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Inheritance money

Expert: Julia Germain

Tracey asked:

My husband and I recently inherited some money from his Aunt who worked, lived and passed away in Nova Scotia. She was 82 years old. We are receiving a partial payment until the Capital Gains and Death Tax Return is filed. The estate is worth $850,000. Of this, $723,000 was held in stocks and shares, 66,487 in GIC's and bonds, 9,470 in pensions and annuities and the balance of approx 12,000 was for personal effects, household goods. Realistically, how much tax is payable on this approximately? We have no idea what to expect.

Julia Germain answered:

I am fairly certain that the estate is subject to probate taxes which means - that the estate has to be valued as of date of death less the value of the asset when acquired. Depending on the type of investment growth - the estate will be taxed accordingly.

Ie if the $ 723 K of stocks held on date of death were purchased for $ 400K - the capital gain would be $ 323K - of which 1/2 of that is taxable at the correct marginal tax bracket of $ 150K+ per annum.. Basically a $ 60-70K tax bill which the estate pays not the inheritor. Answering the "TAX" question is not simple as not enough details are provided.

The inheritors should only receive the balance of the estate after taxes are paid and after the deceased final tax return is filed ie 2007, ie by April 30 2008. The Trustee for the estate is responsible to get these things done. The inheritors will be responsible for any adjustments to tax if there are any reassessments in future years if the Trustee does not hold additional amounts for years to come in case of problems. The inheritors should be encouraged to seek out & hire a Chartered Accountant for a professional opinion on this matter as they are income tax experts.

Their CA of choice should be able to work with the Trustee to see what the inheritors should expect to receive in the end as I think that is really all the should worry about assuming the correct individuals are in place to take care of the estate properly. Perhaps the inheritors should work with the individual chosen by the Trustee to prepare the final tax return.

About the author

Julia Germain is an accounting and business consultant offering full accounting & bookkeeping services to small businesses in York Region. Julia runs Ask the Accountant Inc., a company operating in York Region. Contact Julia at Ask the Accountant Inc., Tel : 416-573-4229.


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