Agenda Overview of Canadian tax filing requirements on death

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Presentation transcript:

© 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Agenda Overview of Canadian tax filing requirements on death Other tax considerations Mitigating death taxes © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Tax Filing Requirements Death of a Taxpayer – T4011 Guide Types of returns to file: Terminal T1 return – Jan 1 to date of death “Deemed disposition” of all capital property at FMV on last to die Various deductions and elections available Filing deadlines to avoid penalties Could result in a large tax bill that is due immediately © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Tax Filing Requirements “Rights & Things” return optional return covers certain items such as dividend payable but not paid, vacation pay etc. Essentially, offer opportunity to file a second tax return and benefit from graduated tax rates © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Tax Filing Requirements Estate return (”Testamentary Trust”) Covers day after date of death to Dec 31 or off calendar period Tax changes for deaths occurring in 2016 and beyond Graduated Rate Estate (GRE) GRE Benefits Charitable gifting – timing of deduction © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Other Tax Considerations Residency of estate for tax purposes “Mind and management test” Voluntary disclosure Confession of sins U.S. tax issues Were you born in the U.S. OR have a Green Card? Clearance certificate request Before distributing assets Partial and final Can take upwards of 6 to 9 months © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Mitigating Death Taxes Managing your tax burden Goal to minimize taxes applicable on death Various techniques and planning tools available – “Estate Planning” Use of Family Trusts “Freeze” or cap death taxes for owners of private companies © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Family Trusts Typical Corporate Structure Mr. X Mrs. X OPCO C/S C/S Legend: C/S = Common Shares © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Family Trusts Freeze Kids Mr. X Mrs. X Mr. X Mrs. X HoldCO OPCO C/S P/S C/S P/S C/S OPCO Legend: C/S = Common Shares P/S = Preferred Shares © 2016 Khalfan Chartered Accountancy. All rights reserved. CONFIDENTIAL

Life insurance matters Funding death taxes Permanent insurance is often used to fund death taxes Beware of significant changes coming to new Life Insurance policies issued after 2016

Q&A Thank You