How do US and Canadian ‘Death Taxes’ differ?
Upon a U.S. taxpayer’s death, all of their property is valued at its current fair market value, less any deductible expenses and liabilities, and is taxed at estate tax rates.
What if You Have Assets in Canada and the U.S.?
If a taxpayer has assets in both the U.S. and Canada, both country’s estate tax could come into play. However, there is relief available for double taxation.
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Death and Taxes: The Deemed Disposition Rule
There are no estate taxes or succession duties in Canada. However, taxes upon death have not disappeared. When a person dies, there is a ‘deemed disposition’ of all capital property.
How Canada Handles your Property After Death
It means that the government treats all your property (unless jointly held) such as stocks, bonds, RRSPs, real estate, etc as sold at fair market value on the day of your death. Your estate will be required to pay capital gains tax on that property.
Your Registered Retirement Savings Plan
This applies to your RRSP if you do not have a spouse to whom you can transfer it. Careful planning can reduce or defer the taxes owed. Without an estate plan, you could lose nearly half of the value of your gains to taxes.
Probate: Understanding the Basics
“Probate” is the recognition by the provincial court of the validity of your Will and the appointment of the person named as your Executor. Granting of the “letters probate” is a notice to the public that your Will complies with the basic formal requirements and that the Will was not being challenged at the time of application.
Depending on the Province
In some provinces, the Executor must apply to the court for “letters probate” in order to begin administering an estate. These fees are payable to the provincial government based on the value of certain assets in your estate. There have been increases over the years in provincial probate fees.
Estate Planning Made Easy
Estate planning strategies need not be complicated or expensive. First, who knows better than you what you want to be done with the things that you’ve worked all your life to build. Second, seek the professional advice of an expert to guide you on the financial and legal implications to ensure that you get the most favorable tax treatment possible.
Get Started on Estate Planning Today
If you do not have a Will, or if your Will has not been updated recently, perhaps it is time to meet with a lawyer and get the job done. For Canadian residents,t ake the first step; call Ontario March of Dimes toll-free for handy estate planning tools.
FAQ for CANADIAN DEATH TAXES
Are there estate taxes or succession duties in Canada?
No, there are no estate taxes or succession duties in Canada.
What is the deemed disposition rule?
It has to do with Capital Gains tax; when a person dies, the government treats all their property as sold at fair market value on the day of their death., thus the estate will be required to pay capital gains tax on that property.
What is probate?
Probate means that the provincial court considers a person’s will as valid, as well as the person named as the executor.
How can probate fees be reduced?
It’s based on the value of certain assets in an estate. An estate or tax planner can often help to arrange one’s affairs reducing probate fees.
Is estate planning complicated?
It does not be complicated or expensive. A professional tax planner can guide you on the financial and legal implications towards the most favorable tax treatment possible.
Why is it important to have a will and keep it updated?
To avoid paying taxes at the highest tax rate, sometimes over 50%. Naturally, you would also want to avoid unintended tax complications from long term care or other financial related issues that arise as a result of or prior to ones death.
Where can I get help with estate planning?
The Ontario March of Dimes offers a free copy of “My Personal Organizer” – a handy estate planning tool. LEGAL Help USA can also assist with providing free tax planning consultations.
What is a Succession Duty?
A tax placed on the property which passes on the death of any person, by means of a transfer from one person (the Predecessor) to another person (the Successor).
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