WHEN IT COMES TO ESTATE PLANNING, MANY PEOPLE MAKE TWO ASSUMPTIONS: 1. When I die, my family can sell my house to pay for my final expenses. 2. When I die, everything will go to my common-law spouse.
How can estate planning help your common-law spouse receive your inheritance? The best way to ensure that your common-law spouse receives your legacy is to put it in writing. • name your spouse as your beneficiary on your life insurance policies and RRSPs, and • be sure to make a will and power of attorney.
that the estate of a deceased person has paid all amounts of income tax, interest and penalties to the Canada Revenue Agency owed at the time the certificate was issued. It doesn’t cover other potential tax liabilities, like property tax.)
How can estate planning help your family?
But these assumptions may not be true. Let’s separate fact from fiction.
Proper legacy planning and a statement of liquidity at death can help to: • assess the succession’s impact on the children, and • avoid unpleasant surprises. Keep in mind that it can take a long time to deal with all the paperwork after someone dies. And while all that’s going on, the tax department and service providers won’t wait. One solution may be a life insurance policy. It can provide your family tax- free funds quickly to help cover the bills after your death.
CAN YOUR FAMILY SELL YOUR ASSETS TO PAY YOUR FINAL EXPENSES? You likely have many assets that will create an inheritance for your children. These assets might include things like: • your family home, • a cottage,
• RRSP savings, and • other investments.
Many people think their family can simply sell their house, or other assets, to pay death-related expenses. Let’s say they choose to sell your house, for example. To do this, the house would have to sell very quickly after death. And a short timeline isn’t very likely.
IS MY COMMON-LAW SPOUSE ENTITLED TO MY INHERITANCE?
In Canada, in some circumstances (but not all), common-law and legally married couples receive equal treatment. Most provinces, however, don’t recognize common- law relationships when someone dies without a will (“intestate”). This means that your common-law spouse may not inherit any of your property. Yet many common-law spouses still believe they’ll inherit from each other. To find out about the intestacy rules in your province, visit your provincial government’s website.
What are the issues with using your assets to pay final expenses?
▲ Evan Patkai, B.B.A. Financial Advisor Member of Advocis (Photo: Evan Ceretti Photography) Contact me to build a plan that will fit your life.
Before your family sells your assets, they will have to cover funeral expenses, legal fees and day-to-day expenses. Sometimes this happens without any cash earmarked for the purpose, forcing them to dip into their own funds. Many assets are, for tax purposes, considered “disposed of” at death at their fair market value. This is true even if they haven’t actually been sold. Capital gains that result are taxable in the hands of the deceased. These “deemed dispositions” could trigger a significant amount of tax. An executor should obtain a clearance certificate* before distributing the estate property to the family. And sometimes this happens before cash from the actual sale of the property is available to pay the tax. (*A clearance certificate confirms
How does common-law inheritance work for pensions?
184 Buchanan Drive, Charlottetown 902.894.8513 ext. 222 Cell: 902.940.6414 evan.patkai@sunlife.com www.sunlife.ca/evan.patkai Patkai & Son Financial Services Inc.
Governments often recognize common-law spouses when it comes to pensions. For example, Quebec specifies circumstances where a common-law spouse can receive their surviving spouse’s pension.
FALL 2021/WINTER 2022 www.pei-living.ca
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