Difficult one

Question 1

Ademption

Answer 1

If the asset bequeathed through the will does NOT exist, spent, destoryed prior to death
- The bequest cannot be made and the beneficiary loses out completely

Question 2

Abatement

Answer 2

the bequest exists but it’s smaller than intended

- the beneficiary get whatever is left of the bequest

Question 3

Lapse

Answer 3

if beneficiary dies before the testator…bequest reverts to residue of the estate and the residueal beneficiary inherits

Question 4

Exoneration

Answer 4

If the will does not stipulate than outstanding debt against an asset bequeathed must be paid off
- The beneficiary gets the assets debt free and estate is responsible for debt

Question 5

Equalization

Answer 5

if surviving spouse is left out of the will, or inadequately provided for …
- Spouse has 6 months from deceased’s date to death to sue estate for equalization of net family property as calculated under the provisions of the family law act

Question 6

Joint Ownership

JTWROS- Joint Tenancy with Rights of Survivorship

Answer 6

undivided ownership of the property
on death, deceased’s interest automatically passes to surviving jt owners
Avoid EAT, estate administration tax because property bypasses estate of deceased but, can cause problems for transferor
- immediate deemed disposition
- subject to creditors of other joint owners
- subject to legal claims by family of other joint owners

Question 7

Assets NOT subject EAS

Answer 7

Assets gifted
transferred prior to death to Inter Vivos Trust
Assets owned jointed - JWROS joint tenancy with Rights of Ownership
Registerred funds with bene, RRSP, RRIF, RPP, TFSA
Life Insurance paid to named Beneficiary

Question 8

Assets Subject to EAT

Answer 8

Wholly owned assets, not rollover to beneficiary or joint owner,
- with Real Estate, any outstanding Mortgage is Deducted from value of Estate

Owned by deceased as Tenant in Common

• Gives each owner control of respective portion
• Different outcomr from JTWROS

will these assets included in the income to tax

Question 9

EAT estate admistration tax in Ontario

Answer 9

0. 5% in first 50K assets

1. 5% on the excess

Question 10

Tax liability at death

Answer 10

type of assets owned
Income, salary, interest, dividends, earned in the year nad not yet tax
Tax planning strategies utilized while living

Question 11

Final Tax Return–Inclusion rate

Answer 11

Common Assets owned at death

• Cash GIC –0%
• Principal Residence —0%
• Life Insurance Proceeds —0%
• Taxable capital gain, stocks, bonds, interests, business interst, cottage *—100%
• RRSP and RRIF * —-100%

If asset is ineligible for, or surviving spouse OPTs OUT for rollover

Question 12

Tax Treatment of Principal Residence at death

Answer 12

Exempt for capital gain tax
apply to any property family live in
- DO NOT have to live there full year
Not designated as principal residence till property sold
if sell 2 properties in the same year, claim exemption on property with larger capital gain

Question 13

tax treatment of capital property at death if left to…

Answer 13

1. Deceased’s spouse
   rollover at deceased’s ACB, tax is deferred till surviving spouse dies or disposes of property
2. Deceased’s estate and surviving spouse is residual beneficiary
   rollover to surviving spouse, unless surviving spouse opts out to rollover
   if surviving spouse opts out, treament same
3. any else
   - deemed dispositon at FMV immediately prior to death
   - Any resulting taxable capital gain is taxable to the deceased in final tax return0

Question 14

Why would a spouse elect to opt out of rollover?

Answer 14

1. To offset Capital Loss incurred by the deceased in the year of death or in previous year
2. To utilize the lifetime capital gains exemption

Spouse must elect to opt out of rollover

• doesnt happen automatically
• Election is on property by property basis

Question 15

Tax Treatment of Net Capital Losses at Death

Answer 15

• Deductible against taxable capital gains in any of the three tax years before the year of death
• May also be deductible against ANY Other income in year of death or the year before death

Question 16

Tax Treatment of RRSPs & RRIFs at death

Answer 16

1. to spouse–rollover, refund of premiums
2. to estate where spouse is residual beneficiary —rollover
3. to dependent, minor child/grandchild –> annuity to age 18, annuity payments taxable to child
4. to disabled child —Life annuity, payments taxable to child

5 to estate or anyone else –100% taxable as income to deceased in deceased final tax return

Question 17

Tax treatment of Joint Property with ROS right of survivorship at death

Answer 17

Deceased’s share of property is deemed Disposition
- 50% of capital gain is taxable to deceased
Surviving joint tenant inherits deceased’s share of property at FMV

Question 18

Tax treatment of Income at death

Answer 18

If not taxed at source (e.g. Salary), included in deceased’s final tax return

Question 19

When subject to tax in the USA?

Answer 19

Residents of Canada, who are not US citizen
Whose Assets at death>5Mil and who own
- Shares of US companies, but not Cdn subsidiaries
- Real estate in US
Business Assets in US

Assets that are exempt
- - US assets owned through Canadian mutual funds or through Canadian corp

Question 20

How it works at death

Answer 20

• Pay Income tax in Canada on any accrued gain on US property
• Pay Estate Tax in US on Full value of asset
• Double taxation alleviated by US/Canada Tax Treaty
  get refund of one country’s tax, end up paying tax at the Higher of the two rates, i.e. US rate

Question 21

Due Dates for T1 final

Answer 21

The LATER of
- six month after death
- april 30 of following year
gives estate representative at least 6 months to submit return

If self-employed or spouse of self-employed, the LATER of

• 6 months after death
• June 15 of the Year following death

Question 22

Due Date for Return for Income from Testamentary trust

Answer 22

90 days after trust’s fiscal year end