Taxevity.com
February 15th, 2024
When combined with the nuances of deemed disposition, estate planning can quickly become complex. Personalized advice is invaluable for devising a strategy to maximize your wealth transfer to the people and causes you love.
Answers to Frequently Asked Questions about Deemed Disposition:
- Does the principal residence get included in the deemed disposition?
Generally, no. Your primary residence (the place you usually live) is typically exempt from this tax rule. - A Will takes care of everything…right?
A Will outlines your wishes, but it’s only one piece of estate planning. Deemed disposition tax is triggered regardless of any Will’s terms. Consulting a specialist ensures your last wishes AND proactive tax strategies receive equal importance. - Can’t I simply gift everything while still alive?
Gifting to reduce later taxation on your estate can make sense, provided you are certain you won’t need those assets later. Some gifts incur immediate tax on you for any accrued gain at the time of transfer. This option warrants discussion with an experienced advisor.
- I always hire an accountant at tax time; isn’t that enough?
A regular accountant is fantastic for ongoing tax preparation. However, estate planning combines law and finances in ways they may not specialize. Choose professionals well-versed in Wills and their interplay with the Canadian tax code. - How does life insurance help with the deemed disposition?
Taxes caused by the deemed disposition can cause financial hardship for your heirs. Life insurance ensures your beneficiaries receive the amount of inheritance you intended without having to liquidate assets (like real estate or business interests) to pay the tax.
Important Caveat:
Each of these situations carries additional rules and potential exceptions. Specific examples are always best examined through consultation with a qualified tax professional to determine precise taxation and the possibility of minimizing impact.
