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If you
have a surviving spouse, your assets can be rolled over tax-free
upon death. However, if there is no surviving spouse, you can expect
the following tax consequences:
-
RRIF/RRSPs - considered to be income in the year of death and are fully
taxed at the appropriate marginal tax rate - typically at the highest
marginal tax rate.
-
Cottage - will be subject to capital gains tax. This is calculated
as follows:
-
Fair Market Value (FMV), minus
-
Adjusted Cost Base - (ACB - the cost of acquiring the property),
multiplied by
-
50% Capital Gains inclusion rate, multiplied by
-
your marginal tax rate
Example:
|
Cottage Fair Market Value
|
$350,000
|
Cottage Adjusted Cost Base
|
- $100,000
|
Total Gain
|
$250,000
|
Inclusion Rate
|
x 50%
= $125,000
|
assumed Marginal Tax Rate
Tax owing
|
x 46%
$57,500
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To
calculate unrealized capital gains on investment portfolios, the
same format as above is used.
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Taxes on a
typical estate may look like the following: |
RRIF/RRSPs
|
$500,000
x 46% -
marginal tax rate
$230,000 -
tax owing
|
Non-registered
Investment Portfolio
|
$600,000
- $300,000 -
Adjusted Cost Base
$300,000 -
Capital Gain
x 50% -
Inclusion Rate
$150,000
x 46% -
marginal tax rate
$69,000 -
tax owing
|
Cottage
|
$350,000
- $100,000 -
Adjusted Cost Base
$250,000
x 50% -
Inclusion Rate
$125,000
x 46%
$57,500 -
tax owing
|
Total Tax Owing
|
$230,000
- RRIF/RRSPs
$69,000
- Unrealized investment gains
$57,500
- Capital Gain on Cottage
$356,500
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