Canadian Tax Rules That You Need To Follow As A Non Resident

By Author: Ken Donaldson
Total Articles: 48
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Using Trusts In Estate Planning for Canadians

Canada is a country where there is no estate tax and this may sound great from the outside, but then what many don’t realize is that there is a deemed disposition tax in Canada which is very similar to estate tax. This is a tax that is applied by the Canada Revenue Agency after you die and is a liability that will have to be dealt with. This can be a problem for many, but then there are ways to get this sorted out by estate planning and to ensure that the assets reach the beneficiaries it is intended for without much hassles. We will be discussing about ways you can reduce the exposure of your assets to the deemed disposition tax and on how you can use planning to safeguard the interests of your assets.

Taxation Issues With Assets

The term deemed disposition tax is used because as per the government your investments are deemed to be sold when you die. Whenever assets are sold, there will probably be capital gains and the capital gains that one gets after the assets are sold after the death will be included in the final income tax return that will have to be ...
... filed in the year of the death. This final tax return will also include the income that is received from stocks, life insurance proceeds gained due to death, value of retirement accounts and real estate investments from the beginning of the death year till the date of death. The federal tax rate in Canada is up to 29% and this will mean that a substantial amount will have to be paid as tax even after death of a person. Provincial taxes will also apply. But there are ways to do some estate planning and defer the tax and it can be done by transferring the assets to a trust or to a surviving spouse using a will. But then if the spouse sells the property, the tax will again be applicable..

Options of Using Trusts

Using trust will often be the best option for estate planning and there a few types of trusts that you can opt for. They are

• Living Trust – This is a trust that is formed when the person is alive. This is a common trust that is formed by people who have a family business and is a popular choice.

• Testamentary Trust – These are personal trusts that are created on the day a person dies and the terms of the trust is usually determined by the will or a court order.

About Author:-

Josep Guardiola is a Toronto tax specialist, who practices as an independent tax consultant. He is providing lots of information about how to manage tax. In this article you can find details information about Canadian income tax. For more information visit taxca.com.