Do you own property in the U.S.? Do you own property on which you’ve been claiming depreciation? Do you own anything that would produce a capital gain if you sold it? Do you own a business? Do you have an RRSP, RRIF or other registered accounts?
If you answered “yes” to any of these questions you could be hit with something you thought had been abolished in Canada — death taxes. Ottawa dropped Estate taxes years ago … And more recently they dropped Probate and replaced it with Estate Administration Tax (EAT). No matter what it’s called, coupled with income taxes it EATs away at your estate.
We don’t have to go outside of Canada or have a change in government policy to be subject to death taxes. Own a place on which you claimed depreciation, and it is recaptured and taxed when it is sold or passes to your heirs.
If an asset is worth more than you paid for it, your estate can also be stuck with tax on the deemed capital gain. Your heirs may be forced to sell it just to pay the taxes. This catches your business interests too, and most other things that would produce a capital gain if sold.
Then there’s income tax on everything that’s been growing tax-free in your RRSP, RRIF, and some other registered plans. It’s fully taxable at your death. Did you really think Ottawa would give you those deductions without expecting anything back? It’s hard to argue when you’re dead.
Some of these taxes can alleviated by leaving the asset to your spouse, and collecting on his or her death. But, whether taxes are payable at the first or the second deaths, life insurance provides an easy, tax-free answer. Thus, the same event that attracts death taxes can produce the cash to pay them. Looking for life insurance? Bowie Can Help.