5705 Cancross Court, Mississauga, ON L5R 3E9View on Map »
Ottawa dropped Estate Taxes over forty years ago. All the provinces did away with Succession Duties by 1985. We thought that was the end of taxes arising at death. We were wrong.
Ask yourself these questions:
If you answered 'yes' to any of these questions, you may be hit with death taxes, something you thought had been abolished in Canada.
The U.S. has Estate Taxes. Paul and Linda own a condo in Arizona. American legislation catches Canadians who own property in the United States.
You don't have to go outside of Canada to fall victim to death taxes. Max owns several rental properties and has been claiming depreciation on the buildings over the years. On death, some of the depreciation may be recaptured and become fully taxable. On top of that, any increases in value of the properties will be taxed as capital gains.
Steve owns a business that has been very successful, worth far more today than he paid for it. On death, his shares will also be subject to tax on the increase in value.
Tom and Pam have a cottage at the lake. It has provided their family many wonderful vacation memories. The cottage will also provide a big tax bill. Capital gains tax can be avoided on very few things, most notably your principal residence.
Then there's income tax on everything that's been growing tax-deferred in our registered retirement plans. Did we really think Ottawa would give us those deductions without expecting anything back?
You can postpone many of these taxes by leaving the asset to your spouse. But that's all it is - a postponement. Often Canada Revenue Agency gets more by waiting for its share until your spouse dies.
Fortunately, there's a better way for most of us to pay these inevitable taxes - life insurance. The same event that attracts death taxes can actually produce the cash to pay them. And at less cost than you might think. There is also a unique type of life insurance policy, called joint-and-last-to-die, that pays on the second death. This plan is especially effective if taxes have been postponed.
*Fictional characters for illustrative purposes only.
Copyright © 2020 Life Letter. All rights reserved. For informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice.. Readers are advised to seek professional advice before making any financial decision based on any of the ideas presented in this article. This copyright information presented online is not to be copied, or clipped or republished for any reason. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or omission, or any financial decision.
This publication and website are intended for Ontario residents only and the information contained is subject to change without notice. Mutual Funds are offered and regulated through Global Maxfin Investments Inc. (GMII). Insurance products (including Segregated Funds) and Income Tax Planning is provided under the name of Ausim Mobeen. GMII does not supervise these activities and will not be accountable, responsible or liable for such activities. This publication contains opinions of the writer and may not reflect opinions of GMII. The information contained herein was obtained from sources believed to reliable, but no representation, or warranty, express or implied, is made by the writer or GMII or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal or account advice. As each situation is different you should consult your own professional advisors for advice based on your specific circumstances.
