Personal finance: Death, taxes and what has to be done

If there is no will, then the court will appoint an administrator as the legal representative.

The easiest way for surviving family members to wind up your affairs is if you have a will in place.

The will should name the legal representative who will be the executor.

If there is no will, then the court will appoint an administrator as the legal representative. The legal representative can charge a fee to the estate to be compensated for the time taken to wind up the affairs of the deceased. The executor can be held personally liable for any outstanding taxes owing by the deceased’s estate.

No one likes to prepare for their own death, but if you prepare a detailed will, then there will be a better chance that your beneficiaries will receive what you intended them to receive from your estate.

Many people just have a basic will whereby when one spouse dies, then the other spouse inherits the estate and then when both spouses die, the children inherit the estate.

When one spouse dies, the remaining spouse can do with the estate what he or she desires. If both spouses pass and the will indicates the estate is to be divided among the children in equal amounts and one child is the executor…well you can imagine the problems that this might cause.

The responsibility and care of a disabled child should be spelled out in a will.

Divorce and ex-spouses of beneficiaries can also cause problems with respect to assets pledged in a will.

Probate is the process of getting the court to rule that a will is legally valid.  If the person dies with assets worth more than $25,000, such as land, house or investments, the will is usually required to go through probate.  There are fees for the process depending on the value of the assets in the estate.

As a legal representative, your responsibilities under the Income Tax Act are to file all the required returns for the deceased, and make sure that all taxes owing are paid. You need to inform the beneficiaries if any of the amounts that they will receive from the estate are taxable.

The first order of business is to let CRA know that the person has deceased. When this happens CRA will remove all representatives from the deceased’s account and will stop all automatic payments such as the OAS.

At this time the representative needs to provide to CRA a copy of the death certificate, the SIN of the deceased, copy of the will or other legal document such as grant of probate or letter of administration indicating who the legal representative is.

There are three kinds of personal returns that can be filed for a deceased person upon death which are the final return, the rights and things return and a business return.

In addition you may be required to file a T3 return for the testamentary trust annually if the assets have not been immediately distributed.

Under the income tax act, the deceased is deemed to have disposed of all capital property at death. If the assets cannot be distributed on the day of death, they roll over into testamentary trust. This trust requires the filing of an annual tax return called a T3. Then when the assets are finally distributed, then the testamentary trust is closed.

Currently, a testamentary trust is treated like an individual and attracts the same graduated tax rates as an individual, so there can be some significant tax savings with the proper estate planning. Finance Canada is looking at changing the taxation of trusts in the near future.

Finally after all the returns have been filed and you have received the assessment notices from CRA,  and before any property is distributed, the legal representative should request a Clearance Certificate from CRA. You will need a clearance certificate for the personal returns filed and a separate certificate for any testamentary trust returns filed.

Just Posted

Kelowna council puts controversial Capri-Landmark plan on hold

Councillors concerned about proposed plan to extend Sutherland Avenue

Two bands and dueling guitars come to rock in Kelowna

Secondhand Habit and Not Even Noon bring their passion under one roof for one night

UPDATE Downtown Kelowna winery evacuated due to gas leak

Kelowna Fire Department evacuating the Sandhill Winery on Richter Street Monday afternoon.

West Kelowna water park to close for the season

Summer is coming to an end and so is the water park fun

Motorbike crash on Highway 97 in Kelowna

A Cooper Mini and a motorbike collided at Highway 97 and Leckie on Monday

‘Fire tornado’ erupts as firefighters battle interior B.C. wildfire

Firefighters near Vanderhoof were taken by surprise

Abdelrazik torture lawsuit delay would be unconscionable: lawyer

The federal government is making a last-minute plea to delay the Federal Court hearing

Trudeau upset after meeting with Saskatchewan chiefs

Trudeau is upset about how time was managed in a recent meeting

Vernon police respond to accusation of delayed 911 action

Vernon RCMP are working with Westshore Estates residents following complaints of delayed 911 response.

B.C. tent city ‘devastated’ after flash flood

Maple Ridge mayor says that residents shouldn’t have to return to their flooded tents

Filipino-Canadians concerned about family after typhoon hits Philippines

Typhoon Mangkhut has killed 66 people in the Philippines and four in China

Ottawa looks at having retired judge help guide renewed pipeline review process

The feds would only says that ‘multiple options were on the table’

Canada bans use of trans fats in food products

Trans fats are know to cause heart disease

Armstrong Metalfest gears up for year 11

Band submissions open until Nov. 1

Most Read