Estate litigation: avoiding tax woes

In estate law, there is a concept referred to as "never money." Some British Columbia residents might recognize this term as referring to money an estate holder is not planning to spend before the end of his or her life; this money is often bequeathed to beneficiaries, like children. It is also interesting to note that passing that money to an heir or heirs while the estate holder is still alive is often a good way to avoid estate litigation and save on taxes. 

Many Canadians are not aware that Canada does not impose a gift tax. This means that any cash or assets given to children or other family members while the estate holder is still alive is not taxed by the government. On the contrary, assets that fall under the "never money" category that continue to accrue will also continue to be taxed, sometimes at a very high rate. A gift of, say, $1 million bequeathed to an heir is not reportable as income so long as the estate holder giving the gift is alive to do so. 

The rules can be a little different for certain types of property, like a cottage or a stock portfolio. The estate holder could be responsible for taxes on capital gains made by this property. However, this does not diminish the overall benefits of giving inheritances before the death of the estate holder. 

This can all be very complicated, and in order to avoid estate litigation further down the line, it is important for British Columbia residents to have the best advice possible. This is why it is advisable to seek out an experienced tax law and/or estate attorney to help determine the best plan of action. With this support in place, the entire family stands to benefit. 

Source: CTV News, "The tax benefits of giving your heirs money while you're still alive", David Hodges, July 3, 2017

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