Executor of the Will Must Plan the Tax

The executor of an estate has a duty to obtain tax advice that goes beyond the simple preparation of tax returns. The failure to engage this advice will leave the executor open to liabilities claimed by the estate and its beneficiaries.

Tax Planning Opportunities

There are several post-mortem tax planning opportunities and consequences available that should be considered when administering an estate.  This can be done more effectively during an estate planning engagement while an individual is still alive, however may also be done post-mortem at the direction of the executor of the estate.

Some opportunities to consider include tax-free rollovers, estate freezes, consideration of the lifetime capital gains exemption, foreign tax planning (for assets or property held outside of Canada or for purposes of international estates) and utilizing Trusts to minimize tax.

Common Errors by Executors

In addition to a lack of planning (inter vivos or post-mortem), some common errors made by executors include the following:

• Failure to file the appropriate tax returns
• Failure to pay the appropriate amount of tax
• Missed planning and filing of the 21-year deemed disposition on Trust returns
• Misunderstanding the tax implications on beneficiary allocations of RRSP an RRIFs
• Failure to understand the settlor attribution rules
• Not identifying US tax issue for income beneficiaries, shareholders and estate and gift tax
• Not obtaining a clearance certificate to limit liabilities of the executor

Get Professional Advice

At Shajani, we can provide the tax preparation necessary as well as provide tax planning services for an estate.  Contact us for a consultation.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2022 Shajani LLP.

Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.