How Are Your Assets Taxed When You Die?

hey guys how you doing I'm Kent Tilly and today we're going to talk about how exactly everything is taxed within your estate we're going to get into how everything is taxed when you pass away uh how to reduce probate in certain provinces and we're going to talk about which provinces are actually the worst ones to die in uh I'm talking to you in Nova Scotia so we'll get into it right away [Music] all before I get started in this example uh please remember to like comment share if you like this video it's the best way to help us grow as a company we're just trying to get the message out there and educate as many people as possible so we love it when you do that um today what I'm going to talk about is actually a pretty wealthy individual because of wanted to show you all sorts of different types of assets and what happens to them when you pass away um we're going to talk about a number of things except for small business stuff and there's a reason why I'm leaving a small business owner out of this because it's way more complicated that would take like an hour's long video there's things to do with double taxation within money coming out of the company all these other things it's way more complicated ated than the average Canadian individual even if they are wealthy like this person so one thing you need to know is if you're married then you pass away all your assets can just roll over straight to your spouse there's going to be no taxable implications at that point in time and something that I do want to talk about in a future video is the most complicated individual planning there is which is Blended Family Planning because estate planning for them gets really tricky because it could roll over to your spouse and then maybe your heirs won't get anything so you need to really plan for that and if that's the case with you I suggest that you really think about working with an accountant a lawyer a cfp financial planner to get these things organized and have conversations about them because it can get really ugly and I'm also going to talk about how to avoid ugly in this scenario because some of these assets can flow outside of your state directly to the beneficiary but if you do that and you don't do it properly then it can cause significant tax implications for maybe somebody else if it's not even so I would avoid it unless you know that it's perfect even though you want to save on the probate so I'll just start with that now let's look at a whole bunch of assets this the the last spouse remaining they have a house it doesn't matter what you bought it for it's worth $1 million that is going to go to the estate you can't put that towards a beneficiary it's going to go into the will but it is going to be taxfree now everybody knows that rsps leras riffs are taxed at 100% it's like they're sold the day die and all of that money has to be paid like it was income in that year so one of the planning things that you're trying to do is reduce the size of your RSP before the day that you die this can go either directly to named beneficiaries or to your state and this is the really risky one to go straight to the beneficiary because then the estate has to take pay the tax but the beneficiary just takes all that money and doesn't have to pay the tax and then maybe somebody else is like you know I you know I have this house left over but I have to pay all the tax on that RSP if you tried to say one kid gets the house worth a million and one kid gets the RSP worth a million and we're going to flow that outside of the estate well then the kid with the house actually has to pay all of the tax and then there might be a fight so I would try and avoid that TF say uh and in this case the RSP is worth a million dollars kind of bad planning uh they didn't get to melt it down as hard as they wanted to but they died young and it was just unfortunate got a tfsa worth $200,000 that can go straight to the estate or directly to the beneficiary completely tax-free love the tfsas they have $200,000 in cash uh the adjusted cost cost base on cash is the same as the amount it hasn't earned anything so there's no tax to be paid on cash cash is just going to go straight taxfree to whoever because you've already paid the tax on it this individual also has a stock portfolio worth a million dollar but the adjusted cost base on that is $500,000 so that means that there was a $500,000 capital gain and the day that they died it's like everything was disposed of deemed disposition as it's as it's called and so the stock portfolio is sold has a $500,000 capital gain at this time also owned a rental property bought it for $200,000 thought it was like perfect nobody ever loses in real estate real estate always makes money turns out that it was actually worth less the day that they died it's it's only worth $100,000 now after realtor fees so you're not going to have to pay tax on the money at like on the realtor fees so once it's said and done they sold it for $100,000 there's a $100,000 Capital loss on that rental property they also have a permanent insurance policy that has a cash surrender value of $250,000 and a f amount of $400,000 this one can go to the estate or a named beneficiary or beneficiaries um and the the insurance any insurance coming individually is completely taxfree so there's 400,000 going to the estate taxfree and lastly there's a family Cottage or cabin if you're in Alberta Cottage if you're in Ontario they bought it for $100,000 over the course of you know the years they put in some improvements they kept their receipts they put an extra $100,000 into it has an adjusted cost base now of $200,000 and it's worth a million dollar so there's an $800,000 capital gain on that cabin the day that they die cabins are also the ugliest thing when it comes to estate planning because because there's usually more than one child maybe one wants it the other one doesn't you have to pay tax on the capital gain in order to keep it otherwise you have to sell it and some people don't want to use it While others want it so if you have a cabin you really need to start planning this with your children to see what and who wants it and how that tax bill is going to be paid if you do want to keep it in the family otherwise it can be really ugly after you pass away so just to look back we've got a house worth a million RSP worth a million tfsa worth 200 Grand uh cash worth 200,000 stocks worth a million but there's a $500,000 capital gain on that uh the rental property had lost uh$ 100,000 uh the power policy is going to pay out 400 taxfree and the C has an $800,000 capital gain so the total amount of assets is $4.9 million but the only ones that are taxable is the RSP that full million dollars is taxable at 100% the stocks they had a $500,000 capital gain so half of that is taxable so $250,000 is going to be added on top of the million from the RS P minus the capital loss from the rental so minus 50,000 because there's a $50,000 Capital loss and then there's the cabin with an $800,000 capital gain times 50% so 400,000 of income on that for a total amount of taxable income of $1.6 million on $4.9 million worth of assets not too bad however nobody is going to be happy with the tax that's going to be owed on this so what I did is I put $1.6 million into the ernston young calculator and looked at every Province and I'm just going Province and territory and we'll put the list on there of the average amount of tax that you're going to have to pay in each province based on that and then I'm going to show you just the highest and the lowest which might make everybody decide to move to Nuno um and move away from Nova Scotia so Nova Scotia has the highest average tax rate on$ 1.6 million of income of 51.75 so this estate owes $827,500 in tax in 2024 Nuno has an average tax rate of 42.3 so they owe 67678 to uh in Nuno which is a difference of 15,21 if you lived in Nuno rather than Nova Scotia I've been in Nuno once uh it's chilly but nice um and there's a road called The Road to Nowhere so anyway I would uh suggest you check it out groceries are cheap up there as far as I've heard think it's like 30 bucks for orange juice or something like that okay so now we're getting into the probate issue so full amount if everything went into the estate that's $4.9 million however if you designated a beneficiary toward and said you know the RSP the tfsa the insurance uh is going to be going directly to a beneficiary and you plan this out properly then in some provinces you can save tens of thousands of dollars in Probate because that money went outside of the estate and just directly to the beneficiary otherwise some of the provinces are going to say this is the value and we're charging you based on that and not including the legal fees that happen here so what I would also suggest is you find a lawyer that doesn't charge based on the percentage of your assets but actually on the time that they're taking they're charging hourly for this process because just because it's bigger doesn't mean that they deserve to make you know 1.5% on $5 million or whatever the heck their rate is just pay them they're $750 an hour and you'll save some money um so some provinces doesn't matter probate doesn't really matter so it's going to be flat or the same amount in some provinces no matter what so I'll just list those off first in Alberta you're going to be pay 525 basically no matter what Manitoba I couldn't believe this actually got rid of probate fees I can't believe that I don't think think that'll last that much longer New Finland and Labrador 435 bucks uh Quebec all they have is an administrative charge which I was surprised about to which is 65 bucks and uh all of the territories have just flat fees for this so Nuno 425 Northwest Territories 435 and Yukon 140 bucks so Ontario BC Saskatchewan new brunic pii and Nova Scotia are all places where you might want to consider some probate planning however like I said there are risks if you don't do this properly you're trying to save and probate and you might cause more harm than good so make sure that you do it right if you're doing that so in onario the max probate you're going to pay is 1.5% uh so on $4.9 million that's 73,500 and on 3.3 million that's 49,500 so that's you know $24,000 worth of you know tax savings I guess when you pass away but is it going to cause more harm than good is the question BC uh it's 6% up to 50,000 and then you got to and then 1.4% over 50,000 so the max is [Music] 68,69 unless you move to Alberta like a boss you know uh Catan's very high 1.7% uh yeah they're even higher than Nova Scotia so uh Ryan I'll put the list of all of those ones on there and what you're actually paying uh Pei is not too bad 400 plus 0.4% New Brunswick is 0.5% which isn't too bad either and then Nova Scotia it's pretty strange with this one so it's $1,265 plus 1.65% of the value of the estate for some strange reason so you know what no Scotia I don't know what's going on here but I've got a little bit of a bone to pick with you lately like why are you charging everybody in every scenario so much money I've heard your roads are not good like we just talking to a couple from Nova Scotia today and they're like I don't know where our money is going but at least in Alberta we've got low rates and we have nice roads so I don't know what you're doing um anyway hope you learned something thanks again for watching and we'll see you guys [Music] soon

Channel: K4 Financial

Views: 2,202

Keywords: financial, canadian, Canadian financial, retirement, cpp, oas, gis, tfsa, rrsp, registered retirement savings plan, RESP, k4 financial, financial plans, tax-free savings account, wealthsimple, questrade, pension, commuting pension, RRIF, RIF, LIRA, Canada Pension Plan, Non-registered investing, ETFs, Canadian Financial Advice, K4, K4 Financial, Financial Education, Financial Literacy, TSX, Index Funds, CRA, Canada Revenue Agency

Id: 0eK_Yx7Sy7Q

Length: 16min 17sec (977 seconds)

Published: Sat Apr 06 2024