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Estate Planning
Our KNV Estate Tax Planning experts will:
- Provide you with consistent, high-quality service by a team experienced in preparing returns for deceased taxpayers and their estates;
- Review prior returns for missed tax-saving opportunities;
- Review assets, income and deductions to minimize overall taxes by filing optional tax returns or making elections where beneficial;
- Review the overall tax situation for tax-planning opportunities to maximize the amount of the estate flowing to the beneficiaries.
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For additional information, please contact:
Bill Vance or Dorothy Brown at 604-536-7614
Tax Returns to be Filed
Upon the death of a taxpayer, one or more tax returns will need to be filed. Some of these returns are optional. In many cases it is beneficial to file optional returns because the personal exemptions can be claimed in full on each T1 filed, and the graduated tax rates apply to each return filed. Note that personal exemptions cannot be claimed on a T3 return, but the graduated tax rates do apply. Therefore, by spreading the income over two or more returns the total tax payable may be reduced. Also, it may be beneficial to tax some income in the estate and pay the after-tax income to the beneficiaries where the beneficiaries would otherwise pay personal tax on that income at a higher rate. Some deductions may also be allocated between the various returns so as to minimize taxes.
Other Tax Considerations
A taxpayer is deemed to have disposed of all of his/her assets upon death, and, as a result, may realize capital gains or losses or be required to recognize income from an RRSP, RRIF or other sources. These must be reported on the T1 Final in addition to the income that would normally be reported. In some cases, special elections are available which can reduce the overall taxes of the deceased, the estate and the beneficiaries.
Other services that may also be required include:
- Estimating the holdback required for taxes where a preliminary distribution to the beneficiaries is to be made;
- Reviewing prior year returns and filing T1 Adjustment Requests where errors have been made or credits not claimed (where an individual has been ill for some time, it is often the case that the disability credit has not been claimed) or requesting a carry-back of donations or losses;
- Applying for clearance certificates to absolve the executor from any liability for unpaid taxes;
- Calculating the required deductions from payments to executors and preparing the T4 return.
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Tax Planning Opportunities
In some circumstances, it may be beneficial to employ one or more of the following strategies. We will review the deceased’s situation to determine whether any of these strategies would be beneficial.
- Transfer the shares of a private corporation to a holding company or winding up a company to avoid double taxation.
- Have the executor make a spousal RRSP contribution on behalf of the deceased within 60 days of the end of the year of death.
- Assets bequeathed to a spouse are generally transferred at cost, deferring the taxation on any gains until the death of the spouse. It may be beneficial to elect to have certain assets transferred to the spouse at a greater amount, e.g. if the deceased has little income or unused losses.
- Look for ways to utilize losses carried forward from prior years or incurred in the year of death or in the estate.
- Where there is no designated beneficiary, elect to rollover an RRSP/RRIF to a spouse or dependent child, deferring tax or transferring the tax liability to the beneficiary who may be in a lower tax bracket.
- Where two or more properties are owned, consider which property should be claimed as the principal residence.
- Evaluate use of foreign tax credits to avoid cross-border double taxation.
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