If I told you, “One day, you will pay the government of Canada 53.53% of every dollar you earn,” would you believe me? Probably not. How about, “you will earn over $220,000 in one day,” Now most of you don’t believe me. The day you pass away, all your assets are virtually sold at fair market value to calculate the final tax bill. I do mean all your assets: stocks, investments, cars, your primary home as well as any secondary homes. You may still have possession of the assets, but they are “sold” in the eyes of the government. Now, you have made over $220,000 in one day and at the top tax bracket in Ontario, paying 53.53% on every dollar you earn over $220,000.
Let’s say, after you “sold” everything, you now have $500,000 of earned income. Your final income tax bill is $231,014, not counting any probate fees or other legal fees you will have to pay for. How are you going to pay for that? It will likely mean having to sell the cottage you want to pass down to your children. Maybe you can no longer give a donation to your favourite charity. This is a lot of stress to put on your heirs.
A well-structured estate plan will transfer wealth from you to your loved ones by minimizing taxes and reducing probate fees. When you pass away, it will be one of the most stressful times for the people you care most about. A proper plan will reduce the stress and your loved ones will thank you.