This topic is substantial. This article only touches on one of the issues. Please note that there are potentially numerous tax issues on death and it is very important to discuss these implications with a lawyer and an accountant.
One of the first issues that I frequently see is the different types of property being gifted to say, adult children, on a parent’s death. It is fundamental to take into account the different tax treatment of different assets because, whilst trying to be “fair”, a parent can actually be creating an injustice unknowingly.
A recurrent and simple example of this is a parent with two children decides to give one child their “estate” (which usually contains the principal residence only and some minimal cash – which seems right for that one child) meanwhile designating the other child as the beneficiary of their RRSP, which flows by beneficiary designation outside the estate. The parent believes this to be not only fair, but “equal” as those two assets are of similar value. However, it can be grossly unfair because the parent’s estate will bear the burden of the tax on the value of the RRSP proceeds, not the child who is inheriting them, and the child inheriting the “residue of the estate” may end up with far less value than the child inheriting the RRSP, because of the tax burden that is payable by the parent’s estate. This is obviously contrary to the parent’s wishes. The parent was simply trying to be “fair” but has created a very unequal result.
Legal and accounting advice during your estate planning is imperative.
This is provided as information ONLY; it should NOT be construed as legal advice. For more information on estate planning/incapacity planning and to discuss your specific circumstances, please contact Vanessa DeDominicis at [email protected] or on 250-869-1140. Vanessa practices in the area of Wills and Estates at Pushor Mitchell LLP in Kelowna and would be more than happy to assist you.
