It can be confusing to interpret the rules regarding the disposition of your property in Canada after your death. Below are some basic facts of which all British Columbia residents should be aware.
On the date of your death, the government calculates the fair market value of all of your property as if it were sold, including depreciable property, capital property and any partnership interests. This value will then be taxed accordingly in your final return.
At the same time, your Registered Retirement Income Funds and Registered Retirement Savings Plans will be collapsed and the fair market value included as part of your income on your final tax return. But income tax can sometimes be deferred if your beneficiary of your estate, RRIF or RRSP is a common-law partner or spouse, financially dependent physically or mentally disabled child or grandchild no matter his or her age, or a financially dependent minor child or grandchild.
There are also probate fees for which your executor is responsible. Transferring and selling assets usually requires both a probated will and death certificate. This probate process actually protects your executor from any liability in his or her actions when making distributions in the event that a more recent will is discovered.
The court charges the probate fee according to the fair market value of all property you own when you die and that is transferred through your estate.
The British Columbia Probate Fee includes the following:
— Real estate located in the province.
— Personal property that is tangible and located in BC.
— For those residents of British Columbia prior to their date of death, any personal property that is intangible and to which you had the rights or owned outright, no matter where it’s located.
British Columbia Probate Fees are:
— Zero if the value of your estate is below $25,000.
— $6 for every $1,000 or portion of $1,000 of the estate value over $25,000 and up to $50,000.
— $14 for every $1,000 or portion of the estate value over $50,000, combined with the $208 fee necessary to begin an application for the grant.
As you can see, without seeking the advice of an estate lawyer and financial planner, your estate could wind up owing a great deal of income tax.
Source: lycosasset.com, “Canadian Deemed Disposition Rules on Death,” accessed Oct. 30, 2015