# Death: Estate tax question(s)



## Jungle (Feb 17, 2010)

Upon death of spouse and myself, what type of taxes would be paid on the following assets, if passed to children? 

Residential property purchased for 100k and worth 250K
500k in stocks/savings account
250k in rrsp

I understand there is probate involved on the entire net worth, but would there be income tax on assumed "deemed positions" and then capital gains as well? 

Thank you.


----------



## MoneyGal (Apr 24, 2009)

If your child is under 18 and financially dependent on you, tax on the RRSP can be deferred. 

Otherwise, there is no tax payable on the house (all gains are tax-free, any losses are not deductible), and the RRSP is included in income in the year of death. The contents of the open account are deemed to be sold at the date of death as well.


----------



## OhGreatGuru (May 24, 2009)

MoneyGal said:


> If your child is under 18 and financially dependent on you, tax on the RRSP can be deferred.
> 
> Otherwise, there is no tax payable on the house (all gains are tax-free, any losses are not deductible), and the RRSP is included in income in the year of death. The contents of the open account are deemed to be sold at the date of death as well.


Assuming the residential property in question is/was the "principle residence" of the deceased, thus qualifying for capital gains exemption. (This wasn't clearly stated in OP's post) If it is an investment property, then capital gains is payable by the estate as if the property was sold.


----------



## Jungle (Feb 17, 2010)

Ok thanks guys (and gals). 

Would there be capital gains tax on the stocks /savings accounts?


----------



## MoneyGal (Apr 24, 2009)

Yes, if you have unrealized gains and losses in the open account they are all deemed to have been sold and all gains/losses realized at the date of death. 

(And yes to OGG's comment as well; I was presuming a principal residence, not just a "residential property.")


----------



## Jungle (Feb 17, 2010)

Yes, I should have said "principal residence."

So just to confirm: 

Principal residence-probate tax (nothing else)
Stocks/saving accounts-unrealized capital gains tax, probate tax, but NOT income tax?
RRSP-probate tax, income tax, (as if entire amount withdrawn)


----------



## MoneyGal (Apr 24, 2009)

I'll see if I can make this crystal clear:

How the assets are taxed at death depends entirely on how they are taxed as if the person was alive, but sold all assets on a particular date. 

So, the principal residence gain (or loss) is not taxable (or deductible from taxes), just as it would be if the person was still living. 

RRSP holdings are treated as if the entire RRSP is sold and taken into income that year. 

Non-registered holdings are treated as if everything is sold on a particular day. So, if you hold bonds (for example) that have unpaid (and due) interest, income tax is payable on that interest (in the final return) just as if you cashed the bond and received the unpaid interest later. So yes, in this case, there is actual income tax owing on an asset held by an estate. 

Keep in mind that spouses can generally roll assets to spouses tax-free upon death. 

Is that clearer? (I caution you that I had surgery earlier this week and am still on narcotic painkillers, so I may not be as clear as I might otherwise be.)


----------



## Jungle (Feb 17, 2010)

MoneyGal said:


> I'll see if I can make this crystal clear:
> 
> How the assets are taxed at death depends entirely on how they are taxed as if the person was alive, but sold all assets on a particular date.
> 
> ...


Yes that was clear, thank you for helping me understand


----------

