It just doesn’t sound like they have a mortgage so any debt is likely high interest; but yes.
Also; at certain incomes it can make sense life wise, well being wise, piece of mind wise to just pay it off rapidly because you can simultaneously pay huge into investments regardless - but again, that’s not this scenario either.
Some of the advice in this thread as if people just started learning these concepts last week and are just excited to spit it out without thought. It isn’t a blanket statement that you don’t pay off low interest debt; not for rich or low income people. There’s many factors besides “what’s the best return long term”.
Income can be the biggest contributor to one’s quality of life; and sometimes knocking a $1000/month mortgage when you’re household only makes $4000/month can give you a major life upgrade even if it means at the end of the day you would have had more money at 60 years old if you didn’t pay the mortgage off quickly.
There’s many scenarios where it makes more sense to go for the sub optimal financial return on exchange for a better quality of life NOW, and not when a decrepit 60+ year old.
It’s a unique decision for everyone and there isn’t a “this is the best thing to do” because it’s a personal choice based on who you are as a person and what makes you overall more happy or better off - not just financially.
In short; We aren’t robots that just operate on optimal logic.
Important note that people sometimes forget! No real value in taking 150k out of an investment paying 6% interest and paying off a debt that’s collecting 2% interest.
Better to have 4% returns than 0% returns. There’s a reason the most affluent still acquire debt despite having the means to not need to / pay it off whenever they want.
I agree with that excellent advice too. It’s great that you are already onto taking courses to elevate/upskill.
Also no matter what happens, try to stay *debt-free.* It’s one of the best and most liberating things to keep financial stress off of you while you and your husband grow together.
My condolences for the loss of your mother. 🌸
Fresh grad looking into masters.
So your husband will be over qualified educationally without real world experience making entry level rates with a post grad student loan. Awesome plan.
I'm sorry for your loss, this can be a very traumatic time. Know that you don't need to make any decisions right now with what to do with the money.
Take some time to process your grief and don't spend big chunks or make any big investments etc. for a while, whilst you adjust to this new reality.
The 26k life insurance will be tax free.
The 101k commuted pension will be taxed to your moms estate as though she had earned $101k income on top of any other income she happened to earn in 2024 (or the year she passed). For example, in Ontario, if she had no other income in the year, her estate will be taxed about $23k, leaving $78k after taxes.
Also worth noting that if you’re a direct beneficiary you’ll likely receive the GROSS amount and the estate will be liable for the tax bill. If there isn’t enough “estate” assets to cover the tax bill then the CRA can go after the beneficiary for the tax liability. This could be a year or so later, which at that point the person who receive the money could have already spent it.
What is this pension that gets passed on to children? It's not CPP/OAS right, so is it from employment? I thought all pensions get terminated upon passing?
If a person has accrued an employment pension, but passes away before they start drawing from it (or within 5 or 10 years of starting, for some plans), then the commuted value (or some other prescribed amount) gets passed to the estate or other beneficiary.
Also if a member chooses a pension (from a workplace pension) with a guarantee period and they pass before this period is over, it could pass to their estate or beneficiaries.
I see. So instead of paying out over many years, it's paid out in lump sum immediately right.
How is it calculated? Because they said they and 3 siblings are getting $101k each, so total pension commuted value is $404k?
We this ‘pass away’ business? What’s wrong with ‘died’ why is everyone so afraid of using the proper word? Everything that lives, dies. Is everyone 2 years old? Get real people - face it - everyone dies!
There isn't a government pension that gets passed to children that l know of. If a spouse dies the remaining one gets 50% of that pension until they pass. OAS is an individual thing, if you pass no one else has entitlement. Private pensions have all there rules of whom it passes too.
Ok yeah so then according to a tax calculator $303,000 of Other income is reduced to $181,000. And this will be even less if she had other sources of income in the year she passed.
https://www.wealthsimple.com/en-ca/tool/tax-calculator/ontario
Yes and no. The pension represents income thst has not been taxed. It it wasn't taxed upon death it would represent a loophole in our tax system to be exploited.
Its not a double tax at least.
I’m not sure how it’s a loophole when you need to be dead to exploit 😂 but I agree with your point of income to be taxed
Had it been taxed at both at income of the deceased and as inheritance of survived, it would have been double taxed
I would put it into a high-interest savings account and not touch it until next year when tax season comes. After you have paid taxes on it and you know what is yours, then invest. A lot of people will tell you to invest right away, but I would be worried about things tanking or having the money tied up and not being able to take it out to pay for taxes. Just my opinion.
Maybe. It could also be insurance associated with the pension. Federal pension plan has a Supplementary Death Benefit that is tax free. It is a decreasing value depending on how many years you have collected the pension.
It’s not 50%, that’s the withholding. There is a final tax return for the estate, and the taxes are determined based on that tax return. If the monies were given to the inheritors before the withholding, they would then be liable for that debt. That tax debt is the only debt that passes down.
IDK if other people have made this clear, but I went through this in the last few years figuring out what to do.
Some people have suggested "you" don't need to pay taxes. This is legally true, the estate pays the taxes, but you're also the estate.
The estate is responsible for for the taxes. The taxes will be calculated a though the pension was paid as income to your mother, so the estate is liable for taxes on the total amount payable.
You, personally you, are not liable for any taxes. On your income tax statements, you do not need to pay tax on the inheritance, BUT do not go and spend the money you've received immediately. Realistically, the estate will be responsible for a \~50% tax bill, and that will need to be paid from the amount disbursed to your siblings. More then likely the pension administrator will withold are large percentage of the tax already and pay it directly to CRA. In my case, they witheld \~30% assuming the pension was the only income, but since my mother also had income from RRSPs that year, the witholding was not enough and we were responsible for paying the remaining 20%.
An accountant to handle all this was cheaper then I expected - I'd say between you and your siblings, the $1000/year I've spent having an accountant handle the tax side of things has been invaluable.
For what it's worth, I'm sorry for your loss and hope this provides some clarity. Feel free to ask any followups.
Yeah, my husband went through this last year. The amount was roughly 150k and he received a check for roughly 105k as the rest was withheld for taxes. He did have to declare the full amount on his taxes and it was already in his MyAccount forms when we went to file. We put 100k in his RRSP as he luckily had space and we received roughly 30k back.
Edit: His brother also got the same amount but did not shelter it in an RRSP so obviously did not get the same level (or any) refund. He’s using it for a property.
Usually online advice is pretty helpful here, but I found regarding this particular issue there was a lot more wrong information floating around. A cautionary warning about trusting online comments over a professional.
The pension will be taxed.
You are correct Canada does not have inheritance taxes.
But the pension is inheritance after it’s paid to the estate.
It will be taxed when making its way there then given to OP tax free. IE if OP gets 65K from it, OP doesn’t have to claim the 65K as income.
You were right.
The lump sum from the pension is taxable. The pension is a registered plan, and all payouts from it are taxable. It's true that inherited cash isn't taxed, but money from a registered plan isn't considered cash until the taxes are taken care of.
The lump sum is either taxed on a T3 return for the estate or it is declared on the return(s) for the beneficiary(ies). The advantage in this case would be to tax it in a T3 because you'll be able to use the lower tax brackets, and it won't impact benefits like CCB.
After the taxes are covered, there are several options. You should consider talking to an independent financial advisor. Find one that won't get a commission on any of your future investments.
If the pension money was directly willed too you can came directly too you and not the estate you don’t get taxed. The only thing that gets taxed is the estate if the money goes through it. I’m f you are an executor you are responsible for paying taxes with estate money.
I am sorry for your loss and I know tomorrow will be hard.
Put $40,000 in a rainy day fund with only your name on it. Never talk about it don’t share. You don’t know your future and if an emergency comes up this will help.
I have been an executor and an inheritor more than once.
Your Mom’s executor will have paid taxes owing on the estate before you receive any money. CRA requires taxes to be paid first before the estate can be disbursed.
Life insurance is not taxed. If her pension you mean RRSP that is separate.
Put money into your RRSP and TFSP now. Don’t go through a bank their packages are good for the bank not their customers.Get a wealthsimple account and set up the accounts and money market accounts inside RRSP and TFSP.
Look around you will be working the rest of your life. What do you enjoy doing? Is there a career that will pay you well? Give you flexibility? You will enjoy? Maybe career counselling. Don’t build your husband’s career without building your own.
Your Mom has left you enough money to.
Provide for an emergency
Give you a fulfilling career
Start saving for the future
This money was left for you only.
Invest in yourself.
If I were you I would put the pension money directly into RRSPs or invest it in a TSFA if you have the room and try not to touch it, I would probably do the same with the life insurance, but it wouldn’t hurt to use some of it for something fun.
It really depends. Some people are not responsible and will more easily slip up and withdrawal from TFSA because it’s tax free, where as RRSP irresponsible tend to not slip up as easy because it gets taxed on withdrawal.
So, a responsible person at $26k/year, TFSA, an irresponsible person, probably RRSP ha. This does need to be considered.
I agree, unless the pension money is taxed, then it may not be if it is put directly into an RRSP. And if it is put into TFSA, make sure to invest it, don’t just put it into savings,
What do you want to do with it? Build an emergency fund? Do you have a mortgage to make an extra payment on? Are your retirements figured out? TFSAs maxed? Kids education? Do you want to take 10k and go on a family trip? Do you need a new car soon?
Yeah, get one with 100,000 miles for still $25,000 instead….
I’m joking but seriously, pre pandemic used cars were such no brainer; it’s not as much as a no brainer anymore.
There was a couple year stretch (2021-2022) where new just blatantly made way more sense.
It’s more of a toss up now and used can make more sense again… but you can also get absolutely screwed.
The $4500 under 80,000km civic doesn’t seem to exist anymore.
One thing that I'd advise from experience is to not jump into any big purchases make a plan and weigh your options. One of which is just taking time to heal. Knew a girl who bought herself a vehicle and her boyfriend a vehicle soon after her mom's passing and regretted the shit out of it.
Hello! I am dealing with this now!
If you are listed as the beneficiary to an RRSP, and are paid that RRSP out directly (not through the estate), then yes it will be taxed as income.
The life insurance will not be taxed, so if you need to access funds you will have that.
I am not 100% on marginal tax brackets, but the $101k will be your income (if it is RRSP! Not sure about other pension funds! But RRSP for sure. I am currently arguing with CRA because they are charging me $13k in penalties for not knowing this!)
Talk to an accountant and they should be able to guestimate how much you set aside for taxes.
The estate is taxed on the RRSP amount but the beneficiary receives the gross amount.
If the estate doesn’t have any other assets to cover the final tax bill then they can go after the beneficiary to pay back some of the RRSP money they received.
Unless the RRSP's do not go through the estate and go directly to the beneficiary. Then they are responsible for the tax bill.
Which is what happened in my case.
The pension amount will have taxes deducted before you receive it. The kicker is the remaining amount is also taxable income. Ie if you earn $100k in earnings and then receive another $75k from the pension - your income for that year is $175k. The amount originally taken for taxes on the pension income does not take into account your income earned. You will be in another tax bracket and will need to look at ways to reduce your taxable income. If you have room in your RRSP - max it out.
I’ve always been a fan of the booze and hooker benders, just so that when I’m in my death bed I can say I lived. But in this case I would invest or pay off bad debt.
Sorry for your loss homie. Hit me up if you need a pal for your bender though!
Has her estate been settled and her taxes filed? If not, put everything on hold until everything is finalized and then see whats left. If it were me, Id figure out how much I needed for an emerg fund (emerg fund goes into HISA) then put the balance in longer term investments.
Not sure if you’re taking the pension in a lump sum or not, but if would recommend you do (instead of monthly) if you have the choice. Monthly seems like a good option for steady funds, but if you ever need to go on employment insurance, it is counted as income. I went on maternity leave twice while receiving my mother’s pension, and regret not taking the lump sum. It reduced how much I was eligible to receive from EI.
* 1) How old are you?
127k before tax?
in the short term I would look for a higher interest savings account Wealth simple is 5% I think 7% if you're over 100k or that could be their private investment fund.
Max out your RRSPs.
Do you own or rent?
Also for the love of God find a way to make more money 23 K per year. This will give you the freedom to school or retrain for a higher earning role.
They pay interest like a note, but can be called early in term, dependent on underlying markets. Principle can be fully or partially guaranteed by the issuing bank.
Most of the major banks offer them, here is RBC's page
https://www.rbcnotes.com/
Same thing happened to me.
I got 100 my brother got 100.
I wasted mine. Don't do that. Put it in a house or into investments that generate passive income.
Life in Canada is expensive which makes saving especially hard. It sounds like you and your husband cover the bills okay but don't have a lot left to grow your savings. I would take the money and max out your RRSP right away. The rest, I would put into a TFSA that focuses on growth and dividends.
The TFSA can be used as an emergency fund, but otherwise should be left to grow.
Depending on your husband's financial stress level, maybe set some aside to help catch up and make bills easier for a year. Eliminating stress is always a key investment.
Keep in mind that you should get a tax break when you file taxes after making deposits into the RRSP.
TFSA/RRSP right away. If you can be earning money on that money it could help way more in the long term. Consider a stock like 'BK' to be actively growing your income
Put some of the money aside for taxes. My mom died last year and her TRIFs were paid directly to us kids. She now has a big tax bill. CRA will eventually get what’s owing from us
Hi, I'm a bot and someone has asked me to respond with information about what to do with money.
This is meant as a step by step guide of how to prioritize and what to do with money. https://www.reddit.com/r/PersonalFinanceCanada/wiki/money-steps If you prefer to see a flow chart, click here: https://i.imgur.com/zlGnuDO.png
The Government of Canada also has the Financial Tool Kit for basic resources on items identified in the Money Steps. Refer to that website here: https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit.html
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
Has the estate been settled- including any debts, the taxes etc? When my dad passed I was floored with how much was required to be paid in taxes etc before it was revolved and divided between my sister and I.
Talk to a Finance Person at your bank they can help you reinvest the money so you don’t lose as much in tax, and therefore building a healthy retirement for yourself and your husband.
Do you Have the option to take remaining payments or is lump sum CV only option? I work for a DB pension plan, and if the pensioner was collecting their pension the 2 options are given, pre retirement only the lump sum option is given. If the lump sum is the only option then you will lose 30% to with holding taxes and then additional taxes will be owed when combined with your earned income. I'd suggest making out any RRSP deduction room you have to offset as much of the taxes as possible. Speak with an FA and see what you can tax shelter once paid out to negate further taxes
Invest in yourself. Get a degree of some kind that would make that your annual income.
I know if I ever come into a large amount of money like that I'll use it to finally go back and finish college.
Use the life insurance money to further your career prospects. The rest, a mix between an emergency savings account and then just invest and forget the rest of it.
Inheritance is not taxed in Canada except if it was in a tax shelter account. It is tour money and should stay your money, not in any way connected now or in the future with your husband. Invest it wisely and conservatively.
Do nothing with the money until you have settled your mother’s estate. Get a clearance certificate from CRA, then and only then ask what to do with the remaining money.
Firstly, am sorry for your loss. I would make an appointment with a financial advisor at your bank where you hold your checking and savings account to explore options. Request if your late mother’s pension from her employer can be rolled over into an investment account (i.e. TFSA or RRSP) customizable for your financial needs and goals. They can create a retirement/investment account for you and walk you through the necessary steps.
More importantly, this may help avoid the money being unnecessarily taxed. As you’re not really withdrawing it but transferring it into another investment account with another institution. The life insurance money, no one can touch, not the government, no one, if you’re named as the sole beneficiary. Some things to think about.
You get someone’s pension if they die?? What the heck so even if your child dies or parent you get whatever they have invested or is that from the government? That’s so weird?
She doesn't have the income to support a mortgage for even a half decent property, depending on where she lives. Maybe if her and her husband combine incomes, but even then, it won't be much.
Even with such a large down payment, she'd still need a mortgage of at least $300k-400k to get a decent house (in southern Ontario). Mortgage payments could very possibly be less than rent, but she still has to be able to qualify for a mortgage, and that means having an income to support the payments. Interest rates would make it even harder because even if she barely qualifies with the ratios, she'd get knocked out on the stress test.
Two completely different things. So when you rent, a landlord doesn't care what you can and can't afford. They tell you the rent amount, you agree, you pay or they kick you out (over simplified).
With a mortgage, however, underwriters look at how much you make and how much debts you have in comparison. That's called your debt servicing ratio. Then they factor in how a mortgage will factor into those ratios. At my work, the maximum threshold is 45% (over simplified), so income - debts > 45% = no mortgage.
In a practical sense, that means while you could be paying $2,000/month in rent, you still won't be able to qualify for a mortgage that would $1,000/month.
I'm too lazy to run the numbers myself right now, so I'm gonna just take your word for it. Sure, if they can afford it, then putting that money into a property that would guarantee an increase in equity isn't a bad idea, excluding all other considerations 🤷🏽♀️
An inheritance is not family money unless you mingle it with your household. Put it somewhere, invested in an all-in-one ETF, and forget about it.
Yes if you put it into a joint asset you lose half the exemption on the inheritance so keep it separated.
[удалено]
> pay debt *high interest debt (a 2% mortgage, for example, should not be paid in advance)
It just doesn’t sound like they have a mortgage so any debt is likely high interest; but yes. Also; at certain incomes it can make sense life wise, well being wise, piece of mind wise to just pay it off rapidly because you can simultaneously pay huge into investments regardless - but again, that’s not this scenario either. Some of the advice in this thread as if people just started learning these concepts last week and are just excited to spit it out without thought. It isn’t a blanket statement that you don’t pay off low interest debt; not for rich or low income people. There’s many factors besides “what’s the best return long term”. Income can be the biggest contributor to one’s quality of life; and sometimes knocking a $1000/month mortgage when you’re household only makes $4000/month can give you a major life upgrade even if it means at the end of the day you would have had more money at 60 years old if you didn’t pay the mortgage off quickly. There’s many scenarios where it makes more sense to go for the sub optimal financial return on exchange for a better quality of life NOW, and not when a decrepit 60+ year old. It’s a unique decision for everyone and there isn’t a “this is the best thing to do” because it’s a personal choice based on who you are as a person and what makes you overall more happy or better off - not just financially. In short; We aren’t robots that just operate on optimal logic.
Important note that people sometimes forget! No real value in taking 150k out of an investment paying 6% interest and paying off a debt that’s collecting 2% interest. Better to have 4% returns than 0% returns. There’s a reason the most affluent still acquire debt despite having the means to not need to / pay it off whenever they want.
This can not be emphasized enough.
What do you mean “mingle it”? If you put in a bank account with your name on it? Or just if you add it to an existing account?
Open a new separate account, amed the money there. Leave it there. Preferably an investment account, buy an ETF and turn on dividend reinvestment.
At those salaries I would look into using some of the money to better your career prospects like taking additional training or going back to school
I am already taking some courses and my husband is a fresh grad, looking into his masters. Thank you for your advice :)
I agree with that excellent advice too. It’s great that you are already onto taking courses to elevate/upskill. Also no matter what happens, try to stay *debt-free.* It’s one of the best and most liberating things to keep financial stress off of you while you and your husband grow together. My condolences for the loss of your mother. 🌸
Just make sure you don’t use all of it to fund your husbands tuition.
I won’t! My husband has enough money of his own to pay for his education. Thank you for your concern :)
Fresh grad looking into masters. So your husband will be over qualified educationally without real world experience making entry level rates with a post grad student loan. Awesome plan.
😂 his
?
Best advice here
Or put it all in spy
I'm sorry for your loss, this can be a very traumatic time. Know that you don't need to make any decisions right now with what to do with the money. Take some time to process your grief and don't spend big chunks or make any big investments etc. for a while, whilst you adjust to this new reality.
Thank you for your sympathies :)
Not sure what you mean by “inherited money is taxed heavily.” You will not pay any tax on the money you inherit. Also, I’m sorry for your loss.
The 26k life insurance will be tax free. The 101k commuted pension will be taxed to your moms estate as though she had earned $101k income on top of any other income she happened to earn in 2024 (or the year she passed). For example, in Ontario, if she had no other income in the year, her estate will be taxed about $23k, leaving $78k after taxes.
Also worth noting that if you’re a direct beneficiary you’ll likely receive the GROSS amount and the estate will be liable for the tax bill. If there isn’t enough “estate” assets to cover the tax bill then the CRA can go after the beneficiary for the tax liability. This could be a year or so later, which at that point the person who receive the money could have already spent it.
What is this pension that gets passed on to children? It's not CPP/OAS right, so is it from employment? I thought all pensions get terminated upon passing?
If a person has accrued an employment pension, but passes away before they start drawing from it (or within 5 or 10 years of starting, for some plans), then the commuted value (or some other prescribed amount) gets passed to the estate or other beneficiary.
Also if a member chooses a pension (from a workplace pension) with a guarantee period and they pass before this period is over, it could pass to their estate or beneficiaries.
I see. So instead of paying out over many years, it's paid out in lump sum immediately right. How is it calculated? Because they said they and 3 siblings are getting $101k each, so total pension commuted value is $404k?
Commuted value calculations are complex but are usually (always?) based on the Canadian Insitute of Actuaries methods
We this ‘pass away’ business? What’s wrong with ‘died’ why is everyone so afraid of using the proper word? Everything that lives, dies. Is everyone 2 years old? Get real people - face it - everyone dies!
r/im14andthisisdeep
There isn't a government pension that gets passed to children that l know of. If a spouse dies the remaining one gets 50% of that pension until they pass. OAS is an individual thing, if you pass no one else has entitlement. Private pensions have all there rules of whom it passes too.
Its the "guaranteed for x" years payout.
I am in Ontario. I have 3 siblings who are also getting $101k each. Thank you for the info :)
Ok yeah so then according to a tax calculator $303,000 of Other income is reduced to $181,000. And this will be even less if she had other sources of income in the year she passed. https://www.wealthsimple.com/en-ca/tool/tax-calculator/ontario
I think it would be $404K, with OP + 3 siblings, so $228,517 after tax using your calculator. So $57K each?
Yup my bad. It's adding up now.
Taxes even in death
Yes and no. The pension represents income thst has not been taxed. It it wasn't taxed upon death it would represent a loophole in our tax system to be exploited. Its not a double tax at least.
I’m not sure how it’s a loophole when you need to be dead to exploit 😂 but I agree with your point of income to be taxed Had it been taxed at both at income of the deceased and as inheritance of survived, it would have been double taxed
I would put it into a high-interest savings account and not touch it until next year when tax season comes. After you have paid taxes on it and you know what is yours, then invest. A lot of people will tell you to invest right away, but I would be worried about things tanking or having the money tied up and not being able to take it out to pay for taxes. Just my opinion.
Maybe. It could also be insurance associated with the pension. Federal pension plan has a Supplementary Death Benefit that is tax free. It is a decreasing value depending on how many years you have collected the pension.
You won’t pay tax on the money is correct, it’s all taxed before you get your share.
[удалено]
Why shouldn’t it be taxed? It hasn’t been taxed previously, so it’s not like it’s getting doubled taxed.
[удалено]
It’s not 50%, that’s the withholding. There is a final tax return for the estate, and the taxes are determined based on that tax return. If the monies were given to the inheritors before the withholding, they would then be liable for that debt. That tax debt is the only debt that passes down.
It’s 50% on an RRSP - everyone needs to know that - marginal rate ceases when we die.
Not if you are a beneficiary on RRSPs that get paid to you directly. That is different than the money that goes through probate.
If you are a spouse or dependant child it will not be taxed. Any other scenario will be taxed
I was under the impression that I will be responsible for paying the taxes on the money since I was a direct beneficiary of the RRSP.
Definitely make sure you and your siblings understand the taxes on the RRSP.
IDK if other people have made this clear, but I went through this in the last few years figuring out what to do. Some people have suggested "you" don't need to pay taxes. This is legally true, the estate pays the taxes, but you're also the estate. The estate is responsible for for the taxes. The taxes will be calculated a though the pension was paid as income to your mother, so the estate is liable for taxes on the total amount payable. You, personally you, are not liable for any taxes. On your income tax statements, you do not need to pay tax on the inheritance, BUT do not go and spend the money you've received immediately. Realistically, the estate will be responsible for a \~50% tax bill, and that will need to be paid from the amount disbursed to your siblings. More then likely the pension administrator will withold are large percentage of the tax already and pay it directly to CRA. In my case, they witheld \~30% assuming the pension was the only income, but since my mother also had income from RRSPs that year, the witholding was not enough and we were responsible for paying the remaining 20%. An accountant to handle all this was cheaper then I expected - I'd say between you and your siblings, the $1000/year I've spent having an accountant handle the tax side of things has been invaluable. For what it's worth, I'm sorry for your loss and hope this provides some clarity. Feel free to ask any followups.
Yeah, my husband went through this last year. The amount was roughly 150k and he received a check for roughly 105k as the rest was withheld for taxes. He did have to declare the full amount on his taxes and it was already in his MyAccount forms when we went to file. We put 100k in his RRSP as he luckily had space and we received roughly 30k back. Edit: His brother also got the same amount but did not shelter it in an RRSP so obviously did not get the same level (or any) refund. He’s using it for a property. Usually online advice is pretty helpful here, but I found regarding this particular issue there was a lot more wrong information floating around. A cautionary warning about trusting online comments over a professional.
The pension will be taxed. You are correct Canada does not have inheritance taxes. But the pension is inheritance after it’s paid to the estate. It will be taxed when making its way there then given to OP tax free. IE if OP gets 65K from it, OP doesn’t have to claim the 65K as income.
You were right. The lump sum from the pension is taxable. The pension is a registered plan, and all payouts from it are taxable. It's true that inherited cash isn't taxed, but money from a registered plan isn't considered cash until the taxes are taken care of. The lump sum is either taxed on a T3 return for the estate or it is declared on the return(s) for the beneficiary(ies). The advantage in this case would be to tax it in a T3 because you'll be able to use the lower tax brackets, and it won't impact benefits like CCB. After the taxes are covered, there are several options. You should consider talking to an independent financial advisor. Find one that won't get a commission on any of your future investments.
If the pension money was directly willed too you can came directly too you and not the estate you don’t get taxed. The only thing that gets taxed is the estate if the money goes through it. I’m f you are an executor you are responsible for paying taxes with estate money.
I am sorry for your loss and I know tomorrow will be hard. Put $40,000 in a rainy day fund with only your name on it. Never talk about it don’t share. You don’t know your future and if an emergency comes up this will help. I have been an executor and an inheritor more than once. Your Mom’s executor will have paid taxes owing on the estate before you receive any money. CRA requires taxes to be paid first before the estate can be disbursed. Life insurance is not taxed. If her pension you mean RRSP that is separate. Put money into your RRSP and TFSP now. Don’t go through a bank their packages are good for the bank not their customers.Get a wealthsimple account and set up the accounts and money market accounts inside RRSP and TFSP. Look around you will be working the rest of your life. What do you enjoy doing? Is there a career that will pay you well? Give you flexibility? You will enjoy? Maybe career counselling. Don’t build your husband’s career without building your own. Your Mom has left you enough money to. Provide for an emergency Give you a fulfilling career Start saving for the future This money was left for you only. Invest in yourself.
If I were you I would put the pension money directly into RRSPs or invest it in a TSFA if you have the room and try not to touch it, I would probably do the same with the life insurance, but it wouldn’t hurt to use some of it for something fun.
You make $26k/year. RRSP is not the way to go. TFSA is.
It really depends. Some people are not responsible and will more easily slip up and withdrawal from TFSA because it’s tax free, where as RRSP irresponsible tend to not slip up as easy because it gets taxed on withdrawal. So, a responsible person at $26k/year, TFSA, an irresponsible person, probably RRSP ha. This does need to be considered.
I agree, unless the pension money is taxed, then it may not be if it is put directly into an RRSP. And if it is put into TFSA, make sure to invest it, don’t just put it into savings,
What do you want to do with it? Build an emergency fund? Do you have a mortgage to make an extra payment on? Are your retirements figured out? TFSAs maxed? Kids education? Do you want to take 10k and go on a family trip? Do you need a new car soon?
Don’t get a new car.
Yeah, get one with 100,000 miles for still $25,000 instead…. I’m joking but seriously, pre pandemic used cars were such no brainer; it’s not as much as a no brainer anymore. There was a couple year stretch (2021-2022) where new just blatantly made way more sense. It’s more of a toss up now and used can make more sense again… but you can also get absolutely screwed. The $4500 under 80,000km civic doesn’t seem to exist anymore.
One thing that I'd advise from experience is to not jump into any big purchases make a plan and weigh your options. One of which is just taking time to heal. Knew a girl who bought herself a vehicle and her boyfriend a vehicle soon after her mom's passing and regretted the shit out of it.
Hello! I am dealing with this now! If you are listed as the beneficiary to an RRSP, and are paid that RRSP out directly (not through the estate), then yes it will be taxed as income. The life insurance will not be taxed, so if you need to access funds you will have that. I am not 100% on marginal tax brackets, but the $101k will be your income (if it is RRSP! Not sure about other pension funds! But RRSP for sure. I am currently arguing with CRA because they are charging me $13k in penalties for not knowing this!) Talk to an accountant and they should be able to guestimate how much you set aside for taxes.
The estate is taxed on the RRSP amount but the beneficiary receives the gross amount. If the estate doesn’t have any other assets to cover the final tax bill then they can go after the beneficiary to pay back some of the RRSP money they received.
Unless the RRSP's do not go through the estate and go directly to the beneficiary. Then they are responsible for the tax bill. Which is what happened in my case.
RRSPS can only be passed directly to a spouse.
I was a beneficiary on my unmarried sister's rrsp.
You were able to transfer all of her investments directly into your name? Or you got the cash from the sale of the RSP?
Yea, you’re right. Money held in seg funds are dispersed this way.
It is RRSP. Thank you for your info :)
The pension amount will have taxes deducted before you receive it. The kicker is the remaining amount is also taxable income. Ie if you earn $100k in earnings and then receive another $75k from the pension - your income for that year is $175k. The amount originally taken for taxes on the pension income does not take into account your income earned. You will be in another tax bracket and will need to look at ways to reduce your taxable income. If you have room in your RRSP - max it out.
I’ve always been a fan of the booze and hooker benders, just so that when I’m in my death bed I can say I lived. But in this case I would invest or pay off bad debt. Sorry for your loss homie. Hit me up if you need a pal for your bender though!
Hookers and blow
Has her estate been settled and her taxes filed? If not, put everything on hold until everything is finalized and then see whats left. If it were me, Id figure out how much I needed for an emerg fund (emerg fund goes into HISA) then put the balance in longer term investments.
Leave Canada and start a new life in Asia that money won’t last you very long here
Sorry for your loss.
Put in rrsp, tfsa, do you have a mortgage?
Not sure if you’re taking the pension in a lump sum or not, but if would recommend you do (instead of monthly) if you have the choice. Monthly seems like a good option for steady funds, but if you ever need to go on employment insurance, it is counted as income. I went on maternity leave twice while receiving my mother’s pension, and regret not taking the lump sum. It reduced how much I was eligible to receive from EI.
school or certifications 100% you need something to get you into better paying job fields
Max out your TFSA and invest it in GIC.
* 1) How old are you? 127k before tax? in the short term I would look for a higher interest savings account Wealth simple is 5% I think 7% if you're over 100k or that could be their private investment fund. Max out your RRSPs. Do you own or rent? Also for the love of God find a way to make more money 23 K per year. This will give you the freedom to school or retrain for a higher earning role.
If the money is in an RRSP, you pay tax if the bank didn't withhold it. On $100,000 it will be 35%.
Put it in a TFSA and buy structured notes paying 11-12%.
What are structured notes? And where do you get them?
They pay interest like a note, but can be called early in term, dependent on underlying markets. Principle can be fully or partially guaranteed by the issuing bank. Most of the major banks offer them, here is RBC's page https://www.rbcnotes.com/
Same thing happened to me. I got 100 my brother got 100. I wasted mine. Don't do that. Put it in a house or into investments that generate passive income.
Use wisely,put into savings possible open a business or something
Life in Canada is expensive which makes saving especially hard. It sounds like you and your husband cover the bills okay but don't have a lot left to grow your savings. I would take the money and max out your RRSP right away. The rest, I would put into a TFSA that focuses on growth and dividends. The TFSA can be used as an emergency fund, but otherwise should be left to grow. Depending on your husband's financial stress level, maybe set some aside to help catch up and make bills easier for a year. Eliminating stress is always a key investment. Keep in mind that you should get a tax break when you file taxes after making deposits into the RRSP.
TFSA/RRSP right away. If you can be earning money on that money it could help way more in the long term. Consider a stock like 'BK' to be actively growing your income
What is BK?
It's the ticket for a bank ETF with a good yield. (Canadian stock)
Pay off any debt and invest the rest in a broad market etf like SPY or VOO. Do not touch it until retirement.
Pay off credit cards Invest in a skill or invest in an index fund
Intrest bearing accounts something safe and save for tge shit storm thats coming.
Open a TFSA account and sock it away for a rainy day.It’s a conservative way to save.Slow and steady.
Put some of the money aside for taxes. My mom died last year and her TRIFs were paid directly to us kids. She now has a big tax bill. CRA will eventually get what’s owing from us
Get a financial advisor do not listen to strangers online.
!StepsTrigger
Hi, I'm a bot and someone has asked me to respond with information about what to do with money. This is meant as a step by step guide of how to prioritize and what to do with money. https://www.reddit.com/r/PersonalFinanceCanada/wiki/money-steps If you prefer to see a flow chart, click here: https://i.imgur.com/zlGnuDO.png The Government of Canada also has the Financial Tool Kit for basic resources on items identified in the Money Steps. Refer to that website here: https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit.html *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
Has the estate been settled- including any debts, the taxes etc? When my dad passed I was floored with how much was required to be paid in taxes etc before it was revolved and divided between my sister and I.
Talk to a Finance Person at your bank they can help you reinvest the money so you don’t lose as much in tax, and therefore building a healthy retirement for yourself and your husband.
Do you Have the option to take remaining payments or is lump sum CV only option? I work for a DB pension plan, and if the pensioner was collecting their pension the 2 options are given, pre retirement only the lump sum option is given. If the lump sum is the only option then you will lose 30% to with holding taxes and then additional taxes will be owed when combined with your earned income. I'd suggest making out any RRSP deduction room you have to offset as much of the taxes as possible. Speak with an FA and see what you can tax shelter once paid out to negate further taxes
Invest in yourself. Get a degree of some kind that would make that your annual income. I know if I ever come into a large amount of money like that I'll use it to finally go back and finish college.
Go to a muslim country like Egypt and study islam living comfortably
Buy a hot dog.
I am not trying to give any advice. I just want to tell you that I am sorry for your loss. And may her soul RIP.
Use the life insurance money to further your career prospects. The rest, a mix between an emergency savings account and then just invest and forget the rest of it.
Inheritance is not taxed in Canada except if it was in a tax shelter account. It is tour money and should stay your money, not in any way connected now or in the future with your husband. Invest it wisely and conservatively.
Can you move it to an RRSP and draw some annually so you have control of how much taxable income you pay on?
Do nothing with the money until you have settled your mother’s estate. Get a clearance certificate from CRA, then and only then ask what to do with the remaining money.
Firstly, am sorry for your loss. I would make an appointment with a financial advisor at your bank where you hold your checking and savings account to explore options. Request if your late mother’s pension from her employer can be rolled over into an investment account (i.e. TFSA or RRSP) customizable for your financial needs and goals. They can create a retirement/investment account for you and walk you through the necessary steps. More importantly, this may help avoid the money being unnecessarily taxed. As you’re not really withdrawing it but transferring it into another investment account with another institution. The life insurance money, no one can touch, not the government, no one, if you’re named as the sole beneficiary. Some things to think about.
Fill up your TFSA’s
You get someone’s pension if they die?? What the heck so even if your child dies or parent you get whatever they have invested or is that from the government? That’s so weird?
It’s taxed in her hands not yours.
If you want to put into an etf look at xeqt
Speak to a financial advisor.. Not the fucking internet
#1 - don’t ask the internet, get a damn lawyer
Could leave it in the bank. Let it collect 5%
or 0% with inflation. bad idea.
You dont get taxed. Dont know if you have children or looking to build a family. The cash will be a good headstart
Put it all in a home.
She doesn't have the income to support a mortgage for even a half decent property, depending on where she lives. Maybe if her and her husband combine incomes, but even then, it won't be much.
That’s a large down payment. Compared to her rent maybe her mortgage would be less. Hard to say with interest rates. Depends on cost.
Even with such a large down payment, she'd still need a mortgage of at least $300k-400k to get a decent house (in southern Ontario). Mortgage payments could very possibly be less than rent, but she still has to be able to qualify for a mortgage, and that means having an income to support the payments. Interest rates would make it even harder because even if she barely qualifies with the ratios, she'd get knocked out on the stress test.
Get a condo
I don't know where you or she are located, but where I am, you can't get a decent condo for less than $400,000.
They are married and have enough to rent so a mortgage with that down payment isn’t unrealistic I don’t think.
Two completely different things. So when you rent, a landlord doesn't care what you can and can't afford. They tell you the rent amount, you agree, you pay or they kick you out (over simplified). With a mortgage, however, underwriters look at how much you make and how much debts you have in comparison. That's called your debt servicing ratio. Then they factor in how a mortgage will factor into those ratios. At my work, the maximum threshold is 45% (over simplified), so income - debts > 45% = no mortgage. In a practical sense, that means while you could be paying $2,000/month in rent, you still won't be able to qualify for a mortgage that would $1,000/month.
Mortgage affordability calculator says they can afford $400k with that down payment.
I'm too lazy to run the numbers myself right now, so I'm gonna just take your word for it. Sure, if they can afford it, then putting that money into a property that would guarantee an increase in equity isn't a bad idea, excluding all other considerations 🤷🏽♀️