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 golf course ready and open for spring business

Two Eagles Golf Course opened Saturday, more to come

Kelowna-Lake Country MLA hopes annual climb will promote peace

MLA Norm Letnick’s 5th Annual Spring Climb for Health & World Peace is April 6

Possible assault to bus driver in Kelowna

A minor bus crash was reported just after 8 p.m. Friday night

Car crash nearly sends car over embankment in West Kelowna

RCMP search for driver of alleged stolen vehicle that caused crash

Update: Highway 3 reopened following rockslide near Keremeos

The slide occurred Friday March 22, at about 8 p.m. between Red Bridge and Standing Rock

Sparks fly as SUV speeds down wrong side of Highway 1 trying to flee RCMP

Captured on video, the vehicle headed westbound against oncoming traffic before crashing

Okanagan woman launches sewing studio

“I know there’s a lot of people up and down the valley that would love to sew.”

1,300 cruise ship passengers rescued by helicopter amid storm off Norway’s coast

Rescue teams with helicopters and boats were sent to evacuate the cruise ship under extremely difficult circumstances

Letter: Stop raising the minimum wage

To the editor: The government is looking for ways to put more… Continue reading

Letter: Immigration will not help other countries, or our own

To the editor: Firearms are not the culprit in all those massive… Continue reading

Letter: Sprawl destroying natural landscape

To the editor: I agree with the assessment by Ian Pooley in… Continue reading

Former Okanagan teen found safe after disappearing from YVR airport

Ethan Burnett, 14, was found safe in Kelowna on March 22

B.C. university to offer first graduate program on mindfulness in Canada

University of the Fraser Valley says the mostly-online program focuses on self-care and well being

Province announces $18.6 million for B.C. Search and Rescue

The funding, spread over three years, to pay for operations, equipment, and training

Most Read