Estate administration taxes are payable on the fair market value of your assets at the time of your death. The amount of estate administration taxes payable depends on the value of your estate and the province in which you reside.
There are a number of things that you can do to minimize estate administration taxes, such as:
- Create a living trust. A living trust is a legal arrangement that allows you to transfer ownership of your assets to a trustee, who manages them for your and sometimes for your beneficiaries’ benefit while you are alive and distributes them to your beneficiaries after your death. Assets that are held in a living trust do not have to go through probate and are not subject to estate taxes.
- Use joint ownership. If you own real property jointly with another person, the surviving joint owner will automatically become the owner of the asset upon your death, unless you indicate otherwise. Financial assets held jointly may be treated differently and it may be that the surviving joint tenant does not get full ownership. This is something to discuss with your estate planning lawyer. If the other joint tenant receives full ownership this means that the asset will not be included in your estate and will not be subject to estate taxes.
- Use beneficiary designations. Many types of assets, such as life insurance policies, registered assets and retirement accounts, allow you to designate beneficiaries. If you designate a beneficiary, the asset will be transferred directly to the beneficiary after your death and will not be included in your estate.
- Use tax planning strategies. There are a number of tax planning strategies that you can use to reduce estate administration taxes as well as income taxes for the estate. These strategies can be complex and should be discussed with an experienced estate planning lawyer and your accountant.
Estate taxes, whether for administration taxes or income taxes can be a significant financial burden for your loved ones. By taking steps to minimize these, you can help to ensure that they inherit more of your assets.
This article is for informational purposes only and is not legal advice. Contact us today to discuss your specific situation.