Many years ago, Benjamin Franklin wrote “nothing can be said to be certain, except death and taxes”. Since that time, people all over the world have done many things to avoid both. However, we will all have to face the inevitability of at least one, if not both.
In Ontario, we do not have an “Inheritance Tax”, or a “Gift Tax” on money received as a bequest in a Will. Estate Administration Tax (formerly known as “Probate Fees”) is set at 1.5% of the value of the assets of an Estate in excess of $50,000.00. As tax rates go, this is not a huge percentage, but no one likes to pay taxes if they can avoid it.
In the world of Estate Planning, we often have clients asking to put their adult children on title to their property to avoid paying Estate Administration Tax (”EAT”) on the transfer of the property. On the surface, this sounds like a fine idea but in reality there are potential pitfalls including (but not limited to):
- Unexpected income tax and capital gains issues
- Adverse exposure to creditors (of any of the potential owners)
- Exposure to matrimonial claims from a marriage breakdown
- Loss of control of the property by the original owner should there be an inter-family dispute
Another common practice is to put an adult child or children as joint signatories on a parent’s bank account(s). This is often done to make it easier for the adult child to assist their parents as they age. Problems arise when the parent dies and the adult child, as “joint owner”, claims the money in the account(s) as theirs alone, under right of survivorship. This can lead to disputes among beneficiaries and potential legal claims.
The best way to minimize taxes on death is to have a robust Estate Plan, which includes a well drafted Will and Powers of Attorney. Our lawyers will be happy to discuss the best way to protect your assets for now and going forward. Please contact our office to arrange your consultation in person, by telephone or via video call.