Tax On Gifts & Inheritances

by Tax Guy - Burlington Accountant on February 19, 2011 Print This Post Print This Post

Gifts, inheritances, and windfall gains from lotteries or other gambling are generally not taxable when received in Canada.

The amounts you receive as gifts, inheritances or windfalls are considered to have been paid from after tax income and would result in double taxation if taxed again. However, like many things in the tax world, there are exceptions to this rule.

RRSP Direct Designations

If you received an inheritance from an RRSP or RRIF through a direct beneficiary designation and the estate of the deceased was unable to pay the income tax bill, you may be held liable for the proportion of income tax that would have otherwise been paid by the estate.

For those making direct beneficiary designations, be aware that you should leave some assets to your estate to allow your executor to pay the final tax bill and other expenses due upon death.

Possible Income Splitting

Under certain circumstances income generated from gifts to your children or spouse may be taxed in your hands. If you leave gifts to children in your Will using a trust, you may be able to leave not only a legacy, but also allow them to income split with your estate.

Contact me to find out how I can help you file the final tax returns for an estate and minimize taxes by taking advantage of all tax planning opportunities.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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