The ‘Science’ of Estates
Lorn Stanners CPA, CMA | Estates practice manager for Dorward & Company LLP Chartered Accountants
According to the dictionary,
“Science is the system of acquiring
knowledge.” When someone dies,
their personal representative,
previously known as executor or
executrix, becomes a ‘scientist.’ They
become responsible for researching
the assets and liabilities, and locating
the estate’s benefi ciaries.
The following stories of clients’
discoveries illustrate some elements
of estate science.
Joanne became a scientist
when her Aunt Mary died. Mary, a
professor, had lived and worked in
six diff erent countries. She was born
and raised in England and came to
Canada, where her brother lived,
nine years ago. When their parents
died, she and her brother inherited
properties and investments. Later,
as she travelled, she bought and sold
other assets including properties and
stocks.
Joanne had a copy of Mary’s
current will and discovered two
foreign wills in her safety deposit box.
Further research revealed records of
foreign investments, bank accounts,
revenue properties, and tax returns,
as well as her Canadian tax returns.
I was surprised to learn of Mary’s
foreign assets. I had asked Mary,
annually, if she had any nonpersonal
foreign assets, and she always said no.
Joanne was surprised to learn
that these foreign assets created tax
problems. Canadian taxes are based
on world income, and nonpersonal
foreign assets over C$100,000 must
be reported annually. Failure to
report these assets may result in a
C$2,500 per year penalty, and the
unreported income may be subject to
penalties and interest.
Since the foreign income and assets
had not been reported, we needed to
amend Mary’s tax returns and report
the foreign assets for the last nine tax
years. We hoped she would qualify
for the Voluntary Disclosure Program
(VDP), which allows taxpayers to
report missed items for up to ten
years. If accepted, Canada Revenue
Agency (CRA) may waive penalties
and reduce interest charges.
Over ten months, Joanne tracked
down all Mary’s known foreign assets,
income, and foreign taxes paid for
the last nine years. Amended returns
were completed including foreign
income asset reports. We disclosed
any estimates to CRA, along with all
Joanne’s research. Thankfully, CRA
accepted the VDP returns.
Frank was another client turned
scientist. His mother, Helen, had
recently died and his father, John,
had dementia and was in a nursing
home.
Frank found the last tax returns
I had prepared for his parents fi ve
years before. Frank also found other
tax information for the following
years.
Helen had cared for John at home.
This became very demanding; their
taxes, among other things, fell aside.
Last year, Helen broke her hip and
ended up in hospital, and Frank
moved his father to a nursing home.
Sadly, Helen never recovered from
her broken hip and passed away.
Frank brought in the tax returns
and other data for my review and left
to do more research on investment
costs, medical expenses, nursing
home fees, and donations, for the
last fi ve years. I also told him about
the disability tax credit (DTC), which
(in Alberta) may save each parent
$2,500+ per year. Based on his
parents’ medical conditions, both
would qualify.
Frank returned with all the
required information. Both parents
qualifi ed for the DTC, and both were
in refund positions after preparing
the tax returns, so we didn’t have to
fi le using the VDP.
The Quarks of Estate Science
Approaching any estate as a scientist
can defi nitely help. Here are fi ve
quarks (the basic building blocks of
matter) to consider when preparing
to meet with your accountant with
respect to an estate:
1. Have a copy of the most recent
will and a list of assets and
liabilities. Depending on how
well the records were kept, you
may have to spend months
locating required information.
2. Have copies of the most recent
tax returns and supporting
data. The CRA information may
be obtained by your accountant
after consent forms have been
fi led.
3. Consider the medical condition
of the deceased at and prior to
death. Many people qualify for
the DTC.
4. To avoid personal responsibility
for any taxes or liabilities, the
personal representative must
ensure these debts are paid
before disbursing funds to the
benefi ciaries.
5. Be aware the average estate
takes about two years to
settle. ●
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