Tag: taxes

27 Sep

The Power of Testamentary Charitable Giving

Rebecca Kennedy Charities Tags: , , , , , , , , , , , , , 0 Comments

This month marks the beginning of the Will Power campaign, led by the CAGP Foundation and the Canadian Association of Gift Planners.

Will Power is designed to show Canadians the power they have to make a difference with their Wills by leaving charitable gifts.

Many Canadians feel that if they leave a charitable gift in their Will, it will take away from gifts and support for their loved ones, who they also wish to benefit as part of their estate plan. But according to CAGP and the CAGP Foundation, leaving even 1% of one’s estate to charity can still “have an enormous impact on your cause, while still leaving 99% of your estate to your family…You don’t have to choose between your loved ones and the causes you care about when planning your Will.” The Will Power website has a helpful legacy calculator, which can help with visualizing what it means to leave a gift to charity, and still be in a position to benefit your loved ones.

Some people may think that they need to have a very large estate to be able to make a meaningful gift to charity. But regardless of the size of the gift, it can still make a difference. Will Power estimates that if only 3.5% more ordinary Canadians included a gift in their Will in the coming decade, the result would be $40 billion in gifts to charitable causes.

Another aspect of charitable giving to consider is the tax benefit of doing so. Depending on the nature of your assets at the time of your passing, and any estate planning steps, there could be significant taxes payable on death. Making a testamentary gift to a cause that is important to you could result in a reduction of the amount of taxes to be paid.

For more information, and helpful links, you can check out this press release from Will Power.

Thanks for reading,

Rebecca Rauws

 

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03 Apr

Hull on Estates #543 – The Uncertainty of Death and RRSP Taxes

76admin Beneficiary Designations, Hull on Estate and Succession Planning, Hull on Estate and Succession Planning, Hull on Estates, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes Tags: , , , , , , , 0 Comments

In today’s podcast, Noah Weisberg and Sayuri Kagami discuss the Alberta decision of Re Morrison Estate, 2015 ABQB 769, and the issue of who is responsible for the often hefty taxes payable on registered accounts of a deceased person: the beneficiary of the account or the deceased’s Estate.

Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.

Click here for more information on Noah Weisberg.

Click here for more information on Sayuri Kagami.

08 Nov

Estate Taxation South of the Border: What’s set to change under the GOP’s Proposed Tax Plan?

Suzana Popovic-Montag Uncategorized Tags: , , , 0 Comments

The recently proposed tax changes by the federal government have left many Canadians on edge. In particular, tax planning for those owning small business corporations is currently under attack, and changes seem inevitable. (You can get a good overview of the proposed changes here.) As we grapple with the implications of these proposed changes in Canada, it is worth noting that our neighbours to the south are in the midst of a tax battle of their very own.

The United States is currently contemplating the new GOP tax bill, which President Trump aims to sign into law by the end of 2017. While discussing the entire breadth of the bill is beyond the scope of this blog (not to mention my caffeine supply), I think one aspect of the proposed bill is particularly worthy of discussion: the planned changes to estate taxation.

Currently, Americans can leave estates worth up to $5.49 million without passing any federal estate or gift tax. Estates worth more than that are subject to a 40% tax. Congress has already raised the estate assets threshold many times over the years; for example, in 2000, 52,000 estates had to pay the tax; it is now down to 5,000.

Congress is looking to raise the threshold once again, with the proposed GOP tax bill doubling that threshold to $11.2 million in 2018 and then doing away with the tax entirely by 2024. According to the Washington Post, the reduction and ultimate elimination of the estate tax would cost American tax payers $172 billion over a decade.

This provision to slash (and ultimately do away with) the federal estate tax has received a lot of buzz, which is perhaps disproportionate considering the proposal’s negligible impact on the American budget overall. According to Congress’ Joint Committee on Taxation, the vast majority of Americans – 99.8%- are no longer affected by a federal estate tax. Of the .2% of Americans who are affected, nearly all those who do pay are among the wealthiest 5% of Americans, with the richest 0.1% paying 27% of the total tax. Thus, the crux of the debate over this provision would seem to rest on principle.

The Republican party argues that the estate tax, sometimes called a “death tax”, should be repealed because it is unfair by its very nature. In an interview with Fox News last Sunday, Speaker Paul Ryan (R- WI) stated the party position as follows: “We just think it’s unfair. Death should be not a taxable event, and we should not be stopping people from being able to pass their life’s work on to their kids.”

Democrats, on the other hand, are widely rejecting this provision, arguing that the proposed estate tax elimination constitutes a giveaway to the mega-rich, and that the money could be used more appropriately elsewhere.

Whether or not the proposed estate tax deduction will pass as part of the GOP tax plan remains to be seen; however, reports suggest progress is being made towards the goal of having a final bill signed into law by the President before Christmas.

Thanks for reading,
Suzana Popovic-Montag and Lindsay Anderson (Law Student)

19 Jul

A Tale of Two Countries – Trusts in the U.S. and Canada

Suzana Popovic-Montag Beneficiary Designations, Estate & Trust, Estate Planning, In the News, Uncategorized Tags: , , , , , , 0 Comments

They love football, we love hockey. Their zee is our zed – and their Trump is our Trudeau. While we share a common border with the U.S., there are many differences between our two nations – and the reasons for setting up a trust can differ significantly by country as well.

The U.S. has a high estate tax for wealthy individuals – up to 40% on assets, with the first $5.5 million or so exempt. Not surprisingly, trusts are used aggressively in many situations to reduce estate values and minimize this estate tax as much as possible.

In Canada, there is no estate tax per se – although there is an estate administration tax (probate fee) in some provinces and there are often taxes payable on capital gains. But with no capital gains taxes on principal residences, the need for trusts as part of U.S.-style estate planning simply isn’t there.

This doesn’t mean that trusts aren’t a valuable planning tool in Canada. They can still be used to shift income from higher-taxed family members to those in lower tax brackets, or to provide dedicated funding for dependants, such as a disabled spouse or child, or as means of creditor protection amongst many other reasons. But there’s a kinder, gentler push behind trust planning in Canada, owing to the less punitive (in most cases) taxation of estates here.

This Globe and Mail article provides a good overview of the many potential uses of trusts in Canada today, and why a more aggressive approach isn’t needed here: https://www.theglobeandmail.com/globe-investor/personal-finance/a-tax-tool-thats-not-just-for-trust-fund-babies/article22996097/

The complexities of cross-border beneficiaries

Trust issues can be clean and tidy in Canada and the U.S. when everything about a trust stays fully north or south of the border. But what happens when trust worlds collide?

In short, it can get complicated, and specialized planning is often needed to avoid additional taxation. While avoiding a cross-border trust arrangement is one way around these issues, avoidance isn’t always possible, such as when a Canadian trust is settled with a Canadian beneficiary, but that individual moves permanently to the U.S. and becomes subject to U.S. tax laws.

This Collins Barrow advisory offers a more detailed discussion of some of the cross-border issues relating to Canadian/U.S. trusts: http://www.collinsbarrow.com/en/cbn/publications/u.s.-citizens-and-canadian-trusts.

Thank you for reading … Have a great day!
Suzana Popovic-Montag

31 May

Testamentary trusts – they’re not dead yet

Suzana Popovic-Montag Estate & Trust, Estate Planning, Hull on Estates, In the News, Trustees, Wills Tags: , , , , , 0 Comments

Remember the good old days? Vacations without smartphones, real letters in your mailbox, tax-effective testamentary trusts? Ah yes, those testamentary trusts.

Before 2016, income and realized capital gains within most testamentary trusts were taxed favourably in the trust, at graduated personal tax rates, not the top tax rates associated with inter vivos trusts. It was an estate planning tool that let many trust beneficiaries, typically spouses or other family members of the deceased, lower their overall taxes through income splitting, with trust earnings taxed in the trust and the beneficiary’s other income taxed personally.

Today, testamentary trusts are taxed at the highest marginal rate, with only two exceptions:

  1. Graduated Rate Estates – which are trusts arising as a consequence of the death of a testator, rather than because a trust was expressly provided for by the terms of a will. These are still taxable at marginal rates for the first 36 months after the testator’s death; and
  2. A Qualified Disability Trust, which is a testamentary trust with a beneficiary who qualifies for the disability tax credit. These trusts are still taxable at marginal rates.

With the graduated tax rate advantage now eliminated, those planning their estates are weighing alternatives, specifically alter ego and joint partner trusts that are available to those age 65 and older. Advisor.ca has a good discussion of these alternatives in light of the new tax treatment of testamentary trusts: http://www.advisor.ca/tax/estate-planning/alternatives-to-testamentary-trusts-158703.

But it’s also important to remember that testamentary trusts can still play an important role in estate planning, even without the benefit of graduated tax rates. Testamentary trusts can still be beneficial from a tax standpoint if beneficiaries have low levels of income, they still offer protection from creditors, and they’re still a very effective tool in second marriage situations, providing income to a second spouse for their lifetime and capital to children from a first marriage thereafter.

This Globe and Mail article provides a good overview of the many potential uses of testamentary trusts today: https://www.theglobeandmail.com/globe-investor/personal-finance/taxes/consider-these-testamentary-trusts-in-your-will/article27031380/.

While the good old days for testamentary trusts may be over, there’s still life left in this estate planning structure in a number of situations.

Thanks for reading … Have a great day.
Suzana Popovic-Montag

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