Canadians don’t deal with an estate tax in estate planning but are subject to the deemed disposition tax when they die. However, there are ways to minimize your estate’s exposure to this tax by structuring your estate plan in a way that guarantees your beneficiaries getting the assets you intend for them.
In Canadian estate planning, there are two significant takeaways to consider:
- Canada’s disposition tax is deferred when assets are transferred or held in a spousal trust for a surviving spouse.
- If you die without making a will, your province will decide how to distribute your assets.
Without further ado, here are the main things you need to prepare for in estate planning:
1. Taxation and Estate Planning
The deemed disposition tax is for when your investments are deemed to be sold after death. Capital gains from the dale are included in a final income tax return filed within the year of your demise. This final tax return indicates the value of any retirement accounts and income received from investments in stocks, bonds, and real estate, as well as life insurance proceeds within the year of death.
However, this tax is deferred if the assets are transferred to a surviving spouse if not sold or unclaimed. Taxes are deferred even if the assets are held in a spousal trust and giving income to the other spouse. However, suppose the surviving spouse sells the assets, the tax applies.
If the spouse dies and the assets are passed to heirs, 50 percent of the overall investments from stocks, bonds, real estate, and other assets are taxable at the personal income tax rate.
2. Make a Will
Ensure that you have a will that indicates your financial affairs so they can be managed according to your wishes once you die. If there is no valid will, you are considered to have died intestate or having died without a valid will. When that happens, your province has the right to decide how to distribute your assets, regardless of your wishes.
Following the intestacy laws, the province generally gives the surviving spouse the first $50,000 value and divides the rest between the spouse and the children. If you are without a surviving spouse or children, the assets will be distributed to your parents, then brothers and sisters, and so on.
Furthermore, without a valid will, there might be delays and extra expenses after your death. The court also appoints a bonded administrator to be the executor of the estate. Assets given to children under the age of 19 are also held by a bonded guardian or the Public Trustee,
A Last Will
In conclusion, ensuring that your assets are given to your heirs or distributed according to your wishes, the last will is necessary. The last will’s purpose is to instruct your chosen executor on how to dispose of your assets following your death. Usually, it is opened after the funeral, which is when your heirs come together to read your last will.
Our experienced will and estate planning lawyers at Ontario Wills and Estate Plans provide quality legal advice for all your estate planning needs. We can guide you in estate planning and writing a will so you can guarantee that your wishes are observed following your death. We know that different circumstances require different solutions, and so we take every opportunity to do what’s best for our clients. Get in touch with us and let us know how we can help.