A trillion-dollar tsunami': Canadians grapple with unprecedented wealth transfer

[Slava]

Originally Posted by CliffFletcher

The life expectancy of women in Canada who reach 65 is 87. Unless those inheritances are in the form of living wills, people typically won’t get them until they’re well into their 50s. So the wealth transfer will largely fund retirements. Lifespans are getting so long that it’s becoming increasingly common for two generations of retirees to live in the same household.

People who write these articles seem to have forgotten about the Silent Generation (born 1925 to 1945). Still lots of them around.

A lot of that inheritance is pre-spent because people are carrying significant debts and plan to use the inheritance to deal with that as well. But, like everything else with the boomers, this is something I've heard about as "imminent" for years, and it never seems to come to fruition. When I graduated from University, it was, "Oh man, you're graduating at the perfect time...all those boomers are retiring, and there are so many great jobs about to come through!" Fast forward more years than I care to consider and many boomers are still working, not leaving until they absolutely have to.

In my line of work, we hear about this enormous wealth transfer all the time, and that's been for at least 15 years now. It has to happen because people die, but at the same time, I've heard that this is imminent for so long that I am far too cynical.

[Locke]

Originally Posted by fotze2

I assumed with your full name your pops was the president of a small Eastern European country. You probably have the coolest name ever next to sample00. Seeing your degree on the wall I was like “there’s no way that’s your real name”

Oh yeah....thats my real name alright. But as has been discussed my dad was a Greyhound Bus driver. No Eastern European Dictatorships here. Which is a shame. I think I'd be a pretty good Dictator.

Trust me, there are no 'Wealth Transfers' coming my way.

[Locke]

Originally Posted by fotze2

I assumed with your full name your pops was the president of a small Eastern European country. You probably have the coolest name ever next to sample00. Seeing your degree on the wall I was like “there’s no way that’s your real name”

Oh...and now I want to know what sample's name is!

[CaptainYooh]

Originally Posted by Locke

…Trust me, there are no 'Wealth Transfers' coming my way.

You should have answered those emails.

[kipperiggy]

Generationally this makes sense - my great grandparents were homesteaders and land values have skyrocketed. Will we see the same appreciation in value? Hard to say.

What is the benefit of a wealth tax? Interesting we are the only G7 country without it but ... is that not double taxation?

[WideReceiver]

Yes, it’s double taxation. Not in favour.

[Shazam]

Originally Posted by kipperiggy

Generationally this makes sense - my great grandparents were homesteaders and land values have skyrocketed. Will we see the same appreciation in value? Hard to say.

What is the benefit of a wealth tax? Interesting we are the only G7 country without it but ... is that not double taxation?

Whatever "estate" you get will be taxed mostly at its highest marginal rate, which in Alberta is 48%, presuming you get something that's worth more than a hundred grand.

Is that enough of a wealth tax for you? Or would you like more?

[Locke]

Originally Posted by CaptainYooh

You should have answered those emails.

I have very little to lose.

[Slava]

Originally Posted by Shazam

Whatever "estate" you get will be taxed mostly at its highest marginal rate, which in Alberta is 48%, presuming you get something that's worth more than a hundred grand.

Is that enough of a wealth tax for you? Or would you like more?

It really depends on how it's held and things like that though. Not everything is taxed just straight across the board as an inheritance tax.

[chedder]

Originally Posted by Shazam

Whatever "estate" you get will be taxed mostly at its highest marginal rate, which in Alberta is 48%, presuming you get something that's worth more than a hundred grand.



Is that enough of a wealth tax for you? Or would you like more?

This is 100% not true. Most things like second homes and land will be taxed at capital gains rates on their appreciation, or half that 48%. Only registered accounts like rrifs would be taxed at that level if big enough.

[Shazam]

Originally Posted by chedder

This is 100% not true. Most things like second homes and land will be taxed at capital gains rates on their appreciation, or half that 48%. Only registered accounts like rrifs would be taxed at that level if big enough.

I just knew somebody would chime in about the cap gains rate. I'm sorry for not explicitly stating it. Because holy crap I guess I should put in every ####ing qualifier when it comes to tax rates.

The point being, there is no special treatment to the assets because someone died. It's a deemed disposition.

[chedder]

Originally Posted by Shazam

I just knew somebody would chime in about the cap gains rate. I'm sorry for not explicitly stating it. Because holy crap I guess I should put in every ####ing qualifier when it comes to tax rates.

Well, seeing as what most people will inherit is real estate and land it's pretty pertinent. And if you get mom's principal residence there will be zero tax in Alberta. So saying most inheritance will be taxed at 48% is pretty disingenuous.

[blankall]

Originally Posted by WideReceiver

Yes, it’s double taxation. Not in favour.

I somewhat agree. Disagree with the home owners exemption being applied across generations though or when cashing out.

If you buy a home for $100k and it increases in value to $1,000,000, how is taxing on that $900k double taxation? The home owners exemption makes sense, when transferring from one home to another. Otherwise, it's a capital gain like any other IMO.

I'd rather see housing capital gains taxed more and income taxed less.

[WideReceiver]

Originally Posted by blankall

I somewhat agree. Disagree with the home owners exemption being applied across generations though or when cashing out.

If you buy a home for $100k and it increases in value to $1,000,000, how is taxing on that $900k double taxation? The home owners exemption makes sense, when transferring from one home to another. Otherwise, it's a capital gain like any other IMO.

I'd rather see housing capital gains taxed more and income taxed less.

My comment was in reference to a question about a wealth tax.

[CroFlames]

Originally Posted by CroFlames

Eh when the rest of you receive your millions, have a care. I ain't getting jack #### from my parents.

Originally Posted by kipperiggy

Generationally this makes sense - my great grandparents were homesteaders and land values have skyrocketed. Will we see the same appreciation in value? Hard to say.

What is the benefit of a wealth tax? Interesting we are the only G7 country without it but ... is that not double taxation?

Originally Posted by WideReceiver

Yes, it’s double taxation. Not in favour.

Found the guys with inheritance. Get 'em boys!

[opendoor]

Originally Posted by Shazam

I just knew somebody would chime in about the cap gains rate. I'm sorry for not explicitly stating it. Because holy crap I guess I should put in every ####ing qualifier when it comes to tax rates.

The point being, there is no special treatment to the assets because someone died. It's a deemed disposition.

It's not the lack of qualifiers; it's that you suggested that estates are taxed anywhere near 48%. Primary residences aren't taxed, cash isn't taxed, and assets are only taxed on their unrealized gains. The effective rate is near zero for most estates.

Having just gone through this with a relative, on a 3M estate (including a secondary property and a bunch of equities), the total final tax bill from deemed dispositions was about $80K, which is an effective rate of about 2.5%.

[DoubleF]

Final returns and trust returns scenarios are complicated AF. CRA gives the option for filing taxes in multiple ways to address the multiple situations and circumstances that pop up (ie: Terminal, estate and trust returns). Many people are getting lost and basically paying tons more in taxes than they need to. (ie: Just because you can defer taxes on a rollover or delay taxes on a delayed transfer/deemed disposition, doesn't mean they should).

I'm not worried about CRA trying to implement auto-file or something similar. I think it's great for straight forward returns. I do warn people that the odds that these programs will essentially file the tax returns somewhat tax inefficiently and err in CRA's favor vs taxpayer favor is high. (ie: glazing over certain deductions, serious problems with data accuracy on certain slips even in this day and age and selecting the appropriate box of multiple boxes in situations such as a T4A for Calgary Co-op and scholarships). It's the taxpayers responsibility to optimize their taxes. CRA is shooting themselves in the foot if they optimize it for you.

People are too concerned about things like max tax rate. CRA could easily drop the top rates a few percent and with a few minor tweaks that most people would think are innocuous, walk away with more taxes than ever before. There are serious problems with our existing tax system that require an overhaul. It's currently disadvantageous to both CRA/DOF and taxpayers alike. But the CRA are working towards making sure it's disadvantageous to taxpayers instead of primarily them and the Department of finance. Tax reform is required to make it fair for all sides.

Taxpayers need to think more in terms of income inclusion rates/portion of income that is not included for tax purposes vs effective tax rates on certain transactions. Otherwise, they risk being penny wise, pound foolish.

[kipperiggy]

Originally Posted by Shazam

I just knew somebody would chime in about the cap gains rate. I'm sorry for not explicitly stating it. Because holy crap I guess I should put in every ####ing qualifier when it comes to tax rates.

The point being, there is no special treatment to the assets because someone died. It's a deemed disposition.

Sorry, I'm not following your posts.

Upon a parent's death, the deemed dispositions are taxed like you say, on the parent's final tax return upon death (geez, morbid).

Why should the beneficiary have to pay an additional wealth or inheritance tax on top of it? It's already being taxed once.

Hence my question - why would we do this? Other than to pay for ballooning deficits I supposed.

All the more reason for the boomers to gift money now rather than later.

[lazypucker]

Is it true that there is no inheritance tax in Canada. But let's say you inherit a house from your parents, you pay 0 tax, but when you sell it later, you will get taxed for capital gain?

[kipperiggy]

Originally Posted by blankall

I somewhat agree. Disagree with the home owners exemption being applied across generations though or when cashing out.

If you buy a home for $100k and it increases in value to $1,000,000, how is taxing on that $900k double taxation? The home owners exemption makes sense, when transferring from one home to another. Otherwise, it's a capital gain like any other IMO.

I'd rather see housing capital gains taxed more and income taxed less.

I think that would end up hurting average joes more than the wealthy. But I don't have evidence either way and you bring up an interesting point.