It is December 2021, and Justin and Sophie Smith would like a review of their family financial situation and estate plan. They have completed a detailed questionnaire and the following summaries have been prepared:

Personal Information

Client	Age	Health	Occupation
Justin Smith	69	Excellent	Business Executive
Sophie Smith	64	Excellent	Business Executive
Andrew Smith (Son)	47	Poor	Unemployed
Maria Smith (Daughter)	40	Excellent	Engineer
Grandchildren	15, 12 & 9

Employment

Justin has owned and operated Smith Inc., a successful specialty manufacturing company, for the past 25 years. He has declined opportunities to expand outside of Canada. Sophie was at one time quite active in the business, but now works on a part time basis only. Each of them owns 50% of the common shares in the company. Justin has negotiated the sale of the company. On closing, January 1, 2022 Justin and Sophie will each receive $950,000 for their shares. They provided the initial share capital of $2,000 each in 1990. Their income from the company has been a combination of salary and dividends.

Justin and Sophie are planning on travelling the world once the sale of the business is complete.

Financial Position

The couple has a home worth $800,000, in Innisfil, Ontario, which is mortgage free. They purchased it in 1995 for $300,000. They also have a cottage in the Kawarthas lake district worth about $350,000, which they bought for$100,000 cash 15 years ago. Both properties are held in joint tenancy.

Justin has accumulated $1,100,000 in RRSP assets and he has Sophie named as his beneficiary. Sophie has $300,000 in RRSP assets and she has the estate named as her beneficiary. Both Justin and Sophie have TFSA accounts and they each have balances of $41,000 in their own accounts. Neither of them has named beneficiaries on their TFSA accounts.

Sophie use to actively trade stocks in a non-registered account. She stopped after the market crash in 2000 and realized a $100,000 capital loss that she has been carrying forward since then. They have a joint non-registered account of $200,000 invested in GICs. Justin and Sophiehave never used the Lifetime Capital Gains Exemption.

Children

A major concern is their son, Andrew. 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 no marketable skills. He has been treated for substance abuse. Justin kept him on the company payroll in recent years at $2,000 a month, but let him go when the business was put up for sale. Andrews employment benefits will expire shortly and he has no job prospects.

Maria is very successful in her field and is comfortable financially. She has three children who will almost certainly go to college or university. Justin and Sophie have stated that they want to pay for their grandchildrens post-secondary education, but have not started separate savings accounts for them.

Life Insurance

Sophie has a $150,000 group term, life insurance policy, which will terminate when the business is sold. Justin and Sophie have $1,000,000 joint-life, last-to-die, term-to-100 policy, which they took out 10 years ago when Justinbecame concerned about the tax liability on his estate. The estate is named as the beneficiary. Sophie and Justin 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

Justin and Sophie 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 Andrew. They can control how much he gets while they are living but they are concerned that Andrew 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 grandchildrens education as tax efficiently as possible. They would also like to leave some funds to charity.

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 the sale of the business and have not gotten them done yet.

Questions:

1) Identify Justin and Sophies estate planning objectives. (4 marks)

2) Prepare Sophie and Justins net worth statement. Please note on the statement the adjusted cost base of each asset(beside or below it). (6 marks)

3) Calculate the tax liability Justin and Sophie will have resulting from the sale of their business after it is complete on January 1, 2022? Assume their MTR is 40%. (3 marks)

4) If Justin were to die following the sale of the business, assume that Sophie is the sole beneficiary of Justins estateand that she wants to maximize all rollover opportunities. Assume a MTR of 40% for both of them. (5 marks)

a) Calculate the taxes payable on his final return.

b) Calculate Sophies ACB following distribution of Justins estate.

5) In writing, provide the Smiths with fiverecommendations to be implemented today to meet their goals and objectives. These recommendations need to be based on their current situation (i.e. moving to Alberta should not be one!). Along with your recommendationsexplain the benefits of implementing them.