Question

Your mother, who lives in Ontario, is reluctant to write a will. She is 78 years old and in failing health. Her major assets are her principal residence and a $100,000 unregistered portfolio containing stocks and bonds.

Please describe in detail for all the part.

Part a

Who decides the distribution of assets in the event of intestacy

Part b

Is there any other document that your mother should have for estate planning purposes?  

Please explain its use.

Another important estate planning document, and why

Part c

Will either of her two major assets be taxed upon her death?

Taxation of principal residence at death

Taxation of unregistered portfolio at death

Answer 1

Part a :

In the event of intestacy the distribution of assets is decided as follows:

Generally, only spouses, registered domestic partners, and blood relatives inherit under intestate succession laws; unmarried partners, friends, and charities get nothing. If the deceased person was married, the surviving spouse usually gets the largest share. If the deceased has no spouse or children than the assets are distributed among distant relatives of the deceased.

If a probate court proceeding is necessary, the court will choose someone based on that priority list.

Part b:

Following are the relevant documents for the estate planning purpose:

Letter of Instruction is a document that your mother should have for estate planning purpose.

The use of this document is as follows:

This is a document prepared by your mother and her lawyer. It should contain the names of the individuals to be notified upon her death, funeral arrangements, directions for disposal of personal property, numbers of bank accounts, information on insurance policies, anatomical-gift information, etc. This is not a legal document; it's just a listing of personal requests to be followed along with the will.

The other documents are as follows:

A power of attorney, a trust, a conservatorship, a guardianship, Medicare benefits and Medicaid benefits and a number of other legal documents are designed to preserve the rights of the deceased for the decision regarding his assets.

Part c:

Yes both the assets will be taxed upon her death.

Taxation of principal residence will arise on sale of the same

The date will be considered from the date of death and not from the purchase date.

Tax will be in the form of capital gain.

Taxation of unregistered portfolio will be the difference between the purchase price and the fmv on the date of death.

One half of that gain is taxable and would be reported on your final tax return, also called your terminal tax return."