Managing an Inheritance
Make an informed decision about the best use for an inheritance to plan and provide for your future.
You have lost a loved one, and now need to decide on the best use of the inheritance you have received. You don't need to retire but you do need a plan.
Losing a loved one is a difficult time. You may have been quite busy providing care and now you have time, but are dealing with feelings of grief. You may also have had the responsibility of finalizing the estate during this time. Property may have had to be sold, personal items distributed and taxes looked after. So this is it, you know the amount you are inheriting and want to make excellent decisions for these funds. This money is special to you. It is not the same as your personal savings so will take specific planning.
You may wonder about taxes when hearing you will inherit money. While there are no taxes on inheriting money in Canada, there are some things to keep in mind.
RRSPs - Taxes owing on RRSPs or RRIFs are owed by the estate not the individual receiving the funds. However, if there are not enough funds in the estate, CRA can go after the individual receiving the funds for the taxes.
Cottages - If inheriting a cottage, capital gains tax is owed by the estate. However, if there are not sufficient funds in the estate to pay all taxes and debts owing, the cottage may have to be sold. This is where the individuals inheriting a family cottage may raise the money on their own to keep it from being sold.
There are ways to structure your finances or your parents finances to minimize tax, plan for and simplify the estate.