As you create your estate plan, you may be wondering if there are ways to minimize the tax burden on your estate. While Canada does not technically impose an estate or inheritance tax, there are probate fees (also called estate fees) and income taxes on capital gains in the final year of life that can still be significant. With strategic planning, it’s possible to reduce these expenses and pass more of your assets to the people you care about. To explore your options, contact us at Verhaeghe Law today.
What Are Estate Taxes?
While Canada does not technically have estate or inheritance taxes, there are estate and/or probate fees that may be due upon the death of a Canadian resident. These fees are collected provincially and depend on the nature of the assets held by the deceased person at their time of death.Â
There are also federal income taxes that must be paid based on the earnings or capital gains accumulated during the final year of a person’s life. This, along with the tax liability of your estate, must be taken into account as you craft an estate plan.
Make Strategic Choices
There are strategic options that could reduce the taxes you owe on your estate. Some options include:
- Making a charitable donation through your estate: It reduces the overall estate value and may be used to calculate a non-refundable tax credit;
- Strategizing the timing of an asset’s sale: Doing so could also reduce the taxes owed on capital gains;
- Diversifying your investment portfolio: Implement tax-efficient investment options such as tax-advantaged trust structures and tax-sheltered accounts;
- And more.
You can also make specific arrangements that come into play if you pass away before your spouse. If you share property, you could establish joint tenancy. Then, should you pass away, they will automatically retain ownership without needing to undergo probate. Consider looking into RRSP and RRIF transfer options that are also available to couples, as that could help reduce the amount of taxes owed. Regardless of your situation, speaking to an Edmonton estate lawyer may be the best first step.
Build a Sound Estate Plan
Create a legally sound will with clear instructions to help streamline the distribution of assets and minimize confusion and risk of disputes. You may also make specific guardianship arrangements for minor children. Planning ahead will help to reduce potential costs down the line and ensure that your estate is handled according to your wishes.Â
There are plenty of tips on how to reduce estate planning costs in Alberta. It is important to leave your executor with a thought out plan, tools, and the flexibility to prepare tax returns and administer the estate in an effective manner.Â
Contact Us Today to Speak to a Lawyer
Though it may seem overwhelming, crafting a thorough estate plan is crucial. It is the best way to ensure that your accumulated assets and property are passed onto your loved ones after you die.Â
As you go through the planning process, you should consider your options for reducing taxes on your estate. Speak to a lawyer at Verhaeghe Law to learn more about the strategies you can implement in your plan. Contact us today to schedule a consultation.Â
** Please note, this article is intended as a general overview on the subject of estate law, and is not intended to be legal advice. If you are seeking legal advice, please consult with an Alberta estate lawyer.