Inheritance/Will question

[Macator2003]

A good buddy of mine lost his dad back during the late winter. His mom passed away quite a few years ago. He and his two sisters are dividing the inheritance equally between them. He met with the Estate Lawyer who informed him that the money from his Dad's house which will be sold this month, will be tax free. They will need to either re-invest the other monies or securities and will need to declare this, but money from the sale of the house (minus real estates fees, lawyer fees etc.), will not be taxed. He's asking me if I think this is true and I really don't know. He doesn't want to get something from Revenue Canada come early 2014 stating that he owes 15 or 20 thousand in taxes.

I'd appreciate hearing from those that have gone through this or those that know due to being in the legal profession.....

 

[needinit]

Here's a link that speaks to this issue...http://www.cga-bc.org/tax_matters.aspx?id=1694

 

[oldjones]

You need to be clear whether you, or the guy you're getting advice from, are talking about taxes on the stuff in estate which it must pay, or what the beneficiaries/heirs must pay, if anything, when they receive their shares.

Roughly speaking, the estate pays taxes as if the deceased suddenly received everything they owned as income, but as in life personal possessions and the residence don't count, just profits from them. By the time the shares are paid out, that's been done by the executrix whose last job is to write those cheques and one for whatever she's owed. For ordinary folk receiving uncomplicated settlements, there is no further tax, but anyone acting as executor should be fully aware of that and have discussed minimizing whatever obligations they might incur.

If your friend really wants you to tell him the lawyer handling the estate isn't being truthful, he's already in trouble, and should get professional advice. His tax accountant should know about the tax end, and might appreciate the heads-up.

 

[Taxman2011/12]

If his father was living in the house (not renting it out) then it likely was his principal residence and there would be no tax on the money received when it gets sold.

All inherited money is tax free to the beneficiary.

There may or may not be taxes payable by the estate depending on what his father owned at the time of death, but the net proceeds that go to the beneficiaries is tax free to them.

If they in turn invest their newly acquired money, the income it generates will be taxable to them, just as if they had invested money that they had earned, paid their share of taxes on and then invested.

 

[Ref]

If they in turn invest their newly acquired money, the income it generates will be taxable to them, just as if they had invested money that they had earned, paid their share of taxes on and then invested.

Another option is to put it in a TFSA if you have not already maxed out that account - At least you can avoid paying taxes on any gains generated from the investment.

 

[rafterman]

Yeah all assets of the deceased are "deemed" sold on the date of death at fair market value for tax purposes. House as primary residence if that was the case is tax free. The executor of the estate must file a terminal tax return effective this date and declare and pay tax on all income and capital gains. The executor is on the hook to CRA for paying all taxes due from the estate so you want to get it right before disbursing funds to the will's beneficiaries. Depending on size of the estate might be worth having a C.A. file the terminal return. Once it is assessed and taxes due are paid you can get a release from CRA saying we release you from any further claim. This process can take up to a couple of years to complete and get the final release from CRA.

 

[thirdcup]

Don't forget about probate fees. Another cash grab from the man.

 

[red]

If his father was living in the house (not renting it out) then it likely was his principal residence and there would be no tax on the money received when it gets sold.

All inherited money is tax free to the beneficiary.

There may or may not be taxes payable by the estate depending on what his father owned at the time of death, but the net proceeds that go to the beneficiaries is tax free to them.

If they in turn invest their newly acquired money, the income it generates will be taxable to them, just as if they had invested money that they had earned, paid their share of taxes on and then invested.

that sounds right

 

[bazokajoe]

Yeah all assets of the deceased are "deemed" sold on the date of death at fair market value for tax purposes. House as primary residence if that was the case is tax free. The executor of the estate must file a terminal tax return effective this date and declare and pay tax on all income and capital gains. The executor is on the hook to CRA for paying all taxes due from the estate so you want to get it right before disbursing funds to the will's beneficiaries. Depending on size of the estate might be worth having a C.A. file the terminal return. Once it is assessed and taxes due are paid you can get a release from CRA saying we release you from any further claim. This process can take up to a couple of years to complete and get the final release from CRA.

This is correct.Any investments(minus primary res.) is taxable upon death.Be sure to check though on weather you will have to probate the house and any other monies.

From my own experiance we never applied for a "certifacate of clearance" from revenue canada.We felt they asked to many personal questions regarding who recieved what from the estate. It was a simple final tax return so why bother.

 

[Macator2003]

Thanks for all your responses....

 

[Moraff]

This is correct.Any investments(minus primary res.) is taxable upon death.Be sure to check though on weather you will have to probate the house and any other monies.

From my own experiance we never applied for a "certifacate of clearance" from revenue canada.We felt they asked to many personal questions regarding who recieved what from the estate. It was a simple final tax return so why bother.

Well if CRA were to discover some unpaid taxes owed by the estate then the Executor(s) would be on the hook for them.

 

[Moraff]

If his father was living in the house (not renting it out) then it likely was his principal residence and there would be no tax on the money received when it gets sold.

All inherited money is tax free to the beneficiary.

There may or may not be taxes payable by the estate depending on what his father owned at the time of death, but the net proceeds that go to the beneficiaries is tax free to them.

If they in turn invest their newly acquired money, the income it generates will be taxable to them, just as if they had invested money that they had earned, paid their share of taxes on and then invested.

Only thing I'd add would be that if the home took awhile to sell and gained in value from the value at death then the estate could be on the hook for capital gains on the difference.

 

[wazup]

A good buddy of mine lost his dad back during the late winter. His mom passed away quite a few years ago. He and his two sisters are dividing the inheritance equally between them. He met with the Estate Lawyer who informed him that the money from his Dad's house which will be sold this month, will be tax free. They will need to either re-invest the other monies or securities and will need to declare this, but money from the sale of the house (minus real estates fees, lawyer fees etc.), will not be taxed. He's asking me if I think this is true and I really don't know. He doesn't want to get something from Revenue Canada come early 2014 stating that he owes 15 or 20 thousand in taxes.

I'd appreciate hearing from those that have gone through this or those that know due to being in the legal profession.....

lmao, the estate lawyer who deals with this stuff everyday told you it wasn;t taxable and you question him, what would he benefit from lying. I`m going to start a thread about my dentist, he told me I needed freezing for a cavity, not sure I believe him, what do you guys think..........lol.