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Wills Checklist – Advice on Preparation of Your Last Will and Testament

Do you have a Last Will and Testament? Is your Will comprehensive enough? This is a checklist of matters to consider for inclusion in your Last Will and Testament. It is very complex, which comes from me trying to cover the many issues you may face, and explain them as best I can.  Some items will be apparent, some not so obvious. This list is certainly not intended to be exhaustive or to be any substitution for legal advice.  I suggest you take your time, read through this article, highlight areas of importance to you, and stroke out those that have no relevance.

Your Will should be prepared by a lawyer and thoroughly reviewed with you.  You may wish to use a do it yourself kit.  However, I still recommend you see a lawyer.  Minor oversights may invalidate your Will or void your wishes, so working with a lawyer is important.  However, filling in the do it yourself kit first will help you think about the many issues.   This should save some time at the lawyer’s office.

I have prepared this checklist as a financial planner. I do not intend it as legal advice in any way. Provincial laws differ, and laws are changed often.   This checklist is intended to help you think about many issues. Before including (or excluding) any clause, ensure that you understand its meaning.  Review it with your lawyer when unsure.

Preparation of final tax returns, selection of appropriate income tax options and acquisition of clearance certificates can be complex with significant cost ramifications. Recommend to your executor that he/she seek income tax advice upon your death, with such costs payable by your estate.  Attached to this checklist is a schedule of some of the income tax issues to be considered.  I believe that the complexity will be self-evident, and the need for qualified advice will be obvious. Ensure your executor and your lawyer will be working with experienced estate tax advisors.

Upon your death, your assets and liabilities are held “in trust”.  This is your estate, and it is called a “testamentary trust”.  Usually, for the first 36 months, it will be also defined as a “Graduated Rate Trust” for income tax purposes.  It is administered by your “executor” (if you have a Will). Taxes are paid on income and gains up to the time of your death on one or more general (T1) tax returns. All of your assets are considered sold just before you die, with a few exceptions.  This is what triggers the taxable gains.  One of the exceptions are transfers to your spouse.  Taxes on income or gains after your death, if any, are reported on a “trust” (T3) tax return. Your Will must provide details so that your executor can transfer your estate to your beneficiaries in the way that you wish, and with the least amount of taxes.  Your executor needs enough knowledge and resources to do this.

Reference to “spouse” throughout this article also refers to common-law partners and the term “executor” is used in lieu of the plural and/or executrix.

General Matters

  1. Cancel prior Wills and Codicils.
  2. Define the terms used in the Will.
  3. Provide for payment of debts and expenses, including income taxes.

Appointment of Executors, Trustees and Guardians

  1. Appoint executor(s)/trustees to administer your estate. The location of the executor or trustee normally determines the residency and tax rates of a testamentary trust.  However, the executor must be doing the work.  If the actual estate decisions are being made by someone else in another province or country, then the tax rates in that location may apply.  A testamentary trust is created upon your death – your estate assets are held in trust until distributed to your beneficiaries.  In addition, you may have voluntarily created more trusts in your Will, such as when you leave money to your children or grandchildren, and ask for it to be held in trust until a certain birthday.  Consideration might be given to appointing an executor in a low tax rate province to save taxes.  However, balance this saving with the potential increase in inefficiency and costs of administration. If your executor becomes a non-resident of Canada, your trust/estate may lose certain tax advantages and administration costs may become very expensive.  You may want a clause in your Will that would discharge the executor, effective immediately, before he/she leaves the country to live elsewhere. If a non-resident is one of several executors, the Will should be drafted so that he/she cannot control the trust.
  2. Appoint alternate executor(s)/trustee(s) in case the first one(s) are unable or unwilling to act.
  3. It may be a requirement for executors to act unanimously.  Obtain legal advice on how to resolve disputes or break tie votes.
  4. Provide for payment or non-payment of executor(s). Also note that executor fees are taxable to the executor but not deductible to your estate. If the executor is also a beneficiary (and maybe also a family member) receiving a tax-free bequest, he/she may be willing to act without a fee. Ensure the Will is clear that bequests to the executor does not relate to his/her duties as executor. In some cases, hourly rates of compensation are granted instead of percentage rates, or in addition to such rates when there are complex issues such as a lawsuit to handle.
  5. Recommend a guardian for minor children for their care until the age of majority. Consider both “guardianship of person” (personal care decisions) and “guardianship of estate” (financial matters). Where there are disabled children or other disabled beneficiaries, a bequest may decrease or eliminate government support.  You may want to look at setting up a discretionary trust to reduce such effects.  There are special (more lenient) tax rules for trusts set up in a Will for a disabled person (called a Qualifeid Disability Trust.)
  6. Appoint a trustee for any trust established for minor children.  This person(s) may or may not be the guardian of the children.  The taxation rules for trusts created by a Will changed after 2015 reducing and/or eliminating certain tax benefits – ensure you obtain up to date advice.  Any income retained in the trust will be taxed at the highest tax rate after 36 months, unless it is a Qualified Disability Trust (QTD) and elected to be so each year.  If the trust is not a QDT, you may want to ensure that all income and gains are paid out annually to the beneficiaries, unless this goes against the reason for setting up the trust.  For small amounts for minor children, if you establish a formal trust, the costs for administering the trust and filing trust tax returns may defeat the purpose of setting it up in the first place.   One possibility would be to bequeath the money directly to the children. This may be more practical, and much less expensive than filing annual trust tax returns.  As long as the children are minors, it will likely be the parents who will manage the money on their behalf anyway.  Unfortunately, in some provinces, if you bequeath the money directly to the children, provincial law may require certain court approvals that result in significant costs.   Hence, some lawyers recommend using a trust, but include a standard trustee power in the Will that expressly allows a trustee to pay an amount to the guardian or parent of a minor beneficiary to avoid such costs.  This provides flexibility to make the most practical decision based on the circumstances.
  7. For guardians/trustees, provide for their compensation and powers to manage funds held in trust for the children.

Bequests and Beneficiaries

  1. Provide for bequests of family heirlooms and personal articles – either within the Will or by reference to an attached list.  Remember to keep the list up to date.
  2. Provide for other specific bequests, such as financial assets. Discuss with your lawyer whether an “in terrorem” clause would be effective in your Will.  Any beneficiary who contests the Will automatically forfeits their gift under such a clause where it is legal.  In addition to your relatives, is there a charitable cause that is close to your heart?  You may wish to include a charity in your Will.  One idea is to make a gift to a “charity child” – give a charity an amount equal to what you are giving each child.
  3. Provide for bequests of residual assets (i.e. those assets not specifically listed).  In other words, who gets what is left over?
  4. Include alternate beneficiaries for all of your bequests. Consider your wishes if one of your children predeceases you. Is his/her share distributed to his/her estate or only to your remaining living beneficiaries?
  5. Insert a clause indicating the procedures required if a beneficiary cannot be located within a specified time period.
  6. Provide for simultaneous or near simultaneous death with a spouse or other beneficiary (i.e. common disaster clause). Set out the procedure if it cannot be determined who died first (e.g. in a car accident).
  7. Remember that witnesses (and their spouses) to your Will cannot be beneficiaries. Witnesses should be able to be contacted in the event of your death to validate the Will.
  8. Consider the possibility of children born outside of the marriage who may not yet be known.  Should the Will include provision for such children? In such cases, wording of the Will to include “children” may be appropriate.  Otherwise, consider stating the names of your children to be beneficiaries.  However, if you include specific names, you must then be sure to update your Will when you have additional children.
  9. Ensure your designation of beneficiaries for life insurance, segregated funds, pensions, and registered retirement plans are up to date.  For your Tax Free Savings Account, designate your spouse as “successor holder”, and others as beneficiaries.  Also, designate alternate beneficiaries.  You may wish to restate the same designations in your Will, particularly where there are complex or multiple designations.  If you do so, be sure to provide all account numbers and policy numbers to be clear.  In such cases, it is also important that the designations are the same in both places to avoid legal concerns.  Make sure beneficiary designations are updated after your separation or divorce (or death of the beneficiary).
  10. The gross value of registered retirement savings and property bequests will be transferred to beneficiaries.  However, any income taxes and disposition expenses will come from the balance of your estate. If this is not intended, insert a clause such that only the net value after related taxes and expenses should be transferred to the beneficiary. Note that the trustees or your RRSP or RRIF (i.e. your financial institution) will pay the beneficiary directly.  If an adjustment for taxes is to be made, this will require special arrangements with either the trustee or the beneficiaries.  Speak to your financial institution if it is your plan to take taxes out of your RRSP or RRIF.  An argument can ensue over how the taxes are calculated.  You may wish to put a calculation method in your Will.  A typical method would be, “Taxes on the [RRSP/RRIF/other property] will be calculated as the difference between my taxes owing on my final tax return with the income/gain included and the balance owing with those items excluded.”
  11. Inheritances received after marriage are usually not included in the definition of family assets in the event of marriage/partnership break-up.  This means they do not need to be divided.  Such amounts must be separately identifiable and not used to buy the family home. Such inheritances should not be used for family purposes or placed in joint accounts, for example.  If you want to protect the inheritance, bequeath it to one individual, e.g. your child, as opposed to your child and spouse, jointly. If you also want the income and capital gains from the inheritance to be protected, insert an appropriate clause in your Will.  Such a clause may or may not be effective, depending on your provincial legislation.  The rules are complex and legal advice is warranted.
  12. If any existing loans owing to you are to be forgiven, indicate this in your Will. If you have demand loans owed to you, provide for either forgiveness or a period of time for repayment. Otherwise, repayment will likely be demanded immediately by the executor, causing hardship on the borrower.
  13. If you set up trusts for minor children, grandchildren, spouse or others, set out the name of the trustee, the trustee’s pay and terms of such trusts. Transfer of assets to trusts can help you keep control over your assets after your death. For example, your spouse or adult children may be unable to manage funds properly. You can instruct your trustee on how/when/why to give them your money (or other property).  In addition, upon receipt by your spouse or children, your assets become subject to their wishes and, upon death, are controlled by their Will. You may not want your assets distributed to your in-laws.  Or you may be concerned about remarriage of your spouse and your assets being given to someone other than your own children. For single parents, or in case of simultaneous death of couples, trusts should be set up to provide ongoing support for minor children. Life insurance proceeds may also be used to establish a trust. Obtain tax and legal advice in this area.
  14. Use of trusts may be expensive and cumbersome for small amounts of money.  Provide the executor with the power to pay money directly to the beneficiary, or to the parent(s) of a minor beneficiary in lieu of setting up a trust, if reasonable in the circumstances.
  15. If you may make gifts before your death, set out in your Will as to whether these gifts will reduce the bequests made in your Will.  Unless clarified, gifts immediately prior to death may result in a reduction of a bequest, called “ademption by advancement”.
  16. Are you deliberately omitting a person from your Will who might otherwise be expected to receive a bequest?  You may wish to set out the reasons in your Will to avoid a possible legal challenge.
  17. Where applicable, recommend payment of charitable bequests using an in-kind transfer of investments.  This may save significant taxes on capital gains.

Executor Powers

  1. Consider giving executors the power to make early advances to beneficiaries, either generally or for specified reasons, such as for their maintenance and education.
  2. Based on your wishes, grant appropriate powers to the executor to manage your investments, by confirming or extending the legislated powers set out by statute. In P.E.I., the Trustee Act states that the “trustee must exercise the care, skill, diligence and judgement that a prudent investor would exercise”.
  3. Grant administration powers to the executor to sell or convert property.  Indicate whether you want them to have either limited or uncontrolled discretion in the realization of your estate as they think best.
  4. Grant discretionary power to the executor to make bequests in-kind (“in specie”) so that property of the estate need not be converted before distribution to the beneficiaries. The Will should provide him/her with the absolute discretion to fix the value of each of the properties to be distributed.  Direct him/her, when fixing the value, to take into account the tax benefits and liabilities which attach to each. It should also be provided that the decision of the executor with respect to the value of any property is final and binding upon all persons concerned.
  5. Give the executor the power to renew loans and borrow money for any purpose connected with the payment of taxes and the administration of the estate. Without a power to borrow, the  executor may be forced to sell property at a very low price in order to pay taxes or administration costs.
  6. Give the executor power to compromise, settle or waive any claims by or against the estate.
  7. Give the executor power to make or renew guarantees.
  8. Provide the executor power to make agreements binding on the estate.
  9. Where your estate will be complex or time-consuming, give the executor the ability to transfer some of their duties to an agent with appropriate compensation from the estate.
  10. Recommend that the executor seek professional advice in tax matters, as well as in legal, investment and other areas to the extent they feel necessary.  Authorize fees to paid from the estate. Because of the complexity of income tax rules, especially on death, we recommend that you insert a clause which imposes a duty on the executor to seek advice from a professional tax adviser.  This would include a duty to consider whether, in light of that advice, particular elections and designations should be made.
  11. Give the executor the power to make any elections and designations available to the testator or to his/her legal representative under the Income Tax Act and any other related statute. Provide that the executor shall be held blameless if he/she makes an election or designation in good faith. Insert a clause that provides for the indemnification of the executor for the cost of any proceedings in respect of the elections and designations that he/she has made in good faith.
  12. The rules should empower the executor, in his/her sole and absolute discretion, to allocate the various types of income and deductions described in the provisions of the Income Tax Act among the beneficiaries.  This, of course, would be within the scheme of distribution set out in the Will.  A clause might also be inserted to provide that the executor may take into account tax law and the tax position of each beneficiary when making the allocations.
  13. Sometimes substantial assets exist and the holding or distribution of such assets may be better managed or more tax efficient within a corporation.  Provide authority to the executor to incorporate a new company, with expenses paid by the estate, if appropriate.
  14. If you wish, and are comfortable it will not create a conflict of interest, authorize your executor to purchase assets from your estate.  Set out how the purchase price should be determined (e.g. by independent appraisal or by other executors/beneficiaries).  Similarly, where the executor is a beneficiary, and receives an in-kind distribution, set out how this value will be determined.  Appraisals are often appropriate, and sometimes an average of two (an appraiser hired by the purchaser and one by the beneficiaries).
  15. Insert an “exculpatory provision” stating that your executor will not be held liable for losses created by their actions except for dishonesty or willful breach of trust.

Executor Powers with respect to Business Interests

  1. Emphasize that you wish your executors to adhere to provisions in any shareholder/partnership agreements.
  2. If you own one or more business corporations eligible for the low tax rate, appoint an executor who has no control over corporations of his/her own to avoid the possibility of association and loss of this lower tax rate.
  3. Where you are the owner of corporate shares, grant the executor all of the voting rights and privileges that you hold as a shareholder.
  4. Empower the executor to carry on your business(es) as he/she thinks appropriate.  This would include the hiring of appropriate managers and professional expertise as required, with the estate indemnifying the executor for any business losses incurred. This clause may be necessary to allow the company to be sold or liquidated at its best value.

Related Advice

  1. For tax deferral purposes, it is generally advisable for the terms of the Will to designate the spouse or dependant children or grandchildren, to be the beneficiaries of any R.R.S.P. or R.R.I.F.  A spouse should be the successor holder of a TFSA.A list of names and locations of important documents, bank accounts, and advisors should be prepared and stored with your Will to assist your executors and family.
  2. Ensure that your family has cash available in an emergency fund to provide enough money for living expenses, funeral expenses, probate fees and other costs pending settlement of your estate.
  3. Be aware of special tax rules regarding corporation buy-sell agreements. Compulsory buy-sell provisions may result in immediate tax costs to the deceased, whereas options to transfer the corporate shares to a spouse or spouse trust may reduce or defer such taxes.
  4. If burial instructions are included in the Will, there is risk that the Will may not be read until too late; a better suggestion is to pre-plan funeral arrangements.
  5. In some provinces, it may be appropriate for the Will to contain a clause such that if the spouse asserts rights under matrimonial legislation, he/she waives rights under the Will.  In other words, they will receive their legal entitlement as a spouse and waive the amounts as stated in the Will.
  6. If permitted by provincial legislation, you may wish to include a “no-contest clause” whereby any heir initiating court action to challenge the Will shall lose their right to any bequests, except where the court is only being used to obtain an interpretation of what is meant by the wording of the Will or to enforce a right to collect a bequest as stated in the Will.
  7. A Will controls your interests in the event of death.  You should also establish an enduring Power of Attorney to control your interests in the event of mental incapacity. A Power of Attorney provides the selected individual with the power to act on your behalf during the period specified in the legal documentation. You may also want to appoint a “monitor” to whom the attorney must report on an annual basis to ensure he or she is properly carrying out their duties.
  8. Be sure to revise your Will on a periodic basis and especially in the following circumstances:
    1. Marriage (an existing Will becomes invalid when you marry unless the marriage is anticipated in the Will);
    2. Birth or death of a child;
    3. Death of a beneficiary or executor;
    4. Separation or divorce
    5. Significant changes in the Income Tax Act;
    6. Changes in Provincial Family Laws;
    7. Change in Province of your residence;
    8. Death of a witness to signatures;
    9. Change to your overall estate plan;
    10. Transfer of shares to a holding company;
    11. Significant change in your net worth or your assets.
  9. There are other ways to distribute property to heirs other than through Wills.  Such methods may reduce the costs of probating and administration of your estate. One method is gifts while living.  Another is transfer of ownership to joint name(i.e. joint ownership with right of survivorship). Use of corporate buy-sell agreements for businesses and designation of beneficiaries on life insurance policies, registered retirement savings, segregated funds and pension plans are other ways to control transfer of property on death. Be sure to obtain tax and legal advice on these methods because of possible costs and risks involved. For example, transfers to joint ownership and giving away title of your assets now will allow access and use by the new owner, as well as expose them to claims by creditors of the recipient. You may also be subject to immediate income taxes on the transfer, and reduction of your income security payments, such as Old Age Security.
  10. Care must be taken in drafting a Will in which income producing property, such as an annuity, is bequeathed to a beneficiary on the condition that the beneficiary pay an annuity to another person. The Will should be drawn so that the obligation to pay the annuity is placed on the beneficiary in the capacity as “trustee of the income”, or so that the annuity is an executable charge on the income producing property. Otherwise, there may be two separate annuities, which will result in double taxation.
  11. Property may be gifted during lifetime or at death, with a “life interest” retained for the benefit of another person. An example is a gift of the family home to a child, with the parent(s) retaining a life interest until their death. The parent(s) has the right to occupy the home until death, at which time the child obtains full ownership without going through administration of the Will because “residual” ownership had already been transferred. The agreement should be clear as to what responsibility the life tenant has for ongoing expenses. Discuss the tax implications of such a transfer with your tax advisor.
  12. Certain loyalty point programs (such as Aeroplan or Air Miles) allow transfer of points on death. In your Will, you may wish to indicate that your unused loyalty reward points can be transferred to a specified beneficiary. Advise your executor to contact the reward provider, and perhaps give him or her the discretion as to whether it is worth while given the number of points  available.
  13. Have you provided sufficient documentation in your will to identify any assets that might require online access by computer, such as online bank accounts, frequent-flyer or store loyalty accounts, ownership of websites and social media accounts, Bitcoin and other such currency ownership, etc.?

Supplement to Wills Checklist – Income Tax Issues

Tax and estate planning should be done throughout your life. Please see my other articles on such planning. These are examples of matters requiring special income tax consideration upon your death.

Time Limit Issues

  1. The final tax return of the deceased is due by the later of April 30 (June 15 if the deceased or his/her spouse was self-employed) or six months after date of death.
  2. If assets are sold within the first year following death, any capital loss realized may be carried back to the deceased’s final tax return to reduce capital gains.
  3. The executor may make a spousal R.R.S.P. deposit on behalf of the deceased for his/her final taxation year within the normal R.R.S.P. time limits (up to his/her contribution room available).
  4. The sale of shares under corporate buy-sell agreements should be completed within the first taxation year of your estate. This may allow capital losses that arise on the sale to offset taxable capital gains in the deceased’s final tax return.
  5. If the estate will be taxable subsequent to death, for example, by receipt of a pension settlement or from significant investment income, appropriate planning is essential. A tax reduction may be available by physically distributing part of the estate within the first year after death with allocation of related taxable income to the beneficiaries. (For the trust to allocate taxable income to beneficiaries within the first year, actual distributions may need to be made.)

Special Tax Rules for Certain Types of Income

  1. The Canada Pension Plan death benefit is not taxable on the final tax return of the deceased, but to either the recipient of funds or on the estate tax return of the deceased.
  2. More than one final tax return may be filed if certain types of income are received, called “rights or things”, multiplying the use of your personal tax credits. Additional returns are also allowed in certain circumstances for income from a trust and from an unincorporated business.
  3. The first $10,000 of qualifying death benefits are tax-free to the recipient. However, death benefits are specifically defined; the CPP death benefit does not qualify.
  4. Care must be taken in drafting a Will in which income producing property, such as an annuity, is bequeathed to a beneficiary on the condition that the beneficiary pay an annuity to another person. The Will should be drawn so that the obligation to pay the annuity is placed on the beneficiary in the capacity as “trustee of the income”, or so that the annuity is an executable charge on the income producing property. Otherwise, there may be two separate annuities, which will result in double taxation.

Use of Tax Deductions and Credits

  1. Medical costs paid in any 24-month period that includes the date of death may be claimed on the final tax return.
  2. Carry-forward amounts from prior years must be used in your final tax return (or carried back to the preceding year in certain cases) if any benefit is to be obtained.
  3. Capital losses can normally only be used to reduce capital gains. Capital losses (including losses carried forward from prior years) may be deducted against other sources of income in the year of death and in the immediately preceding year, with a possible reduction for prior use of the capital gains exemption.  Transfers to a spouse at fair value may assist in planning to use of capital losses carried forward.

Charitable Giving

  1. The executor of the individual’s estate will normally be able to allocate a donation made in a Will among any of:
    • the taxation year of the estate in which the donation is made, if made within 36 months of death (as part of a graduated rate estate, which it would normally be)
    • an earlier taxation year of the estate, or
    • the last two taxation years of the deceased individual.

    Any unused donation amount can be carried forward from the year in which the donation is made and claimed by the estate within the usual limits.

    For any donations made after the graduated rate estate has ended, i.e. after 36 months, but still within 60 months of death, the donation may be claimed in the year it is made by the estate, or the last two taxation years of the deceased.

  2. Charitable bequests made by in-kind transfers of eligible investments will have any taxable capital gains reduced to nil. A charity receipt will be issued for the full value of the investment. Where charitable donations exceed $200 for the year, the tax savings will approximate up to 46-47% (in Prince Edward Island) of the bequest plus elimination of the related capital gains tax.  The savings may be about 51% for taxpayers with income over $200,000.
  3. Where substantial charitable bequests are being made, and the deceased has no spouse/partner, consider designation of the charity as beneficiary of any employer pension plan and of any death benefit entitlements.  This may avoid taxation of these amounts in the estate. In contrast to R.R.S.P.’s, pensions and death benefits are taxable to the recipient instead of on the deceased’s final tax return. However, charitable bequests set out in the Will are only available to reduce taxes on the final tax return. The unfair result can be unused charity credits on the terminal tax return while taxes are payable by the estate on the pension and death benefits. Proper planning is needed to avoid this result.

Special Elections

  1. If R.R.S.P. assets were not bequeathed directly to a spouse or minor children and such assets are being transferred to these parties, income tax elections may be available to implement the tax-deferred benefits of such transfers.
  2. Assets that grow in value while held by the estate may be transferred to beneficiaries after taxes are paid in the estate or on a tax-deferred rollover basis to the beneficiaries. Evaluate whether investments should be rolled over to the beneficiaries, sold within the estate, or transferred at fair value. There may be varying tax implications to the estate, the final tax return of the deceased and/or to the beneficiaries with the carry-over of gains or losses.
  3. If the deceased would have been entitled to claim certain reserves in the year of death, such as for uncollected proceeds for property sales, an election may be used to transfer these amounts to a spouse.

Other Issues

  1. If trusts are established, there is a 21-year rule whereby all assets held by the trust are deemed to be sold on the 21st anniversary for income tax purposes. As a result, appropriate planning should be done at the time a trust is established and/or in advance of that anniversary.
  2. If a life interest (for example, in a home) is granted to one party, and the residual interest to another beneficiary, capital gains may accrue to the residual beneficiary from the time that the life interest is granted.  Obtain tax advice before creating a life interest on a principal residence.
  3. If assets are bequeathed to a spouse, there is an automatic rollover to transfer the assets to the spouse without taxes. However, the deceased has a lifetime capital gains exemption on certain corporate, farm and fishing assets. Rather than using the automatic rollover to the spouse, it would be wise to use this exemption to eliminate or reduce taxes to the deceased.  This would also reduce future taxes to the spouse. There are other reasons to override this rollover also, such as unused tax deductions and differing marginal tax brackets between spouses.
  4. The deceased may have assets eligible for the capital gains exemption but has already used it. Where he or she wishes the value of these assets to pass to children, it may still be advantageous to use the spousal rollover.  The assets would be rolled tax free to the spouse.  When the spouse transfers the assets to the children, he or she may be able to use the capital gain exemption and avoid certain taxes.  Professional tax advice should be obtained.
  5. There are special tax-free rollovers that may apply to farmers, farm partnerships and farm corporations. Tax advice is recommended prior to death to ensure the farm qualifies. Rental of farmland is considered rental income, not farming income.
  6. Tax liabilities arising from deemed sale of assets at death may be paid, with interest and appropriate collateral security, over a period of up to 10 years.
  7. If both spouses are not Canadian residents, certain rollover rules will not apply. Furthermore, if the deceased holds substantial U.S.A. investments or real estate, he or she may be subject to U.S.A. estate taxes. If the deceased is a U.S.A. citizen, a U.S.A. tax return will be required (as is required each and every year during life).
  8. Executor’s fees are taxable to the executor and appropriate tax reporting slips must be prepared and filed with the Canada Revenue Agency.
  9. To protect the executor from future tax liabilities of the estate, a Clearance Certificate should be requested from the Canada Revenue Agency upon assessment of the final tax return to date of death and the final return of the estate, if any is required.
  10. In some jurisdictions, it may be possible to use two Wills, such as one to bequeath assets that will need to be probated, and one for those, such as private corporation shares, that do not.  You should seek legal advice if considering this, and I understand that you will require separate executors and need to ensure that one Will does not revoke the other Will.  Only work with a lawyer that has experience in this area.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum