Winnipeg Free Press - PRINT EDITION

Advanced planning reduces taxes on estate

  • Print

Last week, we talked about the two recommended approaches to estate planning. One is to simplify the estate process by using beneficiary elections and joint ownership, but with great care and thought.

The goal of that approach is to reduce probate fees, simplify and speed up the estate-settlement process and possibly even avoid probate altogether.

The other approach is to write a will with a lawyer who specializes in tax-effective estate planning and have that will describe testamentary trusts through which the beneficiaries will receive their assets. This strategy usually requires maximizing the size of the estate and the resulting funding of the trusts.

This means higher probate fees, but these are only 0.7 per cent in Manitoba. The long-term benefit could be significant tax savings each year for each beneficiary. However, the Department of Finance has introduced a proposal to limit this benefit to 36 months after death.

If implemented after the comments period, this could limit the tax benefits and result in testamentary trusts primarily being used for their other benefits, such as creditor protection, management for inexperienced beneficiaries and protection against excess spending.

Today, we will focus on the tax planning available under either strategy when a person passes away.

When a person dies, the tax return must be prepared from the previous Jan. 1 to the date of death. This is called the final return or the terminal return. It is due April 30 of the following year, or six months after the date of death if the person dies after Nov. 1.

Although Canada has no estate taxes per se, any capital gains at the time of death must be included in this return, as well as the cashing in of any RRSP, RRIF, pension or other registered assets, all of which are taxable on this return.

If a person dies leaving a spouse, spousal rollovers are available to defer this tax and transfer the future liability to the surviving spouse. Otherwise, taxes will be payable on the various items.

Last week, I was reminded in a presentation by Cheryl Norton, CA of Standard Life Investments, a second tax return can be filed, called a "Rights & Things" return. This provides a second personal exemption, and therefore could make a number of taxable items tax-free.

Rights and things are amounts owing to a person at the time they pass away, such as unpaid vacation pay, unpaid CPP or OAS cheques that arrive after the date of death, even paycheques for pay periods ending before the date of death, but arriving after.

A separate tax return can also be filed for a partner or proprietor of a business. This allows for further income splitting. As well, if the deceased is a beneficiary of a testamentary trust, a separate return might be able to be filed for this income. Each time you can file a separate return and divide the income across more personal exemptions, the less tax you pay.

In the year of death (and carried back to the previous year), charitable donations can be claimed up to 100 per cent of net income. Normally, the limit is 75 per cent.

The estate may be able to make a spousal RRSP contribution and take the deduction on the terminal return, if the spouse is under 71 and the deceased had contribution room available.

Any income earned on the deceased person's assets after death will be taxed on an estate return, due March 31 (for 90 days after trust year-end, if other than Dec. 31) for each subsequent calendar year. Generally, CRA only allows 36 months for the winding up of the estate.

Executors will want to get a clearance certificate from CRA prior to distributing the last of the assets, to avoid any potential tax liability coming back to them. This means arranging the investments so no investment income is earned in the period following the date of filing the last estate return. Otherwise, another return would be due.

My conclusion? Getting good professional tax advice on something this important is a very good idea.


David Christianson, BA, CFP, R.F.P., TEP, is a financial planner and adviser with Christianson Wealth Advisers.

Republished from the Winnipeg Free Press print edition September 27, 2013 B17

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes


  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.


Make text: Larger | Smaller


Key of Bart - Four Little Games

View more like this

Photo Store Gallery

  • MIKE.DEAL@FREEPRESS.MB.CA 100615 - Tuesday, June 15th, 2010 The Mane Attraction - Lions are back at the Assiniboine Park Zoo. Xerxes a 3-year-old male African Lion rests in the shade of a tree in his new enclosure at the old Giant Panda building.  MIKE DEAL / WINNIPEG FREE PRESS
  • Down the Hatch- A pelican swallows a fresh fish that it caught on the Red River near Lockport, Manitoba. Wednesday morning- May 01, 2013   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos


Are you concerned about the number of homicides so far this year?

View Results

Ads by Google