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Winnipeg Free Press - PRINT EDITION
Capital gains, probate fees will affect an inheritance
There are many myths circulating about how taxes apply when a person dies. Much of this misunderstanding may come from people reading too many U.S. publications and thinking that concepts like gift tax and estate tax apply in Canada.
They do not. Canada does not assess a tax on the actual value of an estate. It's a little trickier than that.
As you read the following, remember that none of these taxes have to be paid if the deceased person leaves a living spouse. More on that later.
Under Canadian tax law, a person who dies is deemed to have sold, an instant before death, all property they own alone. Recall that selling certain capital property that has appreciated in value results in half the capital gain being included in taxable income.
For example, if the deceased person had owned a rental property with an adjusted cost base (for tax purposes) of $100,000 and the market value on the day of death was $200,000, the gain would be $100,000, half of which would appear as income on the final tax return.
If this person owned shares of a company with the same cost base and current market value, the capital gain and income-inclusion treatment would be the same.
A principal residence would generally not be included in income, though the executor would have a choice of which residence to declare as "principal" if the person also owned a cottage or other non-rental residential property. (See my blog for lots of detail on these rules.)
For investments such as GICs, Canada Savings Bonds, savings accounts or term deposits on which tax has been paid each year -- or any capital property that has not gained in value -- there is no special tax on death.
That final tax return must also include all regular income earned in the year so far, including employment, net self-employment, pension, net rental and professional income as well as interest and dividends received while alive.
Now comes the big taxable amount for many people -- de-registering all RRSPs, RRIFs and related registered accounts such as LIRAs and LIFs. All are deemed cashed in on the day of death, and the entire amount of the plan becomes taxable income on the final tax return.
Since the RRSP or RRIF value is taxed on top of regular income (and any net capital gains), it is often taxed at a high or top tax rate.
TFSA withdrawals are not taxable, either on death or while alive.
Here's some good news for married people.
Subsection 73 of the Income Tax Act allows for a tax-free rollover of assets between spouses when the deceased person leaves a living spouse or common-law partner. (This can also work for transfers to children or grandchildren in the case of farm property.)
This means a widow or widower can opt to pay no tax on capital gains in the year of the first death and instead defer declaration of those gains until the properties are actually sold or the surviving spouse dies.
A similar option exists for a spouse who receives the RRSP, RRIF, LIRA or LIF assets. These can be rolled into the registered account of the surviving spouse, with no tax payable on the first death.
In all cases, the taxable amounts will have to be claimed when passing these assets on to another generation.
There are several situations in which the surviving spouse might opt out of these rollover provisions.
For example, if the person dies early in the year, if shares were eligible for the $750,000 lifetime capital gains exemption, if the deceased had capital losses carried forward or unused credits from large donations or other sources, it might make more sense to claim some of the income on the final return.
While technically not a tax, Canadians pay probate fees in the province in which the will is probated, based on the value of their estate.
Probate fees can be reduced by techniques such as joint ownership with right of survivorship, by naming individuals as beneficiaries where this is allowed, such as on registered accounts and most life insurance products.
However, there are times -- such as when using testamentary trusts for longer-term tax benefits -- that these short-term techniques should be avoided. Again, good advice is recommended, especially if you have a sizable or complicated estate.
This is where good tax advice pays off.
David Christianson is a fee-for-service financial planner with Wellington West Total Wealth Management Inc., a portfolio manager (restricted).
Republished from the Winnipeg Free Press print edition September 14, 2012 B9
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The Washington Post hailed Roger Rosenblatt's Making Toast as "a textbook on what constitutes perfect writing," and People lauded KayakMorning as "intimate, expansive and profoundly moving." Classic tales of love and grief, the New York Times bestselling memoirs are also original literary works that carve out new territory at the intersection of poetry and prose. Now comes The Boy Detective, a story of the author's childhood in New York City, suffused with the same mixture of acute observation and bracing humor, lyricism and wit.
Resisting the deadening silence of his family home in the elegant yet stiflingly safe neighborhood of Gramercy Park, nine-year-old Roger imagines himself a private eye in pursuit of criminals. With the dreamlike mystery of the city before him, he sets off alone, out into the streets of Manhattan, thrilling to a life of unsolved cases.
Six decades later, Rosenblatt finds himself again patrolling the territory of his youth: The writing class he teaches has just wrapped up, releasing him into the winter night and the very neighborhood in which he grew up. A grown man now, he investigates his own life and the life of the city as he walks, exploring the New York of the 1950s; the lives of the writers who walked these streets before him, such as Poe and Melville; the great detectives of fiction and the essence of detective work; and the monuments of his childhood, such as the New York Public Library, once the site of an immense reservoir that nourished the city with water before it nourished it with books, and the Empire State Building, which, in Rosenblatt's imagination, vibrates sympathetically with the oversize loneliness of King Kong: "If you must fall, fall from me."
As he walks, he is returned to himself, the boy detective on the case. Just as Rosenblatt invented a world for himself as a child, he creates one on this night--the writer a detective still, the chief suspect in the case of his own life, a case that discloses the shared mysteries of all our lives. A masterly evocation of the city and a meditation on memory as an act of faith, The Boy Detective treads the line between a novel and a poem, displaying a world at once dangerous and beautiful.
About the Author
Winner of a Robert F. Kennedy Book Prize, a Peabody Award, an Emmy, and two Polk awards, Roger Rosenblatt is University Professor of Writing at Long Island University Southampton College. He writes essays for Time magazine and for The News Hour with Jim Lehrer. He lives in Manhattan and Quogue, Long Island.

subset: commoncrawl


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Jim Cramer's Best Blogs
Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- sellers' reluctance on Friday,
- an opportunity in Intel, and
- why you need to keep an eye on the mobile Internet.
Sellers Reluctant to Hit Bids
Posted at 3:43 p.m. EDT, Oct. 16, 2009
Can we admit that disappointments in high-profile names International Business Machines (IBM), Bank of America (BAC - Get Report) and General Electric (GE - Get Report) did very little damage? Can we come to terms with the idea that these three companies, spanning so much of the globe and so many industries, in the end did not provoke a fall, despite how overbought the market is (the most it has been in months)?
Oh, and as much as I like Google (GOOG), it shouldn't have been able to offset these three big companies.
Once again, the sellers were simply reluctant to hit bids. They either sat on the offered side when we had one of those mini-rallies up, or they didn't appear at all. We just capped another amazing week, one where we should have had at least big down day. Just didn't happen. At the time of publication, Cramer was long Bank of America.Amazing Opportunity in Intel
Posted at 2:57 p.m. EDT, Oct. 14, 2009 See ... see, definitive proof that Intel's (INTC - Get Report) no good: It's not up two bucks! If it were any good, it would be up two bucks. Or more! Could there be any more documentary evidence of how wrong Cramer is? To which I say, the story isn't today's performance; in fact, the failure to run is kind of an amazing opportunity that you don't get very much in this tape. The fact that people think that Intel has run already is the opportunity that is needed to scoop some.
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