FINANCIALS/EQUATIONS/TAXES
ESTATE ADMINISTRATIVE TAX ( CH 36)
First 50,00 = NO TAX
Higher than 50,000 ( value after) = 15$ for every 1,000
Ex. 190,00
190,000 - 50,000 = 140,000
140, = 140
140 x 15 = 9.3
WHAT IS INCLUDED IN ESTATE ADM WHAT IS EXCLUDED FROM THE
TAX CALCULATION CALCULATION
● benefits /wo beneficiary ● Money or property/assets held
named jointly with another person and
● Defts/ liabilities passing to survivorship
● Real estate outside of ontario
DEDUCTED FROM TAX CALCULATION ● Real estate in Ontario held jointly
mortgages registered on property with another person
are deducted from estate tax ● Insurance + benefits passing to
**** ONLY beneficiaries or assigned value
DEDUCT THE ● Any benefits payable under a plan –
AMOUNT OF THE CCP death benefits
ACTUAL DEBT
WAY TO REDUCE ESTATE AD TAX:
1. Disposing property during one’s lifetime ( directly or intended to beneficiary
on the client’s death or to trust such as alter ego trust or joint partner trust)
2. Transferring property into joint ownership with one or more other persons
AND
3. Ensuring that life insurance, RRSP, RRIFs, TFSAs and other plan accounts are
made to beneficiaries instead of client’s estate
4. Using multiple wills ( listing bad ( primary will) and good assets ( secondary
will) and submitting the bad/primary will for probate and adm tax will only be
payable for the bad assets/primary will
a. RECOMMENDED FOR: Only good for clients who own private
company shares becz they can transfer shares w/o probate
b. NOT RECOMMENDED FOR: if client owns with someone else … and
puts the shares in a secondary will, directors might require probate.
Make sure that: company signs trust declaration if holding shares for
you and make sure that there are enough company directors ( 3)
otherwise multiple will DOES NOT WORK
, INCOME TAX
Unless goes to the hands of the beneficiaries, the estate is liable
If the will is silent to who pays the taxes, the estate pays
● Immediately before death, disposed everything at FMV and capital gain is
added in the tax return in the year of death
● Spouse property transfers ( to spouse/common-law partner OR testamentary
trust): transferred at tax cost, therefore rollover available
● Capital gains from QSBCs, qualified farm property, or qualified fishing property
can be sheltered under capital gains exemption
● Charitable gifts can give rise to tax credit and if large enough reduce to 0.
● Direct charitable beneficiary designations (naming charity as beneficiary for
TFSAs, RRSPs, RRIFS and life insurance give rise to similar tax benefits
● RRIFS and RRSPSare taxable at death except if: they are designated to a
beneficiary, then taxed at the hands of the beneficiary and can qualify for
rollover
● Long-term trusts deemed disposition every 21 years
TAXATION OF ESTATE AS TRUST
Trust income goes to the beneficiaries and they are taxed for it.
EXCEPT: some funds stay with the estate – these are cap gains from non-canadian
resident beneficiaries, they are taxed within the trust
Filing tax return for Personal rep must file a tax return for income of the estate anytime where the trust
trusts has income
Before CRA was allowing some trusts not to file a T3 if a) estate is distributed
immediately after a person dies or b) estate did not earn income before the distribution
BUT starting Dec 2023, Most trusts must file anyways
EXCEPTION: graduated rate estate
TIME TO FILE TAX Due date of terminale tax depends on the date of the deceased’s death:
RETURNS for trusts Before NOV: terminal return is due – next following April 30 ( June 15 if the deceased
has business income)
In NOV or DEC: terminal return is due – 6 months from the death
IF THE DECEASED WAS ILL/DIED EARLY IN THE YEAR
Return for the year preceding the year of death
Before MAY: prior years’ return due – 6 months after death
In May or after: prior years’ due on April 30 in year of death and no extension is given
EXTENSIONS TO TIMELINE
● Terminal return where qualifying spousal trust created: late filing penalty after
18 months after death (interest runs from normal deadlines) (ITA, s. 70(7)(a)).
● Rights and things return: due by later of:
a. one year from death and
b. 90 days after assessment of terminal return
● The T3 return is due within 90 days after the expiry of the trust’s year-end.
ESTATE ADMINISTRATIVE TAX ( CH 36)
First 50,00 = NO TAX
Higher than 50,000 ( value after) = 15$ for every 1,000
Ex. 190,00
190,000 - 50,000 = 140,000
140, = 140
140 x 15 = 9.3
WHAT IS INCLUDED IN ESTATE ADM WHAT IS EXCLUDED FROM THE
TAX CALCULATION CALCULATION
● benefits /wo beneficiary ● Money or property/assets held
named jointly with another person and
● Defts/ liabilities passing to survivorship
● Real estate outside of ontario
DEDUCTED FROM TAX CALCULATION ● Real estate in Ontario held jointly
mortgages registered on property with another person
are deducted from estate tax ● Insurance + benefits passing to
**** ONLY beneficiaries or assigned value
DEDUCT THE ● Any benefits payable under a plan –
AMOUNT OF THE CCP death benefits
ACTUAL DEBT
WAY TO REDUCE ESTATE AD TAX:
1. Disposing property during one’s lifetime ( directly or intended to beneficiary
on the client’s death or to trust such as alter ego trust or joint partner trust)
2. Transferring property into joint ownership with one or more other persons
AND
3. Ensuring that life insurance, RRSP, RRIFs, TFSAs and other plan accounts are
made to beneficiaries instead of client’s estate
4. Using multiple wills ( listing bad ( primary will) and good assets ( secondary
will) and submitting the bad/primary will for probate and adm tax will only be
payable for the bad assets/primary will
a. RECOMMENDED FOR: Only good for clients who own private
company shares becz they can transfer shares w/o probate
b. NOT RECOMMENDED FOR: if client owns with someone else … and
puts the shares in a secondary will, directors might require probate.
Make sure that: company signs trust declaration if holding shares for
you and make sure that there are enough company directors ( 3)
otherwise multiple will DOES NOT WORK
, INCOME TAX
Unless goes to the hands of the beneficiaries, the estate is liable
If the will is silent to who pays the taxes, the estate pays
● Immediately before death, disposed everything at FMV and capital gain is
added in the tax return in the year of death
● Spouse property transfers ( to spouse/common-law partner OR testamentary
trust): transferred at tax cost, therefore rollover available
● Capital gains from QSBCs, qualified farm property, or qualified fishing property
can be sheltered under capital gains exemption
● Charitable gifts can give rise to tax credit and if large enough reduce to 0.
● Direct charitable beneficiary designations (naming charity as beneficiary for
TFSAs, RRSPs, RRIFS and life insurance give rise to similar tax benefits
● RRIFS and RRSPSare taxable at death except if: they are designated to a
beneficiary, then taxed at the hands of the beneficiary and can qualify for
rollover
● Long-term trusts deemed disposition every 21 years
TAXATION OF ESTATE AS TRUST
Trust income goes to the beneficiaries and they are taxed for it.
EXCEPT: some funds stay with the estate – these are cap gains from non-canadian
resident beneficiaries, they are taxed within the trust
Filing tax return for Personal rep must file a tax return for income of the estate anytime where the trust
trusts has income
Before CRA was allowing some trusts not to file a T3 if a) estate is distributed
immediately after a person dies or b) estate did not earn income before the distribution
BUT starting Dec 2023, Most trusts must file anyways
EXCEPTION: graduated rate estate
TIME TO FILE TAX Due date of terminale tax depends on the date of the deceased’s death:
RETURNS for trusts Before NOV: terminal return is due – next following April 30 ( June 15 if the deceased
has business income)
In NOV or DEC: terminal return is due – 6 months from the death
IF THE DECEASED WAS ILL/DIED EARLY IN THE YEAR
Return for the year preceding the year of death
Before MAY: prior years’ return due – 6 months after death
In May or after: prior years’ due on April 30 in year of death and no extension is given
EXTENSIONS TO TIMELINE
● Terminal return where qualifying spousal trust created: late filing penalty after
18 months after death (interest runs from normal deadlines) (ITA, s. 70(7)(a)).
● Rights and things return: due by later of:
a. one year from death and
b. 90 days after assessment of terminal return
● The T3 return is due within 90 days after the expiry of the trust’s year-end.
