On death, even the middle class could end up in the new 33% tax bracket, perhaps for the first time in their life, or death. Finance Minister Bill Morneau’s announcement that increases the top federal tax bracket from 29% to 33% could affect anyone dying after December 31, 2015 if the taxable income on their final tax return is over $200,000—and also increases the amount of provincial tax due. But it is said, the dead don’t complain.
One way anyone who has a spouse or common-law partner can defer a portion of their tax bill on death by transferring, or rolling over, certain items to their surviving spouse or common-law partner. However, on death of the last surviving spouse or common-law partner in a relationship, or for anyone who is single, the value of any registered plan—such as an RRSP or RRIF—is added to the deceased’s final tax return. As well, the taxable portion of any capital gains (that is, of the profits) on investments, vacation properties that are not considered a principal residence, and certain other assets are also be added to the deceased’s final tax return. The portion of the taxable income over $200,000 will be taxed at 33%.
January 1, 2016 also brought us additional tax changes that affect the estate plans of the middle class such as the graduated rate estate (GRE). It also introduced the qualified disability trust (QDT) for beneficiaries who qualify for the disability tax certificate and receive their inheritance in a testamentary trust.
© 2017 — All Rights Reserved Sandra Foster — Financial Intelligence™