Tax Saving Strategies Using Estate Planning 

Leaving behind your assets to loved ones is a dream for many. After years of hard work, the things you have to show for it makes you proud and have helped you build a life and take care of your closest family and friends. There are ways to pass on your assets accordingly, though you might have to deal with taxes.

In Canada, estates are considered your assets minus the debts that you have upon passing. The final amount is taxed, with an average tax rate of 1.5%. For a large estate, that could be a large hit, reducing the estate substantially. Below, we’ll discuss how you can save on taxes while securing your assets.



Property can retain its value, which is one of the many reasons why it’s considered a great investment. Because it holds value, it’s often passed down to loved ones with help from an estate. Because an estate is taxed when it’s passed on, it’s good to know ways to reduce taxes.

One strategy is to leave property to your spouse. There is an exception called “spousal rollover,” where all capital gains taxes are postponed when your property goes to the spouse. Taxes on an asset like property can add up, even if they’re only added to 50% of the value.

A property can easily have a value of $100,000, leaving your spouse to pay taxes on $50,000 of that. To avoid the high rate and pass on your property without high capital gains taxes, use a will to leave it to your spouse.


Registered Retirement Savings Plan (RRPS)

RRSP is collected over time and winds up providing a substantial amount that individuals can use to care for themselves once they retire. If your RRPS is left to go into your estate, it’s subject to taxes. There is a way that you can avoid taxes, which requires you to leave your RRPS to your spouse.

Your spouse can transfer it to their own plan upon your death, avoiding any capital gains taxes. In this way, your estate is worth more and void of any taxes, unless your spouse decides to withdraw funds. They don’t have to withdraw all the funds at the same time and can pay taxes on only the amount that they withdraw.


Using Annuity

When estate planning, you can also look into leaving your children with your RRSP, creating an annuity for them. To create an annuity for your children, they need to be dependent on you and under the age of 18. This will pay them monthly payments over a fixed period of time until your funds are dispersed.

Without adding your RRPS into your will and passing it to your spouse or children, it will be taxed, which can reduce the amount significantly, taking away from securing the financial future of the ones you love.


Tax-Free Savings Accounts (TFSAs)

Another account that you might be concerned about is any tax-free savings accounts. Upon your death, these accounts do get taxed, though only the interest that’s been collected. You can save on these taxes by leaving them to your spouse, avoiding taxes so long as they fill out a “Designation of an Exemption Contribution” form.

If your spouse decides to wait a year to transfer the amount into their accounts, they will only have to pay taxes on the interest accumulated from the time of your death, which is much less than interest collected throughout your life, allowing them to access more of your estate and lose less to taxes.


Life Insurance

A life insurance policy can come in handy for many reasons, one of which includes taxes. Beneficiaries for your life insurance policy are not the same as in your will. Upon your death, they receive a death benefit in the amount agreed upon with your insurer.

This amount is tax-free, making it a good way to offset costs in one’s estate. Fulfilling one’s final wishes can be costly, something that is good to note before making any decisions. Helping your loved ones with a lump sum that can go toward reducing your tax rate is one of the best ways to relieve financial burdens and keep the value of your assets.


Add a Trust in your Will

When you create a will, you’re essentially sharing your final wishes and dispersing your assets to whom you would like. Though you can’t avoid taxes on your estate with a will, you can reduce the overall tax burden by dispersing assets to a trust and to multiple beneficiaries.

A trust is one way that you can transfer larger assets, like real estate and stock portfolios. Transferring asset to a trust, you can then set up your trust to payout to your loved ones as often as you’d like. It could be used to pay them each month or used to give them one sum each upon your death.

Without using a trust to disperse your funds, any amount that your loved ones receive will be taxed. This will be considered funds that they received on top of their income, receiving a higher tax rate because of the money that they have received from your estate.


Donate to a Charity

Another strategy to reduce the tax rate on your estate is to donate to a charity through your will. Donations reduce the tax rate the individuals have to pay, which can be a great thing. You can help a charity of your choice instead of losing your estate to taxes, allowing your family to collect more of your estate in the end.


Find your Tax-Saving Strategy, Today

Finding all the ways you can save on taxes applied to your estate takes some professional guidance. After a call with Sim, you’ll have a better idea of how to save on taxes and maximize the estate that your loved ones receive.

Creating your estate is the ultimate way to secure your family’s future, making sure that they are taken care of in the event of your death.


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