However, you still need money when you pass away and you may have unknowingly made CRA your biggest beneficiary.
The Government of Canada provides a small death benefit under the Canada Pension Plan (CPP), provided you qualify. This benefit is a one-time, lump-sum payment to the estate on behalf of a deceased CPP contributor. The benefit is calculated based on the contributor’s pension. It’s equal to six months of calculated pension, to a maximum of $2,500.
Considering the average funeral costs range from $2,500 – $4,300, it’s not difficult to see that CPP just barely covers the minimum cost.
Most people work their entire lives to build assets, intending to eventually pass what remains to their loved ones. And while a will provides the roadmap for distributing assets, it is your executor’s responsibility to file a tax return for you. This final year tax return is often the highest amount of tax you ever pay.
This is because the government considers you sold all assets at their fair market value value just prior to death, which can leave a large tax bill to your estate. This tab may include items such as:
* Probate fees on bank accounts and your primary residence
* Income taxes on RRSPs & RRIFs
* Capital gains tax on a cottage, condo, or rental property, or
* Capital gains tax on a stock portfolio or shares in a business.
Taxes could reduce your estate up to 50% without proper financial planning, and you will make the Government of Canada your largest beneficiary.