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Email: dsmith@synergylife.ca

 

Phone: (705) 434-0562

 

Address: 30 Quarry Ridge Road, Barrie, Ontario L4M 7G1

INHERITANCE PLANNING

WHAT YOU NEED TO KNOW

We all know an inheritance is money or property that you leave to a beneficiary in your will. This person is often a member of your family, a close friend or a favourite charity. However, it’s worth noting there are a few things to keep in mind if you are planning on leaving an inheritance, as well as if you’re receiving one. Planning is the key, so let’s look at a couple of things you should know before you get started:

Leaving real estate to your family

Leaving real estate property to your beneficiaries in a will can create problems due to the capital gains on the fair market value of the property. If it’s a family cottage, beneficiaries may be willing to split the capital gains taxes in order to keep the property in the family. However, you’ll want to be sure to discuss this idea with your family before including this direction in your will. Consider using life insurance as a component of your estate plan to help offset the taxes on property and final income taxes on your entire estate overall.

Planned giving

There are other things you can stipulate in your will, such as leaving a charitable donation to a charity of your choice, not only will you be supporting a worthy cause but your estate will also benefit from tax incentives when filing your final tax return.

Taxes paid by your estate

To put it simply, when someone passes away, their estate may be subject to paying any outstanding income tax, as assets will be considered sold upon death and taxes will be due. A properly structured investment contract with named beneficiaries will allow those funds to be passed directly and avoid the costs and time delays of the probate process. In the case of assets such as RRSP’s or RRIF’s, these can be rolled over, tax-deferred, to a spouse. However, taxes will be due on other assets. It is always recommended that you hire an experienced accountant to prepare the final tax return to make sure the document is filed correctly.

What taxes will you pay

The Canadian government revoked inheritance taxes in 1972, however, assets are deemed sold at the time of death and will be subject to any taxes owed. Certain assets like your home and life insurance proceeds can be transferred to beneficiaries without any tax. Other assets like a family cottage will be subject to capital gains tax and require additional planning if the goal is to keep the cottage in the family.

By utilizing the right financial products, with the guidance of a professional financial advisor and proper planning, you can be assured that:

  •  A significant percentage of your assets can avoid the entire probate process thereby avoiding time delays and excessive probate fees.

  • Select investment funds and insurance policies can often be received by the beneficiaries, normally within 10 business days of filing a death claim.

  •  Beneficiaries may receive a lump sum, a monthly income guaranteed for life or a combination of the two.

  • Inheritance gifts are protected from loss due to divorce.

  • Your inheritance may be structured to offer asset protection from any future creditor claims and lawsuits or even bankruptcy.

Getting your affairs in order prior to a life-altering event is the right thing to do, for yourself and your loved ones. Count on Darryl Smith to give you the advice you need backed by a wealth of experience to help you plan for your future. Give him a call today at 705-434-0562 with any questions or concerns you might have, and he’ll help you take care of your financial assets for a lifetime.

With the right plan, you can retire within 10 years.

If you're a business owner, your inheritance planning will need to account for your company as well. Learn more about inheritance planning for business owners here: