Have you talked to your parents about your eventual inheritance?
Heck no! The mere thought of it feels unbearably uncomfortable, especially if you perceive it to be an entirely selfish topic.
But it香蕉视频直播檚 not as one-sided as you might think.
Parents consulting with me are deeply concerned about their estate going to their children as smoothly and cheaply as possible.
Nobody likes paying taxes! A key estate planning objective is for the bare minimum to go to the government, whether that be through income taxes or probate fees.
And they love you! They want the process to be as trouble and hassle free to their children as possible.
You and your parents are on common ground with these goals.
Your parents might not realize that achieving these goals can take more than just having a will naming their children as beneficiaries.
The tax side of things is particularly important. Canada doesn香蕉视频直播檛 have a death tax, but death can come with a massive tax hit because of how our income taxes work.
Consider your parent香蕉视频直播檚 RRIF.
Canadians receive an income tax benefit as we pay into our RRSP. We often get tax advice to maximize that benefit, timing our contributions for when we香蕉视频直播檙e in the highest tax bracket.
After the RRSP is converted to a RRIF, we pay income tax as money is paid out of that fund. We often get tax advice about minimizing that tax. For example, that making a large withdrawal during one taxation year might cost much more in tax than spreading it out over a number of years.
But we seldom get tax advice about what happens when we die. I doubt many people realize that the entire balance of our RRIF will be taxed as lump sum income the year of our death.
Then there香蕉视频直播檚 your parent香蕉视频直播檚 other investments. They香蕉视频直播檝e hopefully received tax advice about minimizing taxable capital gains. They would hopefully know that selling stocks that they香蕉视频直播檝e held for a long time will trigger a taxable capital gain, so doing so might best be spread over a number of years.
But do they realize that all unrealized capital gains will be triggered the moment of their death, even if those stocks aren香蕉视频直播檛 actually sold?
And then the investment property. Do they realize that the increase in value, possibly hundreds of thousands of dollars, will be a taxable capital gain the year of their death even if the property isn香蕉视频直播檛 sold?
With the maximum income tax rate for British Columbians in the range of 53%, this is high stakes stuff.
It香蕉视频直播檚 one thing to get tax advice about minimizing your ongoing, annual tax burden. It香蕉视频直播檚 quite another to get advice about minimizing the overall tax burden on your estate on your death.
I expect that your folks would appreciate learning about this important estate planning consideration, however it comes to their attention. If it feels uncomfortable for you to bring it up, perhaps use this column as an ice breaker.
Estate tax planning requires the expertise of an estate tax specialist. Reach out to me if you would like help finding an accountant with those qualifications for your folks, or for your own estate planning.
I hadn香蕉视频直播檛 intended this column to focus on tax. There are other important bits and pieces to discuss with your folks to best prepare for the inevitability of their deaths. I香蕉视频直播檒l get to those in later columns.
Paul Hergott
You are encouraged to contact Paul directly at paul@hlaw.ca with legal questions and issues you would like him to write about.
