A guide to wealth and inheritance


We evolve through various stages in our lives.  As children, we rely on others to feed, care for, and provide us with the necessities of life.  We learn to support ourselves and often others as we grow and learn.  Most people build their overall wealth through the growth of their income, investment portfolios, real estate, or inheritance.  The accumulation years usually receive much attention, but rarely is planning or thought given to the ultimate disbursement of wealth considered. This blog brings us to the following question, “Who Could Inherit Your Wealth and What to Consider?”


The Government

Canadians might be surprised to learn that their biggest tax bill could be postmortem.  The fair market value an individual’s assets is deemed the disposition of their assets upon their death.  You can defer payment of the taxes until your surviving spouse passes away, but ultimately the payment is due once they pass.  Taxes may not be realized in the present moment due to the nature of the asset or investment, but may be avoided by pushing forward the payment.  Most people would prefer to increase the amount of their endowment to their family or to charity of their choice, opposed to giving the government a larger share of their wealth upon death.  We would like to transfer more wealth to individuals and places that we want it to go to instead of the government, is there a way to accomplish this? Here’s how.


Things to consider when passing wealth onto your family

1. Have you taken care of  YOURSELF?
It is common for parents to give money to their children to help them buy a house, pay for a wedding, or start saving for grandkids’ education while they are still alive. In order to be financially secure, you must ensure that you have taken steps to protect yourself against the risky aspects of life, which include: market fluctuations, sickness, retirement expenses, and among others.

2. What is the difference between fair and equal?
To leave assets to several children, you should consider how the assets should be divided.  We’ll illustrate with the example of a $1,000,000 in RRSP’s and a $1,000,000 residential property.  According to this scenario, dividing assets between two kids, each valued at a $1,000,000 is fair, as both have the same value.  On the other hand, assets such as RRSPs are taxed upon death. Taxes could reduce the value of these assets by up to $500,000.  A permanent life insurance policy can provide liquidity to pay taxes and decrease your overall tax bill.

3. What type of control do you want?
Multi-generational families can consist of children, spouses, grandparents, and blended families due to divorce and remarriage.  Having a testamentary trust can relieve some anxiety in the event you pass away while your children are still young or if you don’t wish to give your adult children all the money at once due to their inability to manage finances.  A person can then be specific when considering how their wealth could be passed on.  For example, if you have a blended family, you could have a trust that states your spouse will receive benefits from the estate and then upon the spouse’s death, the estate can be distributed to the your children from the previous marriage.

4. What if you own shares of a private company or rental properties?
Owning rental properties or shares of a private company when transferring wealth to your children may reduce your risk of double or triple taxation through post mortem planning.

Charitable Giving or Community

It is possible to leave some or all of your wealth to a cause, such as a charity or your community. You can do this during your lifetime or when you pass.

What can you give? – In addition to excess cash, one could leave assets such as stocks, bonds, and life insurance to a charity in kind.

What are the advantages? – By donating the shares, the estate can avoid capital gains tax and receive a charitable donation receipt for the fair market value of the shares, resulting in tax savings.

Flexibility for your Executor – Most of the time, these gifts are planned well in advance. At the time of death, an estate may have options to satisfy the gift and provide the trustee with the opportunity to make decisions that will greatly improve the tax efficiency.


Life-changing opportunities can result from a considerable inheritance. The following tips will help you manage your inheritance wisely.

Tip 1: Consult With a Financial Professional and Tax Professional

  • You may not owe taxes if you inherited money from a spouse.
  • Life insurance proceeds are typically tax-free.
  • Non-retirement assets are taxed at the time of sale. Accordingly, any capital gains tax due will be based on the asset’s fair market value at the time of the owner’s death.

You must pay tax on distributions from inherited annuities, workplace retirement accounts, or RRSP’s. Be very careful when taking distributions. In the case of cashing out your uncle’s RRSP and rolling the money over into your own RRSP, your uncle will have to pay income taxes on the entire amount. However, spouses who want to roll over the retirement account of their deceased spouse are able to do so.

Tip 2: Park the Cash

Transfer the inheritance to a bank or brokerage account as soon as you can. If you are married, you must decide whether to place the account solely in your name or jointly with your spouse. Please be aware that inheritance is considered separate property in the case of divorce. In commingled accounts, however, this protection is lost.

Tip 3: Cut Down/Eliminate Your Debt

You may be able to pay off your debt, including your mortgage, with your inheritance. Nevertheless, you should pay off those loans with higher interest rates first, such as credit cards, personal loans, and car loans. Then you should consider paying off your mortgage. Make sure that you have a savings account with at least six months’ worth of living expenses for emergencies.

Tip 4: Think About Your Other Goals

Identifying your financial goals can help you determine what types of investments to make or other types of accounts to open. These goals could include:

  • Contributing to a charity
  • Setting up a trust or foundation
  • Paying for a family member’s education
  • Financially helping out loved ones
  • Adding to your retirement savings

Tip 5: Review Your Insurance and Estate Planning Needs

You might want to increase your liability limits on your homeowners policy if you inherited a significant sum of money. Property and casualty coverage may need to be increased if you inherit jewelry, artwork, or real estate.

Think about an umbrella policy. Is your inheritance likely to increase the size of your estate if so, it can be subjected to more taxes? Have you considered setting up a trust for your family or a charity? Alternatively, life insurance can help reduce your tax bill.

Tip 6: Do Something Nice for Yourself

Put aside a small portion of your inheritance — no more than 5% to 10% — for “your wants”. Some examples include: Going on a trip, upgrading your vehicle, or renovating your house.

Please do not consider this communication to be tax advice. Everyone’s tax situation is different. Talk to your tax professional about your particular situation.