Tax and its imposition are often very confusing matters to businesses and normal people alike. But even during death, taxes will still have a role in the process especially when it comes to inheritances and estates.
In Canada, there is really no specific tax imposition on the families or people who will be receiving the estate. They will not have to worry on paying off the taxes before they will be able to get the properties and estates of their late family member.
Because of this law feature in Canada, the families are spared of any tax payments and they could just simply focus on the funeral and cremation services of their late loved one.
Although the beneficiaries are not required to pay the tax of estates and properties of the deceased, those estates still have taxes in them. But the question is who will pay for them? And why do people need to plan ahead regarding estate taxes when they are still alive?
Taxes after Death
Even in death, there are still taxes involved specially on the properties that you are going to leave behind. In Canada, it is bound by law that properties of a person be disposed moments before death.
For those people who have Registered Retirement Savings Plans, the only time that tax is imposed on the money that you placed into the plan is by the time you decide to take the money out of it. In other words, the money in those RRSPs is not tax free.
But according to the rule, beneficiaries are not liable to pay the taxes once the person dies. It is generally the estate that will pay off those taxes. So in simpler terms, the beneficiaries will not be getting the full amount of the estate since it will be deducted by the tax that is imposed on the assets of the deceased.
Most of the time, the estate of a deceased can play an important role for the family to pay off cremation costs and to continue sustaining themselves. Capital gains tax is another liability that will have to be checked once a person dies.