The Thunder Bay Chronicle-Journal

Local LOOK, Tuesday, January 8, 2008

by Less Vandor

Q: My partner and I have been together for four years. We recently had our wills prepared. We have left each other an amount of money out of our respective RRSPs. If my RRSPs are with a major financial institution and are left to estate as the beneficiary, will my partner still be able to get his amount tax free? If not, will my children have to pay the income tax on his amount? My lawyer told me they may have to but he did not know for sure. Signed HM.

A: Money paid directly to a beneficiary, be it from asset sales, savings or RRSPs, is tax free in the hands of the named beneficiary. Money paid to an estate as beneficiary are taxed in the hands of the estate. If you want a set sum to go to your partner, make sure that he or she is named as a beneficiary to an RRSP. The same rule applies to life insurance: name a person as beneficiary and not your estate. If these types of monies flow to an estate, it will trigger tax. As to your children, they are not liable to paying other people's taxes. The obligation rests on the estate.

Q: My husband's step-father is quite ill, and there is a possibility that my husband will be called upon to be a co-executor of the estate. What percentage of the estate are the co-executors entitled to claim as a fee? Is this fee to be split equally among the co-executors? Is the executor fee considered as taxable income? Is the fee paid out right away, along with all the other bills or at the end, when the estate has been settled? Signed HR.

A: Executors are entitled to a fee based on the amount collected and the amount paid out. It averages about 6% of the estate. The amount can be capped by specific terms in a will. The fee is to be shared by all co-executors: each one does not get 6%. The amount received by executors is taxable income. Generally, the fee is paid at the end of the estate administration, however interim draws can be made if required. Lastly, all amounts paid are subject to scrutiny by the beneficiaries and the courts.

LegalSpeak: "Estates of the Realm" comprises the lords spiritual (e.g. Bishops), the lords temporal (e.g. members of the British House of Lords) and members of the British House of Commons.

Les Vandor is an Ottawa lawyer, author and broadcaster. Send your questions to him at lvandor@langmichener.ca. These answers serve as a guide and you are encouraged to consult a lawyer. We regret that not all questions can be answered.

Category: News
Uniform subject(s): Personal investments and finance; Laws and regulations, Taxation and income tax
Length: Medium, 327 words

© 2008 The Thunder Bay Chronicle Journal. All rights reserved.

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