Terminal tax return upon death, and estate residue.

Some random notes about the issue.

https://www.nbc.ca/personal/advice/succession/canada-estate-taxes.html https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/what-when-someone-died/final-return.html

Important ideas: deemed disposition (most of capital), and deemed withdrawal (RIF). Deemed dispostion for your NRA securities, rental properties. Your house can roll-over to your spouse, and be exempt.

Income: rif, cpp, oas, pension Cap gain: cottage, non-reg account Tax-free: tfsa, home rolled over to spouse, life insurance

CPP pays a death benefit.

Estate administrative tax (EAT) takes about 1.5% of value of estate in the will.

Life insurance policies can pay a big fraction of the estate tax bill; you pay a little up front, and get a big pay out upon death.

The trustee/executor may change a flat fee or a percentage.

If left to spouse, then usually no extra taxes.

Warning: the estate's tax return has NO personal items: basic personal amount, age amount.

In the terminal return, any outstanding cap losses go further, and reduce your actual income. Correct?

Naming beneficiaries can avoid paying taxes.

calculate the bill for the estate

CONFIG: trustee/executor may charge flat fee or percentage of net worth
compute the final tax return
simple: die on Dec 31 only; no time between death and the terminating transactions (instead of a few months)
tfsa: no taxes
nra: deemed disposition on capital; tax on capital gains; this is being paid anyway, no matter what is sold
rif: deemed disposition; tax on whole value as income; this is all being paid anyway, no matter what is sold
rif: if given to spouse, no extra taxes
compute the tax payable
simple case: if left to spouse, then usually no extra taxes on the estate
warning: the estate has NO personal items: basic personal amount, age amount
in the terminal return, any outstanding cap losses go further, and reduce your actual income
the terminal return needs to have its own implementation, for both feds and provinces
can I subclass the existing, and set some data to fixed values?
- all capital undergoes deemed disposition for tax purposes; but tax can still be avoided sometimes
no cap gain: primary residence, GICs, bonds, cash, TFSA
convert GICs to principal amounts, as cash; no redemption of outstanding GICs
sweep investment accounts to the bank
calc remaining cash needed to pay for taxes and estate fees
sell stocks to make up the remainder
CONFIG: the order of the accounts
(it makes sense to use rif, nra first, since they are already paying taxes as if its all sold already;
likely the nra first, since tax is only on half the cap gain.)
in each account, sell an equal value of each stock
there's no tax consequences for these sales, so that might need to be backed out; OR, maybe there's a way around that
there's no need to
be careful with the 'quantization' for the integral number of shares
sweep cash to the bank again
bank pays the full bill
THE END. The estate residue is logged.

johanley / end-game

Terminal tax return upon death, and estate residue. #5