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If people are unprepared, the well-being of not just people affected today, but also those in the future, will suffer. This is not just an old-folks issue – it spans all ages. Baby boomers currently make up nearly a quarter of all Canadians. With baby boomer deaths increasing, the process to transfer wealth – in excess of $1 trillion this decade – between generations is messy and getting messier because it’s occurring in an increasingly complex legal, tax, and financial environment ill-prepared to cope with the onslaught of work despite government efforts to streamline. For example, some professionals estimate that the time needed to probate a will in the Greater Toronto Area has now more than doubled to 8-9 months; the time for tax authorities to issue tax clearance certificates now exceeds a year as compared to the CRA's goal of 6 months). This means many people will have to pay probate fees and taxes well before estate proceeds are available to pay them.
After speaking to several people on a mission to help Canadians prepare for the inevitable end of life, we decided to do something about it. We picked five issues we think can be addressed with little or no legislative change or cost, and that will materially help make things as easy as possible for families and their executors preparing for and coping with the death of a family member. The five are:
For more detail on the things we think need to be addressed, please read our letter to the Ontario government (use Chrome or Edge to access this if you can't open this link). And how about you? Have you come up against blocks as you try to move forward to prepare for or settle an estate? Please let us know by emailing [email protected] because these five are just the beginning. #executor #estate #probate #taxes #wills
In this vein, John shared a great (if not for the beneficiaries) story - if you were wondering, here's where Nortel comes in.
When a person dies, the value of all RRIF assets is deemed to immediately be taken into the deceased's income at fair market value as at the date of their death and taxed. For those too young to recall Nortel's collapse, share prices went from a high of $124.50 in mid-2000 to just 39 cents before the company filed for bankruptcy in early 2009. In John's example, a person who ignored warnings not to put too many eggs in an undiversified basket paid $1 million for Nortel securities in the early 2000s (say 10,000 shares at $100 each) and held them - 80% or so of his portfolio - until his death, expecting that the sale of the securities by the executor would cover taxes due when the time came. Instead of a big inheritance, the deceased would have left beneficiaries with a big shock: a BIG tax bill and little to pay it with. Here's how:
Executors, of course, are not responsible for market moves, a willmaker's poor investment decisions, or a company's bankruptcy, but executors are responsible for safeguarding assets, that is, trying to maintain or protect market value. If the willmaker had died when the shares had declined in value to $500,000, a financial or tax advisor could have recommended selling the shares to at least recover enough to pay the tax due. Executors should get financial advice to minimize their liability and avoid beneficiary charges that they did not take logical steps to try to mitigate losses.
 ‘Ah,’ said the cobbler, ‘... What do you supposed ruined me, now?’
‘Wy,’ said Sam ... ‘I s’pose the beginnin’ wos, that you got into debt, eh?’ ‘Never owed a farden [farthing],’ said the cobbler, ‘try again.’ ‘Well perhaps,’ said Sam, you bought houses, which is delicate English for going mad, or took the buildin’, which is a medical term for being incurable.’ The cobbler shook his head and said, ‘Try again.’ ‘You didn’t go to law, I hope?’ said Sam suspiciously. ‘Never in my life,’ replied the cobbler. ‘The fact is, I was ruined by having money left me.’
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