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Spousal trusts

Where a spouse, or a spousal trust that holds assets for a spouse, receives the property, the assets are deemed by law to have been sold immediately before death at their cost. That way, there is no capital gain to be taxed provided that the spouse or the trust receives complete and unrestricted control of the property. The cost base of the assets then passes to the spouse or the trust and only when the spouse or the trust sells the assets are the assets subject to tax.

Planning for the least costly transmission of assets is both a matter of investment strategy and will drafting. Assets that go into probate are subject to fees that are highest in British Columbia and Ontario and relatively low in Manitoba. Where property is held in joint tenancy with a right of survivorship, there should be no probate on it. If the property is held by someone not a spouse, there can be a tax consequence independent of probate.

A private company whose shares are held by family members may either avoid probate or, if subject to probate, can be included in a special, secondary will that only includes these assets. That way, even if other property is subject to probate, the family company may escape it.

In preparation for the drafting of a will, it is useful to draw up a list of all of one’s assets for the guidance of the lawyer, the accountant and the investment advisor or financial planner.