPs.

Thomas plans to expand his business and projects that Apollo will continue to grow at 10 - 15% per year. He expects that Tony will take over the business eventually, as long as he proves himself capable. He hasn't given any thought as to whether Lisa will eventually join Apollo.

Thomas and Sari have met with their lawyer to discuss their wills but the wills haven't been drawn up yet.

Doom's Day

On January 15, 2015, Thomas and Sari were in a terrible car crash. Thomas died at the scene. Sari died in hospital a week later. Lisa has a new boyfriend, 25, who the family thinks is a drug dealer.

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Instructions follow...

Instructions

Respond to the following questions inbulletform:

List the assets that will be included in Thomas's estate at death and calculate the probate fees payable, using Ontario rates.

Using only the information provided in the case and a 40% tax rate, calculate taxes owing on Thomas's death. Show all your work.

List the assets that will be included in Sari's estate at death and calculate the probate fees payable, using Ontario rates.

Using only the information provided in the case and a 40% tax rate, calculate taxes owing on Sari's death. Show all your work.

Total the fees and taxes payable on Thomas's and Sari's death. If you were the estate administrator, which asset/s would you use to pay these expenses and why?

Using only the information provided in the case:

Calculate Tony's net worth and Lisa's net worth after Thomas's and Sari's estates have been settled.

Do you think this is what Thomas and Sari would have wanted for the children? Why or why not?

What step did Thomas take prior to death that will help Apollo's management team in the short-term? Explain your reasoning.

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