October 19, 2022

Author: The Link Between

Estate planning and distribution of investments. What could go wrong? Here’s a story of a father who aimed to divide his estate equally between his sons.

Bernard, a widower, sold his home and settled into a comfortable rental townhome at a new retirement village. Once he’d invested the equity from his primary residence, his non-registered investment portfolio was about equal to his RRIF balance. Because a RRIF with a named beneficiary doesn’t pass through probate, Bernard opted to name a beneficiary to save on probate fees. He named his eldest son, Stephen as beneficiary, and to offset that bequest, named his other son, Jeremy, as the heir to his estate, which consisted solely of the non-registered investment portfolio. Even Steven! Or so he thought.

When Bernard passed away, it was time to settle up with the CRA. Jeremy was pleased to learn that there’d be very little income tax associated with the non-registered investment portfolio because there’d been almost no investment growth. But Bernard’s RRIF was fully taxable! Jeremy had to tell his brother, “Our inheritances aren’t so even, Stephen”. Since Stephen was named beneficiary of the RRIF, it was payable to him, in full, by the bank. But its tax liability was the responsibility of Bernard’s estate and had to be paid from the non-registered portfolio willed to Jeremy. The match wasn’t even close.

Fortunately for these two brothers, their relationship was rock solid, and they were keen to see their dad’s estate divided equally between them. They knew this was their father’s wish, because they’d had a family huddle to discuss it and their dad had also documented his intentions. Stephen and Jeremy split the tax bill equally from the proceeds of their inheritances. Even Steven!

Consider this…

  • While naming a beneficiary (other than the estate) on certain financial instruments means they won’t be subject to probate fees, any tax payable on death is the responsibility of the estate unless the spouse is the beneficiary, then there is no tax liability.

  • When planning, consider the after-tax value of your assets, or account for taxation in your planning.

  • If the heirs of the estate are receiving equal portions, naming them equally as beneficiaries on the financial instrument keeps things even-steven.

To learn more about this topic, read our previous posts: Protecting Your Estate (thelinkbetween.ca), Death, Taxes and Probate Fees (thelinkbetween.ca), Beneficiary Designations and the Importance of Transparency (thelinkbetween.ca), Beneficiary Designations – Making Sure Your Money Goes Where You Want (thelinkbetween.ca) and watch our short video: SMART TALK... about will planning and drafting (thelinkbetween.ca)

Posted ON Tue, November 8, 2022 at 12:23:35 pm MST    Comments (0)
No Comments.
Add Comment
Url:     http://
* Required Fields

Mutual funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Jason Desaulniers who is a Investment Funds Advisor at Excalibur Executive Planning Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

Version 5.3.1
Site Map | Login | Powered By: Techweavers Inc.