How Estate Taxes reduce your heirs inheritance


These Estate Fees and Taxes can Reduce an Estate’s Value:

Probate Fees These fees (now to be called Estate Administration Fees (EAT) in Ontario) are essentially taxes charged by the provinces for confirming that a will is valid, and the executor has the authority to act, referred to as “Letters of Probate” (essentially a tax on your estate). Probate/EAT fees and taxes could be as high as 1.5% of your estate limited only in Quebec, Alberta, and the Territories.

Deferred Sales Charges (DSCs) at Death Generally no charges are applied to Segregated Fund and Term Fund policies at the time of death.

Legal and Executor Fees Legal and executor fees range from 3% to 6% of the estate. These fees are paid to the executors who are responsible for many complexities such as locating the will, arranging the funeral with the family, assessing and determining names and addresses of beneficiaries and next of kin, finding the assets and liabilities, and tax return preparation.

Accounting Fees Significant estates can be very complicated. Thus, an accountant may need to file the final tax returns to ensure the orderly transition of assets and reduction of liabilities for the Executor/Trustee. An accountant’s fees can run upward to another 6% of the total assets.

Life insurance policies, segregated fund and term fund policies with a named beneficiary, do not form part of the estate and are not subject to any executor, legal or trustee fees because these proceeds are distributed directly to named beneficiaries. This means the accounting fees can be reduced during the estate’s assessment.

Note: Registered investments bypass probate. This may not apply in certain provinces, and advice should be sought from a tax specialist and/or an advisor.

The Joy of Planned Giving


For centuries, people have made efforts to help the less fortunate. The singer of U2, Bono, has been involved in many issues throughout the years and supports erasing Third World debt to wealthy countries. Michael Jordan is involved with a variety of charities including the Boys & Girls Club of America, UNCF/College Fund, Special Olympics and organizations that support children and families. Bill and Melinda Gates focus on areas dedicated to improving people’s lives by advancing health and learning efforts in the global community.

You do not have to be famous and wealthy to get involved — everyone can! For a small monthly, tax-advantaged donation of $25 to $100, you can help a child through an NGO such as World Vision. There are many such Non-Government Organizations (NGOs) that help people worldwide when and where disaster strikes.

Planned Giving

Planned giving raises funds through a program of arranging regular systematic donations to serve the interests of a registered charity that best suits the personal, financial and tax situation of an individual donor. Via planned-giving programs, registered charities seek to attract substantial gifts by presenting potential donors with information and advice. You can include the following is your planned-giving program: bequests, annuities, life insurance policies, and residual interests or charitable remainder trusts. Segregated funds work well because they can guarantee the invested capital (plus any growth) upon the death of a donor.

Charitable remainder trust.

A charitable remainder trust involves transferring property into a trust whereby the donor retains a life interest in the property but makes an irrevocable gift of the residual interest to a registered charity. A registered charity can issue an official donation receipt for the fair market value of the residual interest in the property at the time that the residual interest vests to the charity.

How to donate a life insurance policy to a charity.

When an individual absolutely assigns a life insurance policy to a registered charity and makes the charity the registered beneficiary of the policy, the charity can issue an official donation receipt for the cash surrender value of the policy at the time of donation and for the subsequent payment of premiums.

RRSP as an enduring property.

Under the Income Tax Act, a charitable donations tax credit can be claimed on a deceased individual’s return for a donation via a direct distribution of his or her proceeds to a qualified donee who is the designated beneficiary of a registered retirement savings (or income) plan (RRSP/RRIF), a registered retirement income fund (RRIF), or a life insurance policy. Under the Act, a gift received by a registered charity by way of direct designation is a gift of enduring property.

Donating a Registered Pension Plan (RPP).

An individual can designate a registered charity as their beneficiary of a registered pension plan. A charity can issue an official donation receipt for lump-sum pension benefits paid to the charity.

Note: Ask your Advisor if any legislation has changed this.