A rather popular belief is that only wealthy families need estate planning, but the reality is quite different. Any person over legal age should have estate planning in order to maximize the value of property left as an inheritance, no matter the monetary value of the property at the present time. Whether you are single, married, living together, an immigrant, retired, rich or middle class, everyone can benefit from estate planning.
Assets can be transferred without tax consequences, thanks to the rollover of assets to the spouse (deemed disposition by the deceased, at the adjusted cost base). This transfer postpones the payment of taxes to the time when the spouse sells these assets or dies.
RRSPs and RRIFs can also be transferred to the spouse without taxation.
A TFSA transferred to a spouse is added to the spouse’s TFSA.
During the first 36 months after death, the estate benefits from a progressive tax rate, like that for individuals, which allows the income to be split, thereby reducing the taxes payable. After the first 36 months, the applicable tax rate becomes the maximum marginal rate.
Income-generating assets are best (rental property, shares, etc.) for the estate during this period in order to benefit from a progressive rate rather than taxing the income received by the heirs.
If you want to designate someone in addition to their spouse as beneficiary, they should be aware of the fact that taxation could diminish the inheritance.
They can, however, minimize the tax payable by assigning to their spouse the assets whose values have appreciated the most.
They are, thus, free to transfer to the beneficiaries of their choice other assets with low or no capital gains, such as GICs and money market funds.
Paying taxes is an inevitable obligation, even at death. However, it’s possible to set up taxation strategies that will minimize the final tax bill
Have you foreseen/provided for how your heirs are going to pay your tax bill upon your death?
Governments increasingly encourage donations to charitable organizations by granting significant tax advantages in the form of tax credits for individuals.
Planned giving through life insurance is beneficial because the organization that you want to help normally receives much more than the amount that you spent (on the premiums). This strategy enhances the donation amount. According to the type of donation, the tax advantages materialize either at the time of the donation or upon the death of the donor.