Ken's Comments of the Week
OFFENSE TO DEFENSE
Canada Revenue Agency(CRA)
Eventually CRA does notice compliance delinquencies (as they like to say). Arbitrary financial insults result. Your tax position changes from an offensive, self-assessing posture to a more cumbersome, costly (financial and mental), defensive posture. For example, CRA tax collectors do not know or care about why tax is assessed and owing.
CRA expects and suspects you are attempting to reduce your taxes. You might as well oblige them, compliantly of course, whatever that involves.
Estate Planning & Wills
Some things just will not look better with lipstick applied - ever so desperately. Not even worth trying. So here is a plain blast from the vaults of tax despair. The Reaper is laughing his head off before he takes yours – almost as much as the feds will be gloating over your grave.
Your spouse and/or group of your estate beneficiaries – lead by the executor of your will - will not be happy. No. 1 reason – because you died; No. 2 reason – you did not perform a tax review of your will. Let’s just ignore the fact that 50% of adults in Canada do not have a will to do a will.
Naturally, tax and trust, family law and estate legislation in Canada is complex, overpopulated by tax mines and legal niceties – on purpose. Add it all together and you have a perfect tax storm. Without careful attention to the terms of the bequests in your will, let alone predeath disposition of your assets, (to whom, when and now much) it is likely (if you have assets to mumble about) there will be unknown and potentially substantial and automatic shocking tax debt for your estate or your beneficiaries.
It is rarely just a light breeze to get your lawyer and tax accountant together to perform a tax consequences review of the terms of your will, let alone agreeing on the amendments needed to thwart the tax collector - your right as a dead tax payer. Ask your accountant to review your assets and debt (the first complication will be if they are jointly owned) and do a mock terminal tax return (your last). Then ask them for help to suggest the nature and manner of options to reduce the potential tax debt and provide liquidity for its payment. The effort is worth every moment and dollar. You will experience redemption.