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Estate Planning

Are there Estate Taxes when I pass away?

December 27, 2012

This question was posed by one of our members recently.  The short answer is No, not in Canada.  Despite the snow and cold, we have a lot to be thankful for living in Canada! But there’s more to the answer: probate fees and taxes due on the final tax return.

Probate is a process where the Court declares that the Will is valid and enforceable. Probate establishes that the Executor(s) also known as Personal Representative(s) can settle the estate.  The estate is what the deceased owned less what is owed at the time of death. If the deceased owned real estate, probate is required. Most financial institutions also require probate.

The maximum probate fee for residents of Alberta is $400 regardless of the size of the estate. Most Executors use a lawyer to complete and submit forms to the Court and subsequently charge a fee between 1-2.5% of the estate size (e.g. estate size $500,000 x 2.50% = $12,500). Some lawyers charge a flat fee or work on an hourly basis. Please note that most articles in newspapers and magazines on estates originate out of Ontario where probate fees are considerably higher @ 1.50% for estates over $50,000 followed closely by British Columbia @ 1.4%
 
All assets of the estate are deemed disposed of at the time of death. As a result, balances in RRSP/RRIF and capital gains on rental properties, cabins, shares that have appreciated in value, etc. are claimed on the final tax return of the deceased which is likely to cause a tax liability. One way to reduce or eliminate the taxes is to contribute to charities in your Will.* Note that any gains on primary residences are tax-free. 

The good news is that inheritances received by the beneficiaries are tax-free.

 

*Kindly refer to “Leaving a Legacy, Transforming this World.”


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