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What flows to the Estate

Hello,
One of my clients, a widow, died in February. She named beneficiaries for her TFSA and her RIF. Will those flow directly to the beneficiaries, or will the constitute part of the Estate?

In addition she created Joint Ownership of her considerable investment portfolio with herself and three of her children, though she retained control prior to death and declared all of the income. She has one other child, a mentally disabled older son, who is a ward of the Public Trustee in Ontario. Am I correct in concluding that the investment portfolio flows into the Estate in its entirety?

gaywise

  • TFSA will flow directly to the named beneficiaries. Will bypass the estate and not be included in probate

  • RRIF will flow directly to the named beneficiaries. Will bypass the estate and not be included in probate. The Date of Death Value of the RRIF, however, will be reported on her 2019 T1 return. If the Disabled child was named as a beneficiary of part or all of her RRIF (good tax planning), and meets the criteria of “qualified beneficiary” then that portion of the RRIF could be rolled over tax deferred to the dependant’s RRSP, RDSP, or to purchase an annuity.

  • Joint ownership of her investment portfolio.
    Potential for problems here depending on how this is handled. If the widow is the “beneficial owner” of the portfolio, then there is a deemed disposition on death. Joint ownership may give her the chance to avoid probate on the portfolio though. If they are expecting to treat the portfolio as “joint” for tax purposes, such that the decedent reports 1/3 of the portfolio as a disposition (or nothing), there could be some trouble. Was the portfolio set up as joint initially or were the kids names added to the account at some later date? Did the mother report a disposition at the time the kids names were added to the account? If not, the only option may be to claim the mother had beneficial ownership of the entire portfolio, meaning deemed disposition of the entire amount upon her death, and calculation of capital gains on the entire amount. Once again, it may be possible to avoid probate, but the account would likely form part of the estate for income tax purposes.

1 Like

Thank you so much snoplowguy. If you are ever in beautiful downtown Shawnigan Lake I’ll buy the coffee/beer/whatever.

Gay Wise

gaywise@wisefinancialservices.ca

250-743-5999

1757 Shawnigan Mill Bay Road

Shawnigan Lake, BC, Canada

V0R 2W0

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