Tax-Efficient Estate Planning in Ontario

Canada has no inheritance tax, but there is tax at death. When you pass away, you're treated as if you sold most of what you own, and your final tax return can include:

• The full value of your RRSP or RRIF, unless it passes to a spouse, common-law partner or another qualifying beneficiary
• Capital gains on a cottage, an investment property, or investments outside registered accounts
• Gains on shares of a private company

For many families, the RRSP or RRIF alone can create a surprisingly large tax bill. We call it the ticking tax bomb. The good news is that it can be planned for.

In Ontario, assets that pass through your will are generally subject to the Estate Administration Tax, often called probate fees. Probate can also delay when your family can get at the money.

Some assets can pass outside of probate, such as life insurance and registered plans with a named beneficiary. Jointly owned assets often can too, although joint ownership comes with its own risks, so it's worth getting advice first.

Life insurance is generally paid tax-free to your named beneficiaries, and with a named beneficiary it usually bypasses probate. That makes it one of the most efficient ways to:

• Pay the tax bill at death, so your family doesn't have to sell the cottage or the business
• Leave an equal inheritance when one child is getting the family business or property
• Leave a gift to a charity you care about
• Make sure the inheritance actually reaches the people you intended

A will, powers of attorney for property and for personal care, and up-to-date beneficiary designations are the foundation. We're not lawyers, so we work alongside your lawyer and accountant to make sure the insurance, the investments and the legal documents all line up.

Try our free Estate Conversation Starter. It takes about five minutes, there are no wrong answers, and it gives you a simple picture of where you stand and what's worth talking about.