Plan to reduce taxes in your estate. When transferring your assets using a will, try to pass as much value as possible to your heirs. If you hold equity investments such as stocks, they may have accrued capital gains. There will be a deemed disposition of all your property at fair market value at the time of your death. For some, this could mean a capital gains tax liability. Note: Previously unused capital losses can offset capital gains in the estate
Deferral of Spousal Tax Property willed to your spouse can be rolled over tax-free on your death. Your spouse will inherit the assets at the adjusted cost base (cost amount) of the property. The taxation of the asset will then occur when your spouse either disposes of the asset or at their death. This tax deferral is beneficial especially if you have extensive holdings in equity investments. Alternatively, you can choose to transfer any asset to your spouse at fair market value on death and recognise the accrued gain or loss.
Income splitting using a testamentary trust By establishing a testamentary trust in your will, you will be able to maintain control during your lifetime over the use of your investment assets, but set conditions within the trust when you pass away to ensure use of the assets according to your wishes. The trust can provide preferential tax treatment as it is considered a legal tax entity and pays tax on income as an individual would. After-tax income can then distribute to beneficiaries of the trust. Make sure you consult with a qualified tax specialist on Trust matters.
Know your estate tax liability List each separate asset you own, the purchase price and date, as well as its current value. Include your non-registered investments in stocks, bonds, and equity funds, and have your accountant assess what your tax liability will be. Permanent Life Insurance proceeds, if pre-planned, can pay for tax liabilities within the estate.