Post-Death Tax Planning

Terminal tax returns

In the year of death, there are many special tax rules and elections available which must be carefully considered in order to minimize the taxes owing while following the specific requirements of the Income Tax Act. Some of these potential complexities include:
  • Deemed disposition of all capital properties owned at the time of death and triggering of any unrealized capital gains
  • Spousal rollovers
  • Principal residence exemption for homes owned by the deceased
  • Filing of multiple tax returns for the year of death to reduce the overall taxes owing
  • Optionally electing to trigger gains or losses in the year of death
  • Applying capital losses against other sources of income or carrying back these losses
  • Specific tax rules relating to the treatment of TFSA, RRSP, RRIF, RESP upon death and afterwards


Private Company Shares

Where an individual owned shares of a private company at the time of death, careful tax planning is required in order to be able to extract funds from the company without trigger double-tax. Without implementing proper tax planning, the estate may be subject to a capital gains tax on death and a further tax when dividends are received from the company, leading to overall tax rates in excess of 70%.

Based on your specific circumstances, we would help you to identify which of the following strategies should be implemented:

  • Pipeline planning
  • 164(6) loss carryback planning
  • 88(1)(d) bump planning
Each of these strategies has different timing requirements, so it is important to begin the planning process as early as possible.



Graduated Rate Estates

An individual’s estate can be designated as a Graduated Rate Estate for up to three years after death which is taxed at marginal tax rates based on its level of income in the year. In cases where the beneficiaries of the estate are high-income earners, having income taxed in the estate could lead to significant tax savings.

We can assist you developing a strategy to have income earned in the estate and avoiding triggers that may taint the estate’s status as a Graduated Rate Estate.