# inheritance



## couchman (Oct 10, 2013)

I recently received some money from an estate. The money was from the persons TFSA. Does anyone know the rules on whether I will need to claim this money and pay tax on it. Just trying to find out if I should be putting this into an RRSP. (which I would do if Ineed to claim it)


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## Just a Guy (Mar 27, 2012)

Usually the estate would pay all taxes owing and then distribute the remaining assets to the inheritors. Of course, if the executor didn't do their job properly, you could be on the hook for unpaid taxes. I'd check with the executor but your money should be tax free for you.


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## AltaRed (Jun 8, 2009)

The TFSA would cease to be tax protected after the date of death. Assuing the OP was a beneficiary, the executor/institution would be liquidating the assets ASAP and paying them out to beneficiaries. However, that does take a little while and income could continue to be earned (and be taxable) before distribution. Either the estate absorbs taxes due via a T3 Trust Return, or the pre-tax income is passed on to the beneficiary and the executor issues a T3 tax slip to the beneficiary with the income amounts noted. The OP needs to ask if tax treatment was not already stated along with the distribution.


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## amitdi (May 31, 2012)

The idea is that the taxes need to be paid for only once, ideally before you get it. So if its a tax paid money, you should not pay it, it would just be so conceptually unfair.


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## kcowan (Jul 1, 2010)

The inheritance from an estate is not taxable. And all the deceased assets become part of the "estate of" account. The executor must pay all taxes due before distribution. If you are named beneficiary on the TFSA, then you should get the principal tax free as it is not a part of the estate. 

What you do with the money has nothing to do with the fact that it was received as an inheritance.


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## Eclectic12 (Oct 20, 2010)

^^^^

The TFSA can rollover completely tax free ... but only in certain circumstances, with the right paperwork.

http://www.theglobeandmail.com/glob...ay-tax-on-my-tfsa-after-i-die/article4574575/
http://www.moneysmartsblog.com/esta...ry-successor-holder-tax-free-savings-account/


Cheers


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## AltaRed (Jun 8, 2009)

kcowan said:


> If you are named beneficiary on the TFSA, then you should get the principal tax free as it is not a part of the estate.


The principal part is correct but that does not answer the case where the TFSA earns income after date of death but before the assets are distributed to named beneficiaries. Either the executor pays said taxes due from said income out of the estate and distributes AT income, or pays taxes due from said income out of the estate and distributes BT income, or BT income is passed through to the beneficiary along with a T3 indicating income tax due by the TFSA beneficiaries. The first and last methods are the fairest ways IF the beneficiaries of the estate are different than those of the TFSA. 

The middle one could unduly benefit the TFSA beneficiaries and penalize the heirs of the remaining proceeds of the estate. It all depends on how much income is earned by TFSA assets before the distributions are made.


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## kcowan (Jul 1, 2010)

AR are you saying that an executor has their hands on TFSA capital if the OP is named sole beneficiary? If so then I agree with you but it surprises me.

When I inherited the RRSP from my brother, RBC wrote me a cheque for the amount at the time the cheque was written. The estate did not touch it. The taxes due were withheld from the principal in that case.


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## Just a Guy (Mar 27, 2012)

It probably depends on the remainder of the estate. If the estate is insolvent, the executor can make a claim on any assets, even direct benefits, to pay off the debts and taxes owing.


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## AltaRed (Jun 8, 2009)

kcowan said:


> AR are you saying that an executor has their hands on TFSA capital if the OP is named sole beneficiary? If so then I agree with you but it surprises me.
> 
> When I inherited the RRSP from my brother, RBC wrote me a cheque for the amount at the time the cheque was written. The estate did not touch it. The taxes due were withheld from the principal in that case.


What I am saying is IF income is earned by the TFSA after the date of death, and before distribution of proceeds, the taxes due on income must be dealt with. Whether it is the institution OR the executor does not matter (from the beneficiaries' perspective). Maybe I have confused matters in my prior posts by using the word "executor" rather than "the party responsible" which as you suggest should be the financial institution. IOW, the proceeds from the institution should be the original principal + income before distribution (net of taxes due). 

That is a real case for me right now as co-executor of my mother's estate. The TFSA proceeds have yet to be received by the beneficiaries and interest continues to accrue on the GICs in that TFSA. We shall see how, in this case RBC DI, handles it.


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## kcowan (Jul 1, 2010)

I think we are in agreement. I suspect RBCDI will do exactly the same and there will be no probate due.


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## praire_guy (Sep 8, 2011)

The,executor should pay the tfsa proceeds right away. This avoids any tax owning.


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## AltaRed (Jun 8, 2009)

praire_guy said:


> The,executor should pay the tfsa proceeds right away. This avoids any tax owning.


The institution pays the beneficiaries IF the TFSA has named beneficiaries.


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## sags (May 15, 2010)

My dad had a TFSA with $20 in it since he opened it.

It took the CIBC bank 8 months to issue the cheque to the estate. (everything in my dad's will went to the estate first........big mistake).

Even at that...........I had to hound them to get it done. Everything else was finished and I wanted to close the estate.

Every time I went in to check, they had a different person looking after estates and they had to go and dig up the files somewhere in the back.

I don't know who paid the tax on the pennies $20 might have earned in a savings account. 

They can sue me for it.


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## kcowan (Jul 1, 2010)

RBCDI hands it over to their estates department in Toronto. It took 2 months in my case. I did keep on them.


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## praire_guy (Sep 8, 2011)

AltaRed said:


> The institution pays the beneficiaries IF the TFSA has named beneficiaries.



From what the OP stated, it sounded like the tfsa was cashed in, and he received money from the estate, not the tfsa directly. 
If the will says to pay so and so the tfsa, the the executor can do so and not worry about tax owing


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