Reference no: EM133282408

Case: Read the case study and prepare an analysis of Andrew and Sarah's goals and concerns, along with questions for them, and potential recommendations for their estate plan.

Andrew 55, and Sarah 51, just celebrated their 12th wedding anniversary in their home in Toronto, Ontario. For both Andrew and Sarah this is their second marriage. Andrew has two children from his first marriage, Frank 21, and Zoey 14, who live with Andrew's ex-wife, Sophie in London, Ontario, (about 200 km away). Frank is studying creative writing at Fanshawe College in London, while Zoey is in high school and spends the week with her mother and every other weekend with Andrew and Sarah. Although Frank is studying at college, he has maxed out both of his credit cards (approximately $25,000) and lives with Sophie spending every paycheck he receives from his part time job at McDonald's.

Sarah has three children from her previous marriage with Grant. Their children's names are Zack 25, Hannah 23, and Joseph 20. Zack is disabled, living with Sarah and Andrew. He is currently receiving government subsidies for his disability, cerebral palsy. Zack is fully dependent on Sarah and Andrew as he will never be able to work. Hannah is attending the University of Toronto for her dual MBA and law degree and Joseph is attending Seneca College studying to be an accountant.

Together, Andrew and Sarah have twins, Isaac and Ivy who are 10 years old.
Andrew is a mechanical engineer who is a 50% owner of a fabrication plant, MovieLand, they specialize in making custom molds for movie sets. Andrew's partner, Bill owns the remaining 50% of the business. They are currently a partnership. Andrew focuses on the mechanics and building, Bill focuses on the front office, marketing, and sales for the company, MovieLand. MovieLand employs 15 people, ten in the back working with Andrew and five in the front end working with Bill. Andrew and Bill have been running the company for 5 years and are contemplating the next steps in their business relationships and what agreements may be required to support that. Currently they have no agreements in place. Andrew brings home a salary of $250,000 per year with bonuses of up to $25,000.
Sarah is a high school teacher for the Toronto District School Board. She makes $105,000 per year and has contributed into the teacher's pension since she started teaching 28 years ago. She is hoping to retire in 4 years at age 55 to receive her full pension.
Andrew is paying child support for both Frank and Zoey, he is not sure how much longer he has left of the child support. Sophie never remarried after the divorce with Andrew and has been working as a manager at Tim Horton's.
Andrew and Sarah have several properties. Prior to their marriage, Andrew purchased a recreational property in Arizona for $115,000 USD it is currently worth $250,000 USD (approximately $315,000 CAD). Sarah used the proceeds of her divorce to purchase a cottage in Northern Ontario in cash. She purchased it in 2007 for $250,000 CAD, it is now worth $850,000. Together they purchased their home in Toronto for $850,000 that is now worth $1,300,000. They have a mortgage on their Toronto home of $550,000 and have utilized a line of credit on the cottage of $100,000 that they put into a non-registered account as an investment loan.
Andrew has not updated his will since his marriage with this first wife, Sophie. Sophie is listed as his executor and Power of Attorney for both Personal Care and Property.

Sarah selected her brother who lives in Edmonton, Alberta to be her Power of Attorney for Personal Care and her sister who lives in Toronto, Ontario to be her Power of Attorney for Property.
Andrew and his brother, James have just been appointed Power of Attorney for Property and Personal Care for their mother who has been diagnosed with early-stage Alzheimer's. Andrew does not know how much this role is going to demand.
Andrew and Sarah are concerned about their disabled son, Zack and would like to ensure he will be okay should something happen to them.
Andrew has a Term Life insurance policy for $500,000 that is coming up for renewal in 3 years that has the beneficiary of Sophie. According to the divorce agreement, Andrew must maintain this policy until his children have finished either high school or post-secondary education, whichever is later. Andrew would like to keep the policy to go towards his estate plan, but he is not sure if $500,000 is enough to cover his estate planning needs.

Sarah has a Permanent Policy for $100,000 with a term rider of $500,000. The term rider is set to renew in 2026. She is unsure if this is enough coverage.
Do they have enough insurance?
Andrew and Sarah are in good health and could be interested in more life insurance.
Andrew and Sarah's monthly income is currently $31,600 before deductions (CPP, EI, Income Taxes, Pension and Group RRSP Contributions). $20,000 after deductions.

Investable Assets:
Andrew's Group RRSP: $850,000 (ACB $455,500)
Sarah's RRSP: $85,000 (ACB $57,250)
Andrew's TFSA: $45,000 (ACB $30,500)
Sarah's TFSA: $25,000 (ACB $14,250)
Joint Non-Registered Account: $185,000 (ACB $100,000) - leveraged
Sarah's Pension: Monthly benefit at age 65 of $4,020

Monthly Expenses:
Property Taxes $1,200
Water, sewer $500
Property Ins $200
Heat, Electricity $1,000
The Twin's Activities $1,000
Garden $250
Prop Management Service $300
Transportation $800
Leased Car Payment $850
Groceries $1,500
Clothing $500
Gifts $500
Charity $1,000
Entertainment $350
Travel $500
Personal care $300
Subscriptions (Netflix, Amazon, Disney+, etc.) $100
Communications $300
Child Support for Frank and Zoey $3,577
TFSA Savings $1,000
Misc. $3,000
Total $18,727
Monthly Surplus $ 1,273

Your objective is to briefly discuss their goals and objective as well as discuss any other gaps in their estate plan that you would like to bring to Andrew and Sarah's attention. Finally, give Andrew and Sarah Recommendations to the Estate Plan your group has decided on.
Prepare a family tree, net worth statement, and identify 6 items regarding their estate plan that need recommendations or further questioning.

Some items you may want to address:

Question 1. Recommendations should be regarding the Andrew and Sarah's Estate Plan.

Question 2. Do the clients' estate/risk planning needs seem clear enough? Do you require added clarification? Do you require more information to know if the needs are in conflict with other objectives (if so, what). If you require information, state this as you discuss their goals. In general, you can assume that your clients have and will continue to maintain their current lifestyle.

Question 3. Provide a list of your client's current financial position and his or her future income potential and identify financial obligations or objectives that might interfere or conflict with the client's estate/risk planning objectives.