The following has 2 Scenarios:

1)In Scenario One Paul and Lisa are killed in a car accident.

2)In Scenario Two Paul and Lisa are still living and looking for detailed estate planning

3)Each scenario requires analysis and recommendations (focusing on the question). You need to make 2 sets of responses/recommendations (one as to how the estate will be treated at time of their death and another as they plan for their death in advance.

Background

Paul , age 55, immigrated to Canada from Scotland 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, Nessie Inc., owns the hotels and, in some cases, the land on which the hotels are built.

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

Information Gathering Meeting

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

Paul

Personal Assets

FMV

ACB

Home owned jointly with Lisa

$1,800,000

$800,000

RRSPs

$500,000

Non-Registered Portfolio

$1,000,000

$900,000

Corporate Assets/Liabilities

FMV

ACB

1000 Common Shares of Nessie Inc.

$8,000,000

$0

Lisa

Not employed

Serves on the board of the Toronto General Hospital Foundation

Home jointly owned with Paul

Other Personal Assets:

Personal Assets

FMV

ACB

RRSPs

$200,000

Non-Registered Portfolio inherited from parents

$700,000

$400,000

Gavin

Employed by Nessie Inc.; reports to a General Manager who reports to Paul

Leslie

Full-time student.Note:Leslie has a new boyfriend, 25, who the family thinks may be a drug dealer.

Planning to Date

On her marriage to Paul, Lisa purchased a Universal Life policy with a death benefit of $500,000 and named Paul beneficiary. She did not name a contingent beneficiary. Paul and Lisa 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.

Paul and Lisa have both named each other as beneficiaries on their RRSPs.

Paul plans to expand his business and projects that Nessie will continue to grow at 6 - 8% per year. He expects that Gavin will take over the business eventually, as long as he proves himself capable. He hasn't given any thought as to whether Leslie will eventually join Nessie.

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

Scenario #1:Doom's Day

On January 15, 2020, Paul and Lisa were in a terrible car crash. Paul died at the scene. Lisa died in hospital a week later.

Questions for Scenario #1:

1.What possible challenges do you foresee with the settlement of this estate? (5 marks)

2.List the assets that will be included in Paul's estate at death and calculate the probate fees payable, using Ontario rates. (3 marks)

3.Using only the information provided in the case and an appropriate tax rate (you'll need to make an assumption to justify it), calculate taxes owing on Paul's death. Show all your work. (2 marks)

4.List the assets that will be included in Lisa's estate at death and calculate the probate fees payable, using Ontario rates. (3 marks)

5.Using only the information provided in the case and an appropriate tax rate (you'll need to make an assumption and justify it), calculate taxes owing on Lisa's death. Show all your work. (2 marks)

6.Total the fees and taxes payable on Paul and Lisa's death. If you were the estate administrator, which assets would you use to pay these expenses and why? (2 mark)

7.Using only the information provided in the case:

a.Calculate Gavin's net worth and Leslie's net worth after Paul and Lisa's estates have been settled. (2 marks)

b.Do you think this is what Paul and Lisa would have wanted for the children? Why or why not? (1 marks)

In Scenario Two Paul and Lisa are still living and looking for detailed estate planning

Paul and Lisa's accident was just a terrible nightmare. They are still living but the nightmare has scared them both. They want to make sure that an appropriate estate plan is in place as soon as possible.

1.(15 marks) What advice would you provide to Paul and Lisa to ensure that they're estate planning wishes are met?

Be specific.Describe components of their estate, where proper estate planning could actually:

a.Save them money

b.Save them and their heirs and beneficiaries heartache and challenges.

2.(3 mark) What steps should Paul take to further facilitate the viability of Nessie in the event of his sudden death?

3.(2 marks) Do you think Paul is a good candidate for an estate freeze? Why or why not? Illustrate the process Paul would go through to freeze his shares in Nessie.