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Can you avoid capital gains tax?

estate planning tax Nov 28, 2018

Most clients ask our office to draft Wills and estate plans that will help them avoid capital gains. This is an impossible wish. Some people will attempt to sell the property to a family member for less then fair market value. This results in any Capital Gain being taxed twice as the gain will be taxed in both the deceased and the family member’s hands. Thus, no net savings.

Some people believe that placing a family member joint on title with them will avoid capital gains. However, the Canada Revenue Agency legislates this as a partial distribution and the client must pay tax on half the gain as soon as it’s transferred. To make matters worse, they must pay tax on half the gain again when they die. Even though the property will transfer easily upon death because it is jointly owned, CRA will still treat it as a disposition. Again, thus no net savings.

The one way you can avoid paying capital gains tax entirely is if you donate publicly-traded securities to a charity. Charitable donations can always be used to minimize your estate’s overall tax bill. It is a good idea to get tax advice before you make your estate plan.

If you need assistance on creating your family’s plan contact Estate Connection to discuss your situation.

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