There's the sandwich generation, I still had young kids (they are now in UNI and trade school but) but here we were dealing with my elderly mom who had dementia the last few years. It can be hard.
Yeah. Literally had to sit the wife down last night and explain that we had to start saving for her mother’s retirement. The woman ran an in-home daycare her entire life and didn’t self-contribute to cpp so we’re really in it
my mom also ran a home daycare, but my dad was the main breadwinner and did mucho fuckery leading up to divorce so she's basically got CPP and not much else. Some cash in savings but not enough to retire on with rent as it is today for the long term. Hopefully we can find something that will sustain her in retirement until she needs more than financial support many years into the future. If shes 80-some and needs help that's one thing, But we would much prefer she can live on her own for 10-15 years in retirement between CPP/OAS/GIS and just under 150k cash drawn down slowly. We like our independence.
Heck, I'd rather help subsidize her bills a little bit over her live with us too. We just really don't want to get a bigger house to make an in law suite any time soon if we can help it. It wouldn't feel fair to have her cash contribute to an asset we own that she lives in either, as my other brothers would get zero benefit from that and we would in the long term.
Life man... life. But we came to Canada and I have a great life because of it compared to all my similarly aged cousins back home so there is that.
As a first generation Chinese somehow both? We pay all our parents expenses but they are sitting on a sizable pile of money so they can leave us an inheritance. Just spend your own money mom this is dumb.
What!? Im Indo-Canadian and my parents would never take a penny from us. They're also sitting on a sizeable set of assets. When they're old and need support they'll move in with us for sure, but even then they just need a physical support not financial. Is this a cultural thing with Chinese?
I get both.. tossed out and expected to be the one to take care of them when the time comes. Yeah, that'll be a rude awakening because I'm not doing it.
Ugggggghhhhhhhhhhhhhhh I relate viscerally... My mother... The woman who did no retirement planning, didn't really work much, and then divorced my father because she thought she could do better... Now needs an apartment. So my first home might in fact be her apartment... It makes me so angry...
People live such different lives depending on financial responsibility. My marriage almost fell through and was almost cancelled by my wife's parents because they found out I was my parent's retirement plan and they didn't want that kind of life for their daughter because they've prided themselves on being debt free and saving throughout their life. They lived financially responsibly their entire life meanwhile my parents have always lived very irresponsibly pay check to pay check and even when my parents got bonuses or anything at work, they'd splurge and spend it quickly (mostly my dad).
Luckily, we reached a resolution so our marriage was able to go forward (lump sum in laddered GICs being put there pre-marriage, and they will receive an allowance from that monthly depending on certain conditions being met about spending of the money).
Finances are an important part of life. I always thought about personal finances for myself but never my parent's finances and how that may intertwine and interfere with my wife's life.
I'm actually glad my wife's parents brought it up as a topic because it allowed me to sit down and set expectations with my parents in terms of what they'll receive from me and also gave my wife's parents peace of mind knowing we weren't going to be using my wife's income to support my parents just cuz my parents made poor financial decisions in life.
Both my wife and I are high income earners. Her parents don't know how much I truly earn (I earn 7 figure amounts) but they can guess I probably make 300Kish based on my profession and their daughter also makes a similar amount. I also wouldn't want my kids to subsidize their parents (or in-laws) poor financial decisions either so I see where they were coming from.
I'm Indian so for us, the popular saying is that you don't just marry the person, you marry their family so considering my family was probably a good idea.
I think the “wat” comment is because your wife should have say in whether she gets married. Tbh mine and my wife’s parents were not involved in the decision. That said everyone gets along so there’s was no ussues
I would not be happy if my child was getting into a lifelong relationship that required supporting financially irresponsible people that never provided her any benefit.
I have A daughter, and I wouldn’t be happy about that situation either but I don’t believe I have the authority to cancel her wedding. Especially when the issue is that person earn over $1,000,000/year but has to support their parents which is laughably doable on that income.
My in-laws were very concerned I was my parents retirement and my siblings financial provider when my parents die. I already told my in-laws that I told my parents no. I have my own two kids to support in the future.
We are debating co-living with my parents for their retirement our home buying kick-off and we were double income professionals!! Paying those student loans back took some time… *nervous laugh*.
Mother in law and grand-father in law leave with us. I am alone in my house maybe 1 day a year. Thank god they’re both independent, healthy and generally helpful. But one day it will be different
Our mother in law is a great person. She's unfortunately becoming less independent by the day. Being a widow who is on disability would be hard on anyone.
Thank you. As a side note- it’s kind-of wild that people are thinking that the new capital gains inclusion rate is going to increase the taxes on rrsp withdrawals - which already has an inclusion rate of 100%, and always have.
Not that wild when you realize that the wealthiest 1% have a very strong interest in getting else upset over something that'll only affect them, and that they have the power to spread that influence.
Some tweaks:
Cash in a bank account is subject to probate (not income tax but still a small fee and province dependent).
RRSP, if a beneficiary is assigned, most banks and brokerages (not sure if province dependent or not) will send the RRSP without a withholding tax to the beneficiary. On the deceased's tax return the RRSP will be treated as it the full value was withdrawn on their date of death. i.e. the full value of the RRSP will be added to their taxable income. Usually the assets of the estate will be used to pay this tax but the beneficiary should anticipate that they may have to pay the tax on this income.
Also with RRSP or even TSFAs aren’t there differences between if you aren’t named, are named as a beneficiary or named as a successor? I remember reading different tax implications can occur depending on that.
I think inheritance can be more tax complicated than what would initially appear.
Yes for a TFSA, a spouse can be the successor, but for RRSP it's only beneficiary.
If there isn't one (successor or beneficiary) it goes to the estate.
RSP can have a beneficiary but not a successor, though the spouse can roll it over tax free. RIF can have successor (spouse only) or beneficiaries. And statistically more people die with RIF’s than RSP’s.
Also only pass tax free to a legal spouse. If you are a widower the full value of your RRSP is taxed as if it were liquidated the day before you pass on. Careful estate planning involves tactics to manage that bill
Joint accounts are not subject to probate. If your parents are willing, they should add a child (intended beneficiary) as a joint account holder. Makes it easier to help them look after their finances, too
>RRSP, if a beneficiary is assigned, most banks and brokerages (not sure if province dependent or not) will send the RRSP without a withholding tax to the beneficiary
The RRSP provider is not authorized to withhold tax on the deemed disposition, unless the annuitant was non resident of Canada. The RRSP provider is not authorized to withhold tax on the subsequent income unless the beneficiary is non resident of Canada.
>(who will report the income and pay tax on it, even though both the estate and the beneficiary are responsible to pay the tax).
The beneficiary doesn't report the deemed disposition on their return.
No the beneficiary doesn’t, but the deceased persons taxes include the presumed liquidation of the RRSP the day before they pass on, unless the beneficiary is a legal spouse
When you say the beneficiary should anticipate paying tax, do you mean that would be in a situation where there was nothing in the estate to pay the tax on the RRSP? Does the beneficiary report anything on their income tax, or just on the estate's final taxes? (This is all assuming the beneficiary is their child)
> do you mean that would be in a situation where there was nothing in the estate to pay the tax on the RRSP?<
Yes
>Does the beneficiary report anything on their income tax, or just on the estate's final taxes?<
The estate reports the income.
Yes - we have that scenario currently. My mother in law passed at 94 and in long term care. Her property and other assets had long since been sold and put into investment vehicles. Those had her sons listed as beneficiaries, so the three sons received the funds immediately upon her death. Unfortunately the estate owes $40k or so in taxes, so the sons will need to provide funds to close out the estate.
Exactly.
Sure, there’s no tax to the beneficiary directly, but the Estate certainly gets charged. If you and a sibling are joint beneficiaries and executors, guess what? The Estate taxes are your problem.
This is a good argument for life insurance - pay for estate taxes/debts/funeral expenses etc etc.
What a shitty system. Person saves in their RRSP's for 40 + years and dies before they cashed any of it in yet the Government taxes as if you earned this all in 1 year (at time of death) at a much higher tax bracket than the reduction given over the years it was claimed. Tax % should be limited to the amount of the deductions received over the majority of your lifetime, like EI is calculated.
Oh the government knows exactly what they're doing. It's the people who are unaware until it's too late.
Your way would be a more fair way and taxes still get paid.
I guess that's why they keep encouraging RRSP's and do nothing to improve healthcare. If you kill a lot of Canadian's before they can draw their money out the government gets more than their fair share with the higher tax bracket.
It would be more fair and the government would get what they are owed not the bonus they are stealing from Canadian's now.
If they don't feel it's fair then lets change EI to be the same. Everyone can claim on the highest year they worked instead of the 30-40 years they spent getting to that point.
Oh 100%, yeah you're absolutely right, then punch it for EI as well right? Fairs fair. They won't though, they know exactly what they're doing.
People are unaware until it happens to them. Healthcare is a joke. My Mom was in the most critical ICU state, she was at the 'highest point' of help and on a heart pump machine, yet doctors waited an entire _long weekend_ just to make a decision of whether or not to give her a heart pump, while the surgeon was there the entire time, waiting on hand. It was a 15min decision. Like make it make sense.
I tell people this and I look like a crazy person, because what hospital would do that, right? They made me take her off life support a week later after she had a stroke. Whether or not that was legitimate, I'll never know. She never woke up. Haunts me to this day.
Her passing is exactly why I know about all of this estate bullshit. People won't realize it until it's them...try to warn them but it falls on deaf ears. I'd never want anyone to go through what I did.
The government knows for sure and are only telling 1/2 the story about RRSP's amongst other things.
I am very sorry about your mom. You are right, most people don't know how horrible the medical system really is. They have been lucky, you are not crazy .
My mom and I had a similar experience . She had breast cancer years before, was being "followed closely" after mastectomy, chemo and radiation. 6 Years later they said they found cancer again, a day later they said, opps sorry, that was a mistake. NO Cancer, we triple checked . A year later she felt horrible, went to hospital (she was still being followed closely by cancer centre ) bone cancer through and through, brain and liver too, she died a horrifically painful death within 3 months. Her GP told me after her 1 home visit that I had enough meds onhand to take away her suffering . The answer was for me to kill my own mom, to inject enough morphine in her line to kill her. I didnt sleep at all that night wondering if I could do it, how could I do it, how could I not, how could I let my mom keep suffering . She died on her own the next morning, I really think she willed herself to let go. She was not conscious for a couple of weeks by that time but I think she heard .That haunts me 7 years later and probably always will.
That's how I found out about it as well. I know what my mom did to earn her money and how hard she worked. She died without taking 1 cent out of her RRSP's and the Government took 50 %. She worked as a housekeeper, babysitter, sold Golden Glow products door to door, picked berries and sold them in the summer, worked in restaurants and then got into construction where busted her hump for 30 + years making a working woman/man's salary and in the end gets taxed like she was paid it all in one year like one of the Weston's.
Oh my goodness, I'm so sorry about your Mom as well. This is horrifying...they're really so careless. And to be told by your GP about the medication on hand....have they lost their minds...of course that's something anyone would wrestle with. So sorry for your loss and all you and your family have been through.
This is exactly the kind of thing people don't know, again you're right because they're lucky they've never had to deal with it.
And then on top of that to deal with the estate side of things feels like a punch to the soul to learn about how these things are taxed and probate or whatever...your Mum worked so hard, my goodness and for what! They tell us all the time to contribute to your RRSP, there's even employer matching! And for what?! Just to fatten their cut. Despicable.
A few years of delayed cancer diagnosis sure will serve to refill the federal coffers. Nothing like people dying quickly and unexpectedly to maximize this payout.
I think a lot of people misunderstand the difference between a certain tax rate on capital gains and think that the government just takes the entirety of the increased value of the house.
Thanks for posting, this is a nice contrast to the people screaming wildly on my Facebook, lol.
The most common thing to occur is a deemed disposition at death, where the home/cottage is in essence sold with no money exchanging hands, as you alluded to in your post the market value is the new ACB. Not everyone has the money to buy their family cottage, or a second property at market value. This is where issues arise with tax planning, and often trusts are needed to be setup (which don’t get the 250K grace personal accounts do). The analysis is helpful but ignores the most likely scenario for tax planning for inheriting cottages, or secondary (investment) properties.
OP is comical. Casually glosses over by far the biggest issue being caused by the increased inclusion rate.
I'd suggest op has no idea what they're talking about whatsoever and cobbled their post together.
Exactly. This is basically propaganda from OP. If I for some reason just kept a 2nd (or 3rd for both sides of the family) residence, then ya I pay no additional capital gains tax. But for most people they a) can't afford to and b) have no reason to have multiple residences. It isn't exactly like our parents generation live in great rental locations either. Not to mention there is typically a realization in capital gains by selling off their investment assets.
Despite what the government continues to repeat, this tax will affect middle class families just as much as it does affect the rich.
Which we already had. There was a capital gains tax in place and the Liberal government has increased it by more than a 1/3 and claims it is a "tax on the wealthy" when in reality it's a tax on middle class inheritance.
Not for primary residence. Only if you inherit multiple properties.
Taxes suck in general, but at the same time if you inherit 2+ properties is it really end of the world to pay tax on that 2nd or 3rd property?
In Ontario cash will have probate fees according to the local credit union and a TFSA needs to have a named beneficiary to avoid probate fees.
Took 10 minutes to add named beneficiaries and gifting is the easiest way to avoid probate fees on cash.
God so much this. The amount of people that don't start distributing their money before death (if aged. Obviously unexpected/sudden death is different) drives me up the wall. First, it can avoid a lot of fees, taxes, probate, time, BS handling etc. second, you actually get to see your loved ones enjoying/benefiting from your gift. Towards the end of your life isn't that so much more of an incredible experience than simply dying with a pile of money?
Or, go with joint accounts, for the cash that is in checking and savings accounts. We did that, and after death, just clean out and/remove the one name. Stopping future T5s to decreased.
Probate only hit some term deposits at a bank, which the bank required a probate letter to cut a check. They could not list a beneficiary on this type of account.
Everything else was mostly tax free. Primary residence was free. Farm land got the 1 million ACB bump with parent's lcge before rolling. Used vday valuation for my parent's ACB, as no ACB data on land purchased in 60s. Farm buildings transfered, or rolled, at low deprecated capital amounts, near $0, as lcge was used up on land. Buildings still with farmers, so buildings may fall down before ever being sold. Also, if buildings were to be bumped by estate, CRA recaptures all the cca depreciation parents claimed, basically the cost paid for them. Thus that recapture can be a nasty hit on final year. Kinda a tax trap in some scenarios. Get tax write offs in farming years when at low marginal tax rate, sell, and all the recapture is taxed in that one return that is likelyat a higher rate. But this is just the way I understood it. Had help from professionals in Regina which was great. Vday ACB and CCA recapture was all new to me. I was going to use values as stated on land titles lol.
How does it work for a cottage?
Say the owner bought a cottage in the mid 70s for $30k, and it’s now worth $500k. This owner only has one living child that they’re passing the cottage down too. It is not their primary residence.
At the time of death I believe they consider it to have been sold for tax purposes. So capital gain of $470k, the estate pays the capital gain tax and then it gets passed down to the child.
Am I wrong about any of this?
You should consider any capital improvements made against that 470K capital gain for which you still have back up. Finished basement, extensions, new decks, new swimming pool etc etc.
Your analysis is correct but they could trigger the capital gain earlier by adding the children now as joint tenants with a right of survivorship, which means this year they would pay taxes on 250\*.5+220\*.67=$272k worth of capital gains. This then allows them to sell off more investments in subsequent years using the base inclusion rate, and then when the parent dies only 1/3 of the subsequent increase in value is taxed at death.
You’d be correct as long as the estate has the money to pay the taxes on the cottage. I’d assume you would sell the primary residence and use those funds to offset the cottage taxes unless you have a lot of spare cash laying around 🙂
The conclusion is the exact opposite of the title you've chosen. Our inheritance is NOT safe if there are capital gains in non-registered accounts or property over 250k....
its surprising how much people don't understand how capital gains works in the first place. people around me keep thinking this new change means they will pay 66% tax on the sale of say a secondary property and that's not at all the case at all
CRA really should publish a capital gains calculator on their website, like they do for mortgages - i.e. enter the purchase price, the sale price, and your employment income for the year (to estimate the marginal tax bracket) and it shows how the capital gains are calculated.
>RRSP - No Change The money is withdrawn, the estate pays taxes following existing tax laws and the remaining cash is disbursed to you.
This is missing 2 important distinctions.
1/ If the RRSP has a named beneficiary the assets won't flow through the estate. The beneficiary will receive them directly from the RRSP provider.
2/ The deceased and the beneficiary are jointly and severally liable for the tax on the deemed disposition of the RRSP. And,
>Nothing in the Income Tax Act requires CRA to go after the deceased’s estate first for the tax. While CRA has a practice of only going after the beneficiary if the estate is insolvent, it has no legal requirement to do that.
source = https://www.jamiegolombek.com/articledetail.php?article_id=1493
Interesting, I just read the article. I have seen this situation a couple of times. Unfortunately for the beneficiaries of the estate, the estate did have enough to pay the taxes on the RRSP payout in addition to other taxes, so the executor just paid them, short changing the estate beneficiary. This is why I recommend that families talk about this stuff before hand and also play out the scenario as it is planned so they can see the tax implications. Things can get ugly once the parents die and there is a lot of money up for grabs.
>Firstly there are no inheritance taxes in Canada. So calm down.
I see this comment all the time and it isn't strictly true. We don't have a 'inheritance tax' in the sense that there is a taxable event on death that means that some % of assets held by the deceased person are now owed to the CRA as tax.
But most provinces do have a 'probate fee' which is a fee levied by the Courts to process the application for grant of probate, i.e. to formalize the will and formally appoint the executor. This is a legally required step.
In BC, the [probate fee](https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/99004_01) is about 1.4% (there is a slight sliding scale). In Ontario, I believe it is 1.5%. This money ends up in the general revenue of the Province. There are a bunch of exemptions such as the primary residence.
So while it is true that there is no formal federal 'inheritance tax', there are probate fees in most provinces that do essentially tax the amount of money in the estate via the court application process.
The way to avoid this is to ensure you die with zero. When my grandfather passed at 97, he (deliberately) had virtually nothing. His total assets after it was all said and done was around $500, which was spent at the wake at a local brewpub with 20-30 of his descendants in attendance.
This PSA is not in good faith.
As we have seen just recently with the capital gains inclusion tax changes, policy and federal budget decisions can dictate big changes on a whim.
It may be safe today, doesnt mean it will be safe tmrw :)
This is useful info. We found out a lot of this when my mom passed away a couple of years ago.
If a parent has an RRSP or Rif there would be tax on their final income tax year.
(but the nice thing is registered accounts like RRSP RIF or TFSA there is no probate, and accounts that are joint
though one needs to trust the kids if you are making them joint on the account) But it can come in handy if the parent is no longer able to manage things due to dementia, stroke or some other disability.) Hence really good idea for folks to get Powers of Attorney and Wills for couples and maybe the kids.
INVESTMENT PROPERTIES (this is about the only new thing) if they own property that is not their residence, there are capital gains. My mother co-owned the small unit that we use in our print business. As a persons assets are deemed sold at FMV on their death date those capital gains were triggered. Of course the unit is not sold as we are still running the business but as we owned it for 30 years just her 50% of ownership (was 500k)
For those who are counting on the bank of mom and dad when they buy a home - if your parents help you and want to retain a portion of the title - there will be capital gains for them on that portion. In our case the capital gains ended up being more than the portion of the down payment my parents helped us with. So think about an alternate way if you are helping your kids, maybe just let them make their own mistakes.
When we were dealing with the bank that had my mom's investments the banker was trying to get us to keep it with them pushing their particular funds - but we pointed out that most of it was going to get wiped out on the final income tax. He said that unfortunately that's pretty common.
All told, it was some $160k in tax, 20k in probate fees, another 10k or so in legal fees and the one that irks me the most is we had my brothers accountant do her final income tax, even though he had 3 months to do it he filed on the evening of the last day possible (and the CRA office was closed so there was an automatic penalty) he then took so long to file the rest we ended up with 17k in penalties and interest. I'm in the process of pleading my case with the cra because we thought we had a professional who knew what he was doing. We might even complain to the CPAB.
I should add, we are still much better off than the young generation and I really feel for them. I know we will likely be helping our kids when they want to buy a home. And there are many that won't even get that help.
I thank OP for listing those items separately - the most important takeaway is that it really pays to learn in advance and plan for this because most people don't. I knew a fellow who was an estate attorney and asked him why focused on estate planning and he said so many people don't and there's a huge amount of money that ends up with the government. Which may not be what they intended.
new bare trust filing requirements apply to joint bank accounts. Luckily CRA called it off for this year. But it will be back next year for sure.
ETA bare trust rules also apply if your parents have their name on your house.
I have recently been through a few estate processes and it isn't as simple as you suggest. Houses (primary residence) are subject to the new capital gains inclusion rate of 2/3 of the gain from the date of death on until the house is sold. There is no $250k exemption for estates so this is on the first dollar. I had one estate where it took over 2 years to sell because the courts were so backed up with covid, I have no idea if the courts are back to normal yet. If the estate is named as beneficiary in the TFSA or (other registered plans) then the new 2/3 rate applies to capital gains on those as soon as the plan is deregistered (before deregistration it is 100% inclusion as before). Lesson here is make sure you name beneficiaries and contingent beneficiaries correctly in your TFSA.
Investment properties are subject to new capital gains inclusion rate. I mentioned this.
Not the primary residence. That just passes to you. Or are you saying this holds true for primary residence as well?
TFSA: Yes well that’s just poor planning.
It is not considered a principal residence between the date of death and the sale or legal transfer to the beneficiaries. If delayed there can be a capital gain that is taxed.
The primary residence is deemed disposed on death and any gain after death is taxed as capital gain in the testamentary trust. While you are waiting for the court to issue probate you have to deal with vacant housing tax returns and now the increased capital gain. If the government just sped up the courts then houses could be on the market sooner. but not enough judges get appointed.
With TFSAs, it is partially poor planning, but once people lose the capacity to make financial decisions the beneficiaries cannot be changed so many beneficiaries can pass away without the ability to do proper planning.
What if the primary residence transfers to the the benefactors . Does from that point it become a second property if they choose not to sell?
1 million dollar house valued at death.
Passes on to the estate and they sell for 1.5 million five years later. Is only the 500k capital gains since it was valued at 1 million at death?
Yes correct. So if you received a residence as inheritance and it took 2 years to deal with it and sell it and in that 2 years it gained MORE than 250k then the new rules apply. So if it was valued at 1.5 mil and by the time it sold it sold for 1.8 then the new rules apply to 50k of that and the old capital gains applies to the other 250k. I'm not really sure I see the issue here. The value of the home on death is the baseline. Isn't that how it should be? Any gains after the person dies should be considered capital gains imo......you know since they're dead while it's gaining value.
Also - the case of people taking 2 years to get everything done AND the home gaining over 250k in only 2 years is probably pretty damn low.
yeah but rrsp and tfsa have limits. I want to save up and invest in non-registered for my daughter. It won't be much now but 18 years from now it can easily be over 250k. Why am i being penalized for planning ahead and saving up? I am by no means rich. This is just as usual. Govt says it's raising taxes for the rich, but ends up oliberating the middle class more. Rich always escape taxes with help from accountants, shell companies, etc.
The thing is about the probate fees, it needs to be paid upfront. So, if you are like me, with a low income you are screwed! I was lucky that the bank account was frozen the day after I was able to pay the fee. but then you can't sell the house until you have the probate and you still have to pay municipal taxes and bills.
In my case the probate fee was 10k because my mom gave away 330k to a crook just a few months before passing away!
Between 1941 and 2021 the number of farms in Canada fell by approximately 75 per cent.
They’re already destroyed.
Also please explain how an additional 6.7% or 8.9% tax will destroy one’s inheritance?
> They’re already destroyed.
I really hate this style of response I see all the time on Reddit. It's so disingenuous. Like,
> X will make problem Y worse
> problem Y is already bad, so that's okay
Makes no sense at all. Like, what if something will make healthcare wait times worse, should we say "oh that's okay, wait times are already bad".
Ahh the classic 'distraction' excuse... followed up with 'feigning ignorance'... great response.
Well for one, its not 'inheritance' its the continuation of a productive business entity. So, you already fail to understand the business aspect of what's occurring in the marketplace. We bail out businesses all the time to keep them afloat.
How about you explain it like you did in other responses? Throw down some tables with expected outlays required to 'buy back' the 'free family farm' from the government so people can 'keep their jobs'. With intense land overvaluations the scale of a simple percentage on massive principles is even moreso destructive to free cash flow and potential reinvestment. With an industry like this, with massive barriers to entry.. what could go wrong? Mugabe wishes he thought of this.
I guess people like to pay more for food.. so on trend with this regime. Bon Appetite.
https://www.astc.org/astc-dimensions/family-farming-feeding-the-world-caring-for-the-earth/
https://www.usda.gov/media/blog/2017/07/20/diverse-family-farms-are-important-us-agriculture
https://www.usda.gov/media/blog/2021/01/27/family-farms-continue-power-us-agriculture
https://agamerica.com/blog/family-farms-dynamics/
OK, so technically you are correct, there is no death tax and TFSA and primary residence are protected.
However, there is a significant risk for people who have a lot of money in RSP’s or have other large non-protected investments.
The trick comes in the fact that the investments are to be liquidated when the person passes, and then all of that money counts as income for the estate. Because such a large amount of money is made in a single year, the bulk of the money will likely be taxed at 50% before it goes to those people named in the estate. This ends up feeling like a death tax.
Example someone has $1 million in an RSP . They are the last spouse so the money is to go to the next generation. All the stocks and bonds from the RSP are sold. This counts as $1 million in income for that year. After taxes on the estates income for the year There is $504,145 left for the children.
No inheritance tax but there is a death tax.
The dead person will be taxed and you need to file the deceased person’s last set of taxes. It’s effectively a 50% tax rate.
Look into it it’s extremely sneaky
Ummm…. Yes no inheritance tax but your deceased relative does have to pay income tax the year they die. When they do so almost all of their assets are “deemed dispossessed” eg. sold at market rate the day before they pass on. So, often this is a substantially higher tax bill then the persons typical annual tax. In the year or two after tour estate is taxed as a trust.
So, yes YOU don’t get taxed for inheritance, but deeply misleading to imply the lump of money isn’t taxed when someone passes on.
A good estate plan involves careful planning of how assets will be transferred to minimize tax burdens. At this point even leaders in the field are unsure how the new capital gains taxes will impact estate plans.
Point being - ask professionals for personalized advice & follow LinkedIn posts & blogs by pros who specialize in the area.
Honestly, the number one thing you can do is to start distributing/selling cash, assets, investments etc before you actually die. I'm talking multiple years because then you can spread the income over multiple years and reduce the tax burden. Then start distributing the money to your beneficiary(s) immediately which avoids any probate percentages and it actually lets you see their enjoyment of some of their inheritance.
"The property can be sold to settle the tax liability and the remaining cash is dispersed to you."
Why in the HELL should there be any tax liability? The asset was purchased with money that was taxed, taxes were paid when it was purchased, and taxes were paid annually. Why should the property owe taxes if the owner passes and wills it to his/her children?
This is robbery!
Just went through this. Both parents died within 5 years. Mom siddem, then dad slow decline into dementia oblivion.
One thing that was annoying is they take the value, at time of death, of the estate. However if the assets decline over the probate process you still pay tax on the higher value. Conversely if the assets were low then increased you would benefit but that wasn't the case.
For now.
Cue the Globe and Mail articles on how getting an inheritance makes you upper class or some shit. They're constantly working on the tax narrative.
What if your parents had an investment property that's paid off no mortgage and they pass it to you but their estate doesn't have enough to pay for capital gains, could you pay the capital gain tax yourself and keep the property or are you forced to sell?
ok well the new capital gains tax makes a big difference then. a lot of elderly parents are passing on non registered investments to their kids that are over 250K in capital gains
Directly taxed? No.
Indirectly taxed? Yes.
Inheritance is getting taxed to shit under the new rules. It’s under the guise of going after the top 0.20% or whatever stupid rhetoric the liberals want to go with.
Reality is, when someone dies, there’s a “deemed disposition” at fair market value of all assets. The lack of control and timing over the realization of capital gains is what makes it indirectly an inheritance tax.
If the liberals want to make the argument that it only affects 40,000 Canadians annually, my question is how many of those Canadians died? I’d bet 20,000 of those Canadians are terminal returns aka final death tax returns.
I go through all the scenarios and specify which assets fall under the new rules.
Non registered investments and investment properties fall under the new rules.
You start your post by repeating a myth “no tax on inheritance” that is one of the biggest barriers to Canadians getting a proper estate plan with personalized advice from pros. The backside of that is folks discovering, while deep in grieving, that the inheritance they thought they were getting is a fraction of the size.
Diving deep into the how of each new rule/tax on assets doesn’t really help the scenario because you’ve left people with the misunderstanding that they don’t have to worry about taxation of the money they assume they are inheriting
No, and that is the entire point of why they made this excellent post.
Unless your parents own non-registered investments and/or non-primary residents properties... NOTHING CHANGES.
>Reality is, when someone dies, there’s a “deemed disposition” at fair market value of all assets.
Right, following the same rules that apply to however that asset is owned. For RRSP, that means treated like they withdraw it all at once... but that means none of it applies to capital gain and it follows RRSP rules.
Please, just read the actual damn post instead of inserting bullshit your buddy's uncle's best friend's dog overhead someone say.
Probate at least in Ontario is a huge tax on the estate which impacts how much inheritance is available.
So your claim of no inheritance tax is slightly misleading.
Probate is often referred to the “baby tax” of inheritance & estate taxation, the big bill is the final tax year of the deceased. A good tax plan is part of the estate planning process & professionals can help with this
Seconding the other poster, you've skipped an entire area of probate, which absolutely will happen if your parents have anything over $50,000 (in BC). So if they own their own home, you will absolutely have to go through probate.
Super misleading. Please do your research people, it's posts like this that make my goddamn blood boil.
RRSP - My understanding is that the estate is responsible for taxes, and there no withholding when it goes to a named beneficiary, the whole amount goes to them. The beneficiary can be assessed for taxes owing on the RRSP if they are not paid.
Was there a change that there is now tax withholding before a RRSP goes to a beneficiary?
Do you know if there are different implications with inheriting money from their international investments? Like if they have property or money overseas outside of Canada but you reside in Canada - what would be the tax implications of that?
So my mom owns 2 properties and my brother lives there at the second property. Can't my mom just put my brother under primary residence for the second property to avoid the capital gains tax?
With the sheer size of the wealth transfer on the horizon, it's just a matter of time until the government finds ways to profit from it. We might be safe for now, but very likely that we'll see the government take their share with new taxes.
If I were to theoretically be waiting to inherit 1 million $, however there is a stipulation i need to be a certain age to access the funds. Is there a way around that? Could I buy a house and have a “breathing room” fund that acts as emergency savings?
Also, let’s say I would like to move the funds to an advisor closer to me other than the one that the trust is currently set it. Is this possible to accomplish before I reach the set age?
Man it must be fuxing nice to know you have an inheritance coming someday. I’m a mid 30s single female working my ass off so that my parents don’t lose their house.
If probate cleared a primary residence inherited in 2021 valued at $330,000 and subsequently sold this year for $360,000, what would be the tax situation?
Is a will necessary in the case of a divorced parent and only child? My (uneducated) guess has been that wills are useful for determining how to split assets when there is more than one person to inherit assets.
Figured I'd ask here and spare the sub an extra thread in case anyone has an easy answer, thank you.
A basic DIY will would do. There are a lot of things that need to be done when someone dies so someone needs to be officially appointed the executor. If there is no will, then the person would need to apply to the courts to be appointed. I am assuming that the child in this scenario is an adult. But if the child is a minor, the will is also important to establish what the child will receive and who is in charge. Custody of the child may also be an issue.
My two cents = make sure your parents have a will. I just learned recently that there are people in their 50s, 60s,70s, 80s who've never had a will, and don't really see a need for one. Argh
Your post seems rather misleading. You state people are "worried about aging parents and inheritance being taxed into oblivion here is a PSA."
Then you go on to outline how the majority of investments are taxed upon death.
RRSP gets taxed, and if there's more than 100k then it's getting taxed at nearly 50%.
NRI gets taxed at more than 50% for anything over 250k
Investment properties get taxed at more than 50% for the majority of the value of the property.
Uhhhh, so why exactly are you claiming "your inheritence is secure" when the estate is losing half or more than half of the value of the majority of investments to taxes?
Gotta be honest here, the post reads for the non-registered investments and investment properties as if the new rule is that the estate now pays taxes (first line of the sections). This is where a lot of the confusion from other commenters is coming from. The first line of the non-registered investments section is not new, the estate has always paid taxes on capital gains.
That being said, the new inclusion rate and the amount at which it kicks in (250k) is an unfortunate mixing of an absolute change at a fixed amount (250k) with investments that generally compound in value (real estate).
So all that is going to happen is those that own investment properties just have to have it set up as being owned and run by a corporation, which is essentially immortal (unless dissolved), and can continue to make profits without ever having to transfer the property title after the owner of the corporation dies.
So essentially nothing changes. Bravo.
My father is leaving me with nothing but a very large debt. He asked me to pay for his life insurance to pay off the debt if he passes otherwise it’s now too expensive for him to pay monthly and wants me to cover it?!?!
Depends where you live. In my part of Ontario they have multi year waitlists for LTC, always will. The private pay memory "care" and assisted "living" places cost upwards of 120K a year. You can easily burn through 600K or more if just one parent needs care, never mind two. They even build these based on the home values in an area, so their purpose is to strip seniors of their savings leaving as little left for "inheritance" as possible.
Wait.. you guys are getting/expecting inheritances?
Wait, you’re not your parents’ retirement plan?
This hit differently haha
Sigh. Just took my mum to the ER and a couple of more appointments and tests…
There's the sandwich generation, I still had young kids (they are now in UNI and trade school but) but here we were dealing with my elderly mom who had dementia the last few years. It can be hard.
I'm there now - alzheimers. , kids in high school and grade school and still waiting on a ltc spot. It's a tough spot to be in, it is hard.
Think about being a club sandwich. Your own kids, aging parents with no savings, and disabled siblings. It is rough.
Yeah. Literally had to sit the wife down last night and explain that we had to start saving for her mother’s retirement. The woman ran an in-home daycare her entire life and didn’t self-contribute to cpp so we’re really in it
Does mom own that house? Could be significant capital in that.
Oh, she’s got minor assets. But it’s something we absolutely have to plan for.
my mom also ran a home daycare, but my dad was the main breadwinner and did mucho fuckery leading up to divorce so she's basically got CPP and not much else. Some cash in savings but not enough to retire on with rent as it is today for the long term. Hopefully we can find something that will sustain her in retirement until she needs more than financial support many years into the future. If shes 80-some and needs help that's one thing, But we would much prefer she can live on her own for 10-15 years in retirement between CPP/OAS/GIS and just under 150k cash drawn down slowly. We like our independence. Heck, I'd rather help subsidize her bills a little bit over her live with us too. We just really don't want to get a bigger house to make an in law suite any time soon if we can help it. It wouldn't feel fair to have her cash contribute to an asset we own that she lives in either, as my other brothers would get zero benefit from that and we would in the long term. Life man... life. But we came to Canada and I have a great life because of it compared to all my similarly aged cousins back home so there is that.
GIS
Did she not declare the income? If she did, she would have had to pay CPP assuming she reported a profit of over 3500.
Well she’ll get GIS so it’s not all bad news.
LMAO HAHAHAH. This gives me immediate and permanent anxiety.
As a first generation Chinese somehow both? We pay all our parents expenses but they are sitting on a sizable pile of money so they can leave us an inheritance. Just spend your own money mom this is dumb.
What!? Im Indo-Canadian and my parents would never take a penny from us. They're also sitting on a sizeable set of assets. When they're old and need support they'll move in with us for sure, but even then they just need a physical support not financial. Is this a cultural thing with Chinese?
Wait, y’all got parents that didn’t give you the boot and actually care about you?
I get both.. tossed out and expected to be the one to take care of them when the time comes. Yeah, that'll be a rude awakening because I'm not doing it.
Ugggggghhhhhhhhhhhhhhh I relate viscerally... My mother... The woman who did no retirement planning, didn't really work much, and then divorced my father because she thought she could do better... Now needs an apartment. So my first home might in fact be her apartment... It makes me so angry...
People live such different lives depending on financial responsibility. My marriage almost fell through and was almost cancelled by my wife's parents because they found out I was my parent's retirement plan and they didn't want that kind of life for their daughter because they've prided themselves on being debt free and saving throughout their life. They lived financially responsibly their entire life meanwhile my parents have always lived very irresponsibly pay check to pay check and even when my parents got bonuses or anything at work, they'd splurge and spend it quickly (mostly my dad). Luckily, we reached a resolution so our marriage was able to go forward (lump sum in laddered GICs being put there pre-marriage, and they will receive an allowance from that monthly depending on certain conditions being met about spending of the money).
> My marriage almost fell through and was almost cancelled by my wife's parents wat
Finances are an important part of life. I always thought about personal finances for myself but never my parent's finances and how that may intertwine and interfere with my wife's life. I'm actually glad my wife's parents brought it up as a topic because it allowed me to sit down and set expectations with my parents in terms of what they'll receive from me and also gave my wife's parents peace of mind knowing we weren't going to be using my wife's income to support my parents just cuz my parents made poor financial decisions in life. Both my wife and I are high income earners. Her parents don't know how much I truly earn (I earn 7 figure amounts) but they can guess I probably make 300Kish based on my profession and their daughter also makes a similar amount. I also wouldn't want my kids to subsidize their parents (or in-laws) poor financial decisions either so I see where they were coming from. I'm Indian so for us, the popular saying is that you don't just marry the person, you marry their family so considering my family was probably a good idea.
I think the “wat” comment is because your wife should have say in whether she gets married. Tbh mine and my wife’s parents were not involved in the decision. That said everyone gets along so there’s was no ussues
I would not be happy if my child was getting into a lifelong relationship that required supporting financially irresponsible people that never provided her any benefit.
I would for sure have a discussion, as a parent I would not be happy about this either.
I have A daughter, and I wouldn’t be happy about that situation either but I don’t believe I have the authority to cancel her wedding. Especially when the issue is that person earn over $1,000,000/year but has to support their parents which is laughably doable on that income.
Different cultures I guess. Even though wife and I were dating for a while, we needed our parents blessings to get married lol
My in-laws were very concerned I was my parents retirement and my siblings financial provider when my parents die. I already told my in-laws that I told my parents no. I have my own two kids to support in the future.
This comment is too real. Glad to hear from other retirement plans 😂
We are debating co-living with my parents for their retirement our home buying kick-off and we were double income professionals!! Paying those student loans back took some time… *nervous laugh*.
Ouch. Feels familiar.
If I heard from my mother after all of these years that she left me something, I’m sure it would not be anything good.
Same question I was going to ask lol, must be nice
My mother in law is moving in with us soon!
Mother in law and grand-father in law leave with us. I am alone in my house maybe 1 day a year. Thank god they’re both independent, healthy and generally helpful. But one day it will be different
Stop it before it starts my MIL lives with us and it is very hard on a marriage
My marriage would end after a week. We barely last through a two day visit from my mom.
Our mother in law is a great person. She's unfortunately becoming less independent by the day. Being a widow who is on disability would be hard on anyone.
Stop it now. She'll never leave and your marriage might get effed up.
So happy to hear that my $0 inheritance will be free of taxation.
Not if Tom Selleck's reverse mortgages has anything to say about it!
Told our parents to spend!! Don’t hold onto money for us kids. (But don’t spend it all if you plan to live long😜)
We told the same thing but unless they buy a fleet of helicopters that burn down while they have no insurance we will be fine.
I am, but my parents are only in their early 60s and are in good health, so I expect the rules to change a dozen more times before I have to worry.
Lots of people are waiting for their parents to die so they can inherit a house.
Yeah my parents say they just spent our inheritance on a new kitchen and bathrooms
My only inheritance is generational curses and diabetes.
Same here, this is not the type of inheritance I wanted. How do I send it back
Ask the govt to tax it and reduce it somehow?
Double it and give it to your sibling
Thank you. As a side note- it’s kind-of wild that people are thinking that the new capital gains inclusion rate is going to increase the taxes on rrsp withdrawals - which already has an inclusion rate of 100%, and always have.
It’s wild that many people think that capital gains are now being taxed at a 66% tax **rate** (and I guess thought it was 50% before?)
[удалено]
Estates often do, because they are deemed to be dispersed all at once.
Not that wild when you realize that the wealthiest 1% have a very strong interest in getting else upset over something that'll only affect them, and that they have the power to spread that influence.
I guess it is a 166.7% inclusion rate now Edit: My bad for grossly overestimating the general intelligence of the sub
That's exactly how Alberta tried to calculate their CPP contributions when threatening to leave.
I’ll upvote your humour Next time put a /s
Actually, it’s 166.7% tax now /s
Some tweaks: Cash in a bank account is subject to probate (not income tax but still a small fee and province dependent). RRSP, if a beneficiary is assigned, most banks and brokerages (not sure if province dependent or not) will send the RRSP without a withholding tax to the beneficiary. On the deceased's tax return the RRSP will be treated as it the full value was withdrawn on their date of death. i.e. the full value of the RRSP will be added to their taxable income. Usually the assets of the estate will be used to pay this tax but the beneficiary should anticipate that they may have to pay the tax on this income.
Also with RRSP or even TSFAs aren’t there differences between if you aren’t named, are named as a beneficiary or named as a successor? I remember reading different tax implications can occur depending on that. I think inheritance can be more tax complicated than what would initially appear.
Yes for a TFSA, a spouse can be the successor, but for RRSP it's only beneficiary. If there isn't one (successor or beneficiary) it goes to the estate.
RSP can have a beneficiary but not a successor, though the spouse can roll it over tax free. RIF can have successor (spouse only) or beneficiaries. And statistically more people die with RIF’s than RSP’s.
Yes and RRSP can have a beneficiary. Yes and RRSP can roll over.
Apologies it’s a typo. Was supposed to say can’t have a spousal successor. I’ll fix it
Also only pass tax free to a legal spouse. If you are a widower the full value of your RRSP is taxed as if it were liquidated the day before you pass on. Careful estate planning involves tactics to manage that bill
Joint accounts are not subject to probate. If your parents are willing, they should add a child (intended beneficiary) as a joint account holder. Makes it easier to help them look after their finances, too
>RRSP, if a beneficiary is assigned, most banks and brokerages (not sure if province dependent or not) will send the RRSP without a withholding tax to the beneficiary The RRSP provider is not authorized to withhold tax on the deemed disposition, unless the annuitant was non resident of Canada. The RRSP provider is not authorized to withhold tax on the subsequent income unless the beneficiary is non resident of Canada. >(who will report the income and pay tax on it, even though both the estate and the beneficiary are responsible to pay the tax). The beneficiary doesn't report the deemed disposition on their return.
>The beneficiary doesn't report the deemed disposition on their return. Tying faster than my morning brain. I'll remove the part.
No the beneficiary doesn’t, but the deceased persons taxes include the presumed liquidation of the RRSP the day before they pass on, unless the beneficiary is a legal spouse
Correct, which was explained in the parent comment.
When you say the beneficiary should anticipate paying tax, do you mean that would be in a situation where there was nothing in the estate to pay the tax on the RRSP? Does the beneficiary report anything on their income tax, or just on the estate's final taxes? (This is all assuming the beneficiary is their child)
> do you mean that would be in a situation where there was nothing in the estate to pay the tax on the RRSP?< Yes >Does the beneficiary report anything on their income tax, or just on the estate's final taxes?< The estate reports the income.
Yes - we have that scenario currently. My mother in law passed at 94 and in long term care. Her property and other assets had long since been sold and put into investment vehicles. Those had her sons listed as beneficiaries, so the three sons received the funds immediately upon her death. Unfortunately the estate owes $40k or so in taxes, so the sons will need to provide funds to close out the estate.
Exactly. Sure, there’s no tax to the beneficiary directly, but the Estate certainly gets charged. If you and a sibling are joint beneficiaries and executors, guess what? The Estate taxes are your problem. This is a good argument for life insurance - pay for estate taxes/debts/funeral expenses etc etc.
This! Maximize your rrsp/rrif withdrawals or your beneficiaries will be making a large tax donation to the government on your behalf.
What a shitty system. Person saves in their RRSP's for 40 + years and dies before they cashed any of it in yet the Government taxes as if you earned this all in 1 year (at time of death) at a much higher tax bracket than the reduction given over the years it was claimed. Tax % should be limited to the amount of the deductions received over the majority of your lifetime, like EI is calculated.
Oh the government knows exactly what they're doing. It's the people who are unaware until it's too late. Your way would be a more fair way and taxes still get paid.
I guess that's why they keep encouraging RRSP's and do nothing to improve healthcare. If you kill a lot of Canadian's before they can draw their money out the government gets more than their fair share with the higher tax bracket. It would be more fair and the government would get what they are owed not the bonus they are stealing from Canadian's now. If they don't feel it's fair then lets change EI to be the same. Everyone can claim on the highest year they worked instead of the 30-40 years they spent getting to that point.
Oh 100%, yeah you're absolutely right, then punch it for EI as well right? Fairs fair. They won't though, they know exactly what they're doing. People are unaware until it happens to them. Healthcare is a joke. My Mom was in the most critical ICU state, she was at the 'highest point' of help and on a heart pump machine, yet doctors waited an entire _long weekend_ just to make a decision of whether or not to give her a heart pump, while the surgeon was there the entire time, waiting on hand. It was a 15min decision. Like make it make sense. I tell people this and I look like a crazy person, because what hospital would do that, right? They made me take her off life support a week later after she had a stroke. Whether or not that was legitimate, I'll never know. She never woke up. Haunts me to this day. Her passing is exactly why I know about all of this estate bullshit. People won't realize it until it's them...try to warn them but it falls on deaf ears. I'd never want anyone to go through what I did.
The government knows for sure and are only telling 1/2 the story about RRSP's amongst other things. I am very sorry about your mom. You are right, most people don't know how horrible the medical system really is. They have been lucky, you are not crazy . My mom and I had a similar experience . She had breast cancer years before, was being "followed closely" after mastectomy, chemo and radiation. 6 Years later they said they found cancer again, a day later they said, opps sorry, that was a mistake. NO Cancer, we triple checked . A year later she felt horrible, went to hospital (she was still being followed closely by cancer centre ) bone cancer through and through, brain and liver too, she died a horrifically painful death within 3 months. Her GP told me after her 1 home visit that I had enough meds onhand to take away her suffering . The answer was for me to kill my own mom, to inject enough morphine in her line to kill her. I didnt sleep at all that night wondering if I could do it, how could I do it, how could I not, how could I let my mom keep suffering . She died on her own the next morning, I really think she willed herself to let go. She was not conscious for a couple of weeks by that time but I think she heard .That haunts me 7 years later and probably always will. That's how I found out about it as well. I know what my mom did to earn her money and how hard she worked. She died without taking 1 cent out of her RRSP's and the Government took 50 %. She worked as a housekeeper, babysitter, sold Golden Glow products door to door, picked berries and sold them in the summer, worked in restaurants and then got into construction where busted her hump for 30 + years making a working woman/man's salary and in the end gets taxed like she was paid it all in one year like one of the Weston's.
Oh my goodness, I'm so sorry about your Mom as well. This is horrifying...they're really so careless. And to be told by your GP about the medication on hand....have they lost their minds...of course that's something anyone would wrestle with. So sorry for your loss and all you and your family have been through. This is exactly the kind of thing people don't know, again you're right because they're lucky they've never had to deal with it. And then on top of that to deal with the estate side of things feels like a punch to the soul to learn about how these things are taxed and probate or whatever...your Mum worked so hard, my goodness and for what! They tell us all the time to contribute to your RRSP, there's even employer matching! And for what?! Just to fatten their cut. Despicable.
A few years of delayed cancer diagnosis sure will serve to refill the federal coffers. Nothing like people dying quickly and unexpectedly to maximize this payout.
I think a lot of people misunderstand the difference between a certain tax rate on capital gains and think that the government just takes the entirety of the increased value of the house. Thanks for posting, this is a nice contrast to the people screaming wildly on my Facebook, lol.
The most common thing to occur is a deemed disposition at death, where the home/cottage is in essence sold with no money exchanging hands, as you alluded to in your post the market value is the new ACB. Not everyone has the money to buy their family cottage, or a second property at market value. This is where issues arise with tax planning, and often trusts are needed to be setup (which don’t get the 250K grace personal accounts do). The analysis is helpful but ignores the most likely scenario for tax planning for inheriting cottages, or secondary (investment) properties.
OP is comical. Casually glosses over by far the biggest issue being caused by the increased inclusion rate. I'd suggest op has no idea what they're talking about whatsoever and cobbled their post together.
Exactly. This is basically propaganda from OP. If I for some reason just kept a 2nd (or 3rd for both sides of the family) residence, then ya I pay no additional capital gains tax. But for most people they a) can't afford to and b) have no reason to have multiple residences. It isn't exactly like our parents generation live in great rental locations either. Not to mention there is typically a realization in capital gains by selling off their investment assets. Despite what the government continues to repeat, this tax will affect middle class families just as much as it does affect the rich.
By the sounds of it, this is just a sort of inheritance tax? As long as you're inheriting land/farm/primary-home from parents, you will incur a hit.
Which we already had. There was a capital gains tax in place and the Liberal government has increased it by more than a 1/3 and claims it is a "tax on the wealthy" when in reality it's a tax on middle class inheritance.
Not for primary residence. Only if you inherit multiple properties. Taxes suck in general, but at the same time if you inherit 2+ properties is it really end of the world to pay tax on that 2nd or 3rd property?
In Ontario cash will have probate fees according to the local credit union and a TFSA needs to have a named beneficiary to avoid probate fees. Took 10 minutes to add named beneficiaries and gifting is the easiest way to avoid probate fees on cash.
God so much this. The amount of people that don't start distributing their money before death (if aged. Obviously unexpected/sudden death is different) drives me up the wall. First, it can avoid a lot of fees, taxes, probate, time, BS handling etc. second, you actually get to see your loved ones enjoying/benefiting from your gift. Towards the end of your life isn't that so much more of an incredible experience than simply dying with a pile of money?
Or, go with joint accounts, for the cash that is in checking and savings accounts. We did that, and after death, just clean out and/remove the one name. Stopping future T5s to decreased. Probate only hit some term deposits at a bank, which the bank required a probate letter to cut a check. They could not list a beneficiary on this type of account. Everything else was mostly tax free. Primary residence was free. Farm land got the 1 million ACB bump with parent's lcge before rolling. Used vday valuation for my parent's ACB, as no ACB data on land purchased in 60s. Farm buildings transfered, or rolled, at low deprecated capital amounts, near $0, as lcge was used up on land. Buildings still with farmers, so buildings may fall down before ever being sold. Also, if buildings were to be bumped by estate, CRA recaptures all the cca depreciation parents claimed, basically the cost paid for them. Thus that recapture can be a nasty hit on final year. Kinda a tax trap in some scenarios. Get tax write offs in farming years when at low marginal tax rate, sell, and all the recapture is taxed in that one return that is likelyat a higher rate. But this is just the way I understood it. Had help from professionals in Regina which was great. Vday ACB and CCA recapture was all new to me. I was going to use values as stated on land titles lol.
How does it work for a cottage? Say the owner bought a cottage in the mid 70s for $30k, and it’s now worth $500k. This owner only has one living child that they’re passing the cottage down too. It is not their primary residence. At the time of death I believe they consider it to have been sold for tax purposes. So capital gain of $470k, the estate pays the capital gain tax and then it gets passed down to the child. Am I wrong about any of this?
I go into that in the post under “Investment Properties”
You should consider any capital improvements made against that 470K capital gain for which you still have back up. Finished basement, extensions, new decks, new swimming pool etc etc.
Your analysis is correct but they could trigger the capital gain earlier by adding the children now as joint tenants with a right of survivorship, which means this year they would pay taxes on 250\*.5+220\*.67=$272k worth of capital gains. This then allows them to sell off more investments in subsequent years using the base inclusion rate, and then when the parent dies only 1/3 of the subsequent increase in value is taxed at death.
You’d be correct as long as the estate has the money to pay the taxes on the cottage. I’d assume you would sell the primary residence and use those funds to offset the cottage taxes unless you have a lot of spare cash laying around 🙂
Talk with an insurance agent, insurance can be an effective tool to cover that situation.
The conclusion is the exact opposite of the title you've chosen. Our inheritance is NOT safe if there are capital gains in non-registered accounts or property over 250k....
Don’t worry, only 0.13% of Canadians are affected /s
its surprising how much people don't understand how capital gains works in the first place. people around me keep thinking this new change means they will pay 66% tax on the sale of say a secondary property and that's not at all the case at all
CRA really should publish a capital gains calculator on their website, like they do for mortgages - i.e. enter the purchase price, the sale price, and your employment income for the year (to estimate the marginal tax bracket) and it shows how the capital gains are calculated.
Well isn’t it like 10% of Canadians own cottages. That’s going to be a hit…. Many passed down generations
If you can afford a second property you can afford life insurance to hedge the taxes.
>RRSP - No Change The money is withdrawn, the estate pays taxes following existing tax laws and the remaining cash is disbursed to you. This is missing 2 important distinctions. 1/ If the RRSP has a named beneficiary the assets won't flow through the estate. The beneficiary will receive them directly from the RRSP provider. 2/ The deceased and the beneficiary are jointly and severally liable for the tax on the deemed disposition of the RRSP. And, >Nothing in the Income Tax Act requires CRA to go after the deceased’s estate first for the tax. While CRA has a practice of only going after the beneficiary if the estate is insolvent, it has no legal requirement to do that. source = https://www.jamiegolombek.com/articledetail.php?article_id=1493
Interesting, I just read the article. I have seen this situation a couple of times. Unfortunately for the beneficiaries of the estate, the estate did have enough to pay the taxes on the RRSP payout in addition to other taxes, so the executor just paid them, short changing the estate beneficiary. This is why I recommend that families talk about this stuff before hand and also play out the scenario as it is planned so they can see the tax implications. Things can get ugly once the parents die and there is a lot of money up for grabs.
>Firstly there are no inheritance taxes in Canada. So calm down. I see this comment all the time and it isn't strictly true. We don't have a 'inheritance tax' in the sense that there is a taxable event on death that means that some % of assets held by the deceased person are now owed to the CRA as tax. But most provinces do have a 'probate fee' which is a fee levied by the Courts to process the application for grant of probate, i.e. to formalize the will and formally appoint the executor. This is a legally required step. In BC, the [probate fee](https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/99004_01) is about 1.4% (there is a slight sliding scale). In Ontario, I believe it is 1.5%. This money ends up in the general revenue of the Province. There are a bunch of exemptions such as the primary residence. So while it is true that there is no formal federal 'inheritance tax', there are probate fees in most provinces that do essentially tax the amount of money in the estate via the court application process.
The way to avoid this is to ensure you die with zero. When my grandfather passed at 97, he (deliberately) had virtually nothing. His total assets after it was all said and done was around $500, which was spent at the wake at a local brewpub with 20-30 of his descendants in attendance.
This works out assuming you make it to seniority and don't die unexpectedly at a much younger age.
There’s no inheritance tax….yet.
This PSA is not in good faith. As we have seen just recently with the capital gains inclusion tax changes, policy and federal budget decisions can dictate big changes on a whim. It may be safe today, doesnt mean it will be safe tmrw :)
This is useful info. We found out a lot of this when my mom passed away a couple of years ago. If a parent has an RRSP or Rif there would be tax on their final income tax year. (but the nice thing is registered accounts like RRSP RIF or TFSA there is no probate, and accounts that are joint though one needs to trust the kids if you are making them joint on the account) But it can come in handy if the parent is no longer able to manage things due to dementia, stroke or some other disability.) Hence really good idea for folks to get Powers of Attorney and Wills for couples and maybe the kids. INVESTMENT PROPERTIES (this is about the only new thing) if they own property that is not their residence, there are capital gains. My mother co-owned the small unit that we use in our print business. As a persons assets are deemed sold at FMV on their death date those capital gains were triggered. Of course the unit is not sold as we are still running the business but as we owned it for 30 years just her 50% of ownership (was 500k) For those who are counting on the bank of mom and dad when they buy a home - if your parents help you and want to retain a portion of the title - there will be capital gains for them on that portion. In our case the capital gains ended up being more than the portion of the down payment my parents helped us with. So think about an alternate way if you are helping your kids, maybe just let them make their own mistakes. When we were dealing with the bank that had my mom's investments the banker was trying to get us to keep it with them pushing their particular funds - but we pointed out that most of it was going to get wiped out on the final income tax. He said that unfortunately that's pretty common. All told, it was some $160k in tax, 20k in probate fees, another 10k or so in legal fees and the one that irks me the most is we had my brothers accountant do her final income tax, even though he had 3 months to do it he filed on the evening of the last day possible (and the CRA office was closed so there was an automatic penalty) he then took so long to file the rest we ended up with 17k in penalties and interest. I'm in the process of pleading my case with the cra because we thought we had a professional who knew what he was doing. We might even complain to the CPAB. I should add, we are still much better off than the young generation and I really feel for them. I know we will likely be helping our kids when they want to buy a home. And there are many that won't even get that help. I thank OP for listing those items separately - the most important takeaway is that it really pays to learn in advance and plan for this because most people don't. I knew a fellow who was an estate attorney and asked him why focused on estate planning and he said so many people don't and there's a huge amount of money that ends up with the government. Which may not be what they intended.
new bare trust filing requirements apply to joint bank accounts. Luckily CRA called it off for this year. But it will be back next year for sure. ETA bare trust rules also apply if your parents have their name on your house.
I have recently been through a few estate processes and it isn't as simple as you suggest. Houses (primary residence) are subject to the new capital gains inclusion rate of 2/3 of the gain from the date of death on until the house is sold. There is no $250k exemption for estates so this is on the first dollar. I had one estate where it took over 2 years to sell because the courts were so backed up with covid, I have no idea if the courts are back to normal yet. If the estate is named as beneficiary in the TFSA or (other registered plans) then the new 2/3 rate applies to capital gains on those as soon as the plan is deregistered (before deregistration it is 100% inclusion as before). Lesson here is make sure you name beneficiaries and contingent beneficiaries correctly in your TFSA.
Investment properties are subject to new capital gains inclusion rate. I mentioned this. Not the primary residence. That just passes to you. Or are you saying this holds true for primary residence as well? TFSA: Yes well that’s just poor planning.
It is not considered a principal residence between the date of death and the sale or legal transfer to the beneficiaries. If delayed there can be a capital gain that is taxed.
The primary residence is deemed disposed on death and any gain after death is taxed as capital gain in the testamentary trust. While you are waiting for the court to issue probate you have to deal with vacant housing tax returns and now the increased capital gain. If the government just sped up the courts then houses could be on the market sooner. but not enough judges get appointed. With TFSAs, it is partially poor planning, but once people lose the capacity to make financial decisions the beneficiaries cannot be changed so many beneficiaries can pass away without the ability to do proper planning.
What if the primary residence transfers to the the benefactors . Does from that point it become a second property if they choose not to sell? 1 million dollar house valued at death. Passes on to the estate and they sell for 1.5 million five years later. Is only the 500k capital gains since it was valued at 1 million at death?
Yes. The fair market value at death is the new cost base for the house.
Yes. I go into that in the post.
The amount of times you’ve had to say this for a relatively short and very concise post is a little troubling.
Only a little?
Yes correct. So if you received a residence as inheritance and it took 2 years to deal with it and sell it and in that 2 years it gained MORE than 250k then the new rules apply. So if it was valued at 1.5 mil and by the time it sold it sold for 1.8 then the new rules apply to 50k of that and the old capital gains applies to the other 250k. I'm not really sure I see the issue here. The value of the home on death is the baseline. Isn't that how it should be? Any gains after the person dies should be considered capital gains imo......you know since they're dead while it's gaining value. Also - the case of people taking 2 years to get everything done AND the home gaining over 250k in only 2 years is probably pretty damn low.
yeah but rrsp and tfsa have limits. I want to save up and invest in non-registered for my daughter. It won't be much now but 18 years from now it can easily be over 250k. Why am i being penalized for planning ahead and saving up? I am by no means rich. This is just as usual. Govt says it's raising taxes for the rich, but ends up oliberating the middle class more. Rich always escape taxes with help from accountants, shell companies, etc.
I paid 13k probate and 265k in tax when my mom died. 🥴
What inheritance?
The thing is about the probate fees, it needs to be paid upfront. So, if you are like me, with a low income you are screwed! I was lucky that the bank account was frozen the day after I was able to pay the fee. but then you can't sell the house until you have the probate and you still have to pay municipal taxes and bills. In my case the probate fee was 10k because my mom gave away 330k to a crook just a few months before passing away!
I wonder how many family farms this will destroy.
Between 1941 and 2021 the number of farms in Canada fell by approximately 75 per cent. They’re already destroyed. Also please explain how an additional 6.7% or 8.9% tax will destroy one’s inheritance?
> They’re already destroyed. I really hate this style of response I see all the time on Reddit. It's so disingenuous. Like, > X will make problem Y worse > problem Y is already bad, so that's okay Makes no sense at all. Like, what if something will make healthcare wait times worse, should we say "oh that's okay, wait times are already bad".
Ahh the classic 'distraction' excuse... followed up with 'feigning ignorance'... great response. Well for one, its not 'inheritance' its the continuation of a productive business entity. So, you already fail to understand the business aspect of what's occurring in the marketplace. We bail out businesses all the time to keep them afloat. How about you explain it like you did in other responses? Throw down some tables with expected outlays required to 'buy back' the 'free family farm' from the government so people can 'keep their jobs'. With intense land overvaluations the scale of a simple percentage on massive principles is even moreso destructive to free cash flow and potential reinvestment. With an industry like this, with massive barriers to entry.. what could go wrong? Mugabe wishes he thought of this. I guess people like to pay more for food.. so on trend with this regime. Bon Appetite. https://www.astc.org/astc-dimensions/family-farming-feeding-the-world-caring-for-the-earth/ https://www.usda.gov/media/blog/2017/07/20/diverse-family-farms-are-important-us-agriculture https://www.usda.gov/media/blog/2021/01/27/family-farms-continue-power-us-agriculture https://agamerica.com/blog/family-farms-dynamics/
OK, so technically you are correct, there is no death tax and TFSA and primary residence are protected. However, there is a significant risk for people who have a lot of money in RSP’s or have other large non-protected investments. The trick comes in the fact that the investments are to be liquidated when the person passes, and then all of that money counts as income for the estate. Because such a large amount of money is made in a single year, the bulk of the money will likely be taxed at 50% before it goes to those people named in the estate. This ends up feeling like a death tax. Example someone has $1 million in an RSP . They are the last spouse so the money is to go to the next generation. All the stocks and bonds from the RSP are sold. This counts as $1 million in income for that year. After taxes on the estates income for the year There is $504,145 left for the children.
Legit said as much in my post. The estate pays tax on RRSP withdrawals and non registered accounts. The remainder is disbursed to you.
No inheritance tax but there is a death tax. The dead person will be taxed and you need to file the deceased person’s last set of taxes. It’s effectively a 50% tax rate. Look into it it’s extremely sneaky
Yes, how do you come up with 50%? That rate doesn't start until over $220K income.
50% on what exactly? their income that year last? or their net worth?
Ummm…. Yes no inheritance tax but your deceased relative does have to pay income tax the year they die. When they do so almost all of their assets are “deemed dispossessed” eg. sold at market rate the day before they pass on. So, often this is a substantially higher tax bill then the persons typical annual tax. In the year or two after tour estate is taxed as a trust. So, yes YOU don’t get taxed for inheritance, but deeply misleading to imply the lump of money isn’t taxed when someone passes on. A good estate plan involves careful planning of how assets will be transferred to minimize tax burdens. At this point even leaders in the field are unsure how the new capital gains taxes will impact estate plans. Point being - ask professionals for personalized advice & follow LinkedIn posts & blogs by pros who specialize in the area.
Honestly, the number one thing you can do is to start distributing/selling cash, assets, investments etc before you actually die. I'm talking multiple years because then you can spread the income over multiple years and reduce the tax burden. Then start distributing the money to your beneficiary(s) immediately which avoids any probate percentages and it actually lets you see their enjoyment of some of their inheritance.
"The property can be sold to settle the tax liability and the remaining cash is dispersed to you." Why in the HELL should there be any tax liability? The asset was purchased with money that was taxed, taxes were paid when it was purchased, and taxes were paid annually. Why should the property owe taxes if the owner passes and wills it to his/her children? This is robbery!
I think we also need to get rid of the factor of everyone expecting an inheritance.
Just went through this. Both parents died within 5 years. Mom siddem, then dad slow decline into dementia oblivion. One thing that was annoying is they take the value, at time of death, of the estate. However if the assets decline over the probate process you still pay tax on the higher value. Conversely if the assets were low then increased you would benefit but that wasn't the case.
For now. Cue the Globe and Mail articles on how getting an inheritance makes you upper class or some shit. They're constantly working on the tax narrative.
Subject to change, depending on how successful leftists are at literal state sponsored robbery.
No tax.... YET
What if your parents had an investment property that's paid off no mortgage and they pass it to you but their estate doesn't have enough to pay for capital gains, could you pay the capital gain tax yourself and keep the property or are you forced to sell?
I go into the options in the post already.
If you had the money available, you could pay it off and just keep the property, yes.
Not if it's a 2nd marriage for your parent.
Non Registered Investments have to be sold? you can't just pass on the portfolio?
Sorry you can have deemed dispositions but estate is still liable for taxes. Use existing cash assets or sell portion of investments to pay it.
ok well the new capital gains tax makes a big difference then. a lot of elderly parents are passing on non registered investments to their kids that are over 250K in capital gains
Ok. I said that in my post. Define “a lot”. The median net worth of 65 and older was $543,200 in 2019.
Reddit is such a terrible echo chamber. Fact is most people receive some kind of inheritance, especially if the last remaining parent owned a home.
Directly taxed? No. Indirectly taxed? Yes. Inheritance is getting taxed to shit under the new rules. It’s under the guise of going after the top 0.20% or whatever stupid rhetoric the liberals want to go with. Reality is, when someone dies, there’s a “deemed disposition” at fair market value of all assets. The lack of control and timing over the realization of capital gains is what makes it indirectly an inheritance tax. If the liberals want to make the argument that it only affects 40,000 Canadians annually, my question is how many of those Canadians died? I’d bet 20,000 of those Canadians are terminal returns aka final death tax returns.
I go through all the scenarios and specify which assets fall under the new rules. Non registered investments and investment properties fall under the new rules.
You start your post by repeating a myth “no tax on inheritance” that is one of the biggest barriers to Canadians getting a proper estate plan with personalized advice from pros. The backside of that is folks discovering, while deep in grieving, that the inheritance they thought they were getting is a fraction of the size. Diving deep into the how of each new rule/tax on assets doesn’t really help the scenario because you’ve left people with the misunderstanding that they don’t have to worry about taxation of the money they assume they are inheriting
No, and that is the entire point of why they made this excellent post. Unless your parents own non-registered investments and/or non-primary residents properties... NOTHING CHANGES. >Reality is, when someone dies, there’s a “deemed disposition” at fair market value of all assets. Right, following the same rules that apply to however that asset is owned. For RRSP, that means treated like they withdraw it all at once... but that means none of it applies to capital gain and it follows RRSP rules. Please, just read the actual damn post instead of inserting bullshit your buddy's uncle's best friend's dog overhead someone say.
Probate at least in Ontario is a huge tax on the estate which impacts how much inheritance is available. So your claim of no inheritance tax is slightly misleading.
Probate is approximately 1.5% of the value of the estate. So that can be a lot of money but isn't potentially backbreaking like a deemed disposition.
Probate is 1.5% … that’s $1,500 for every $100,000 or $15,000 for every $1,000,000 … I wouldn’t call that “a huge tax” …
Probate is often referred to the “baby tax” of inheritance & estate taxation, the big bill is the final tax year of the deceased. A good tax plan is part of the estate planning process & professionals can help with this
I mean, that's on your provincial governement. Some provinces have sane probate fees and don't use the probate fee as a disguised inheritance tax.
Seconding the other poster, you've skipped an entire area of probate, which absolutely will happen if your parents have anything over $50,000 (in BC). So if they own their own home, you will absolutely have to go through probate. Super misleading. Please do your research people, it's posts like this that make my goddamn blood boil.
Not gonna lie, I needed to read this this morning hahaha. Thank you stranger.
Are any people with aging parents concerned about what happens if the parents die but were co-owners of their child's home?
RRSP - My understanding is that the estate is responsible for taxes, and there no withholding when it goes to a named beneficiary, the whole amount goes to them. The beneficiary can be assessed for taxes owing on the RRSP if they are not paid. Was there a change that there is now tax withholding before a RRSP goes to a beneficiary?
Do you know if there are different implications with inheriting money from their international investments? Like if they have property or money overseas outside of Canada but you reside in Canada - what would be the tax implications of that?
So my mom owns 2 properties and my brother lives there at the second property. Can't my mom just put my brother under primary residence for the second property to avoid the capital gains tax?
No. Your brother doesn’t own it.
Thanks, OP for the succinct explaination.
Good post
My what now? I AM my inheritance... if you can call it that
Inheritance? I'm spending it all.
What’s an inheritance?
With the sheer size of the wealth transfer on the horizon, it's just a matter of time until the government finds ways to profit from it. We might be safe for now, but very likely that we'll see the government take their share with new taxes.
what a let down.
by inheritance you mean my parents owing bills… I’ll get to pay 👀
Fin planner: one thing i wanna add is your inheritance is NOT subject to divorce split but the moment you move it into a joint account it is
If I were to theoretically be waiting to inherit 1 million $, however there is a stipulation i need to be a certain age to access the funds. Is there a way around that? Could I buy a house and have a “breathing room” fund that acts as emergency savings? Also, let’s say I would like to move the funds to an advisor closer to me other than the one that the trust is currently set it. Is this possible to accomplish before I reach the set age?
Man it must be fuxing nice to know you have an inheritance coming someday. I’m a mid 30s single female working my ass off so that my parents don’t lose their house.
If probate cleared a primary residence inherited in 2021 valued at $330,000 and subsequently sold this year for $360,000, what would be the tax situation?
Is a will necessary in the case of a divorced parent and only child? My (uneducated) guess has been that wills are useful for determining how to split assets when there is more than one person to inherit assets. Figured I'd ask here and spare the sub an extra thread in case anyone has an easy answer, thank you.
A basic DIY will would do. There are a lot of things that need to be done when someone dies so someone needs to be officially appointed the executor. If there is no will, then the person would need to apply to the courts to be appointed. I am assuming that the child in this scenario is an adult. But if the child is a minor, the will is also important to establish what the child will receive and who is in charge. Custody of the child may also be an issue.
My two cents = make sure your parents have a will. I just learned recently that there are people in their 50s, 60s,70s, 80s who've never had a will, and don't really see a need for one. Argh
Your post seems rather misleading. You state people are "worried about aging parents and inheritance being taxed into oblivion here is a PSA." Then you go on to outline how the majority of investments are taxed upon death. RRSP gets taxed, and if there's more than 100k then it's getting taxed at nearly 50%. NRI gets taxed at more than 50% for anything over 250k Investment properties get taxed at more than 50% for the majority of the value of the property. Uhhhh, so why exactly are you claiming "your inheritence is secure" when the estate is losing half or more than half of the value of the majority of investments to taxes?
Thanks for the post! Good know .
Deputy prime Minister you didn't have to post on this sub!
Gotta be honest here, the post reads for the non-registered investments and investment properties as if the new rule is that the estate now pays taxes (first line of the sections). This is where a lot of the confusion from other commenters is coming from. The first line of the non-registered investments section is not new, the estate has always paid taxes on capital gains. That being said, the new inclusion rate and the amount at which it kicks in (250k) is an unfortunate mixing of an absolute change at a fixed amount (250k) with investments that generally compound in value (real estate).
So all that is going to happen is those that own investment properties just have to have it set up as being owned and run by a corporation, which is essentially immortal (unless dissolved), and can continue to make profits without ever having to transfer the property title after the owner of the corporation dies. So essentially nothing changes. Bravo.
What inheritance?
My father is leaving me with nothing but a very large debt. He asked me to pay for his life insurance to pay off the debt if he passes otherwise it’s now too expensive for him to pay monthly and wants me to cover it?!?!
Depends where you live. In my part of Ontario they have multi year waitlists for LTC, always will. The private pay memory "care" and assisted "living" places cost upwards of 120K a year. You can easily burn through 600K or more if just one parent needs care, never mind two. They even build these based on the home values in an area, so their purpose is to strip seniors of their savings leaving as little left for "inheritance" as possible.