Did you recently receive an inheritance, or are you expecting to collect one soon? Whether the value of your inheritance is large or small, it’s important that you make the most of it.
An inheritance can include money as well as investments and other assets, such as real estate. Discussing what you will inherit ahead of time and outlining plans for what to do with any extra money is more important than ever, especially in today’s rapidly changing economic landscape.
I’ll explain what you should do after receiving an inheritance and provide some helpful tips on how to handle the extra money.
WHAT SHOULD YOU DO AFTER RECEIVING AN INHERITANCE?
The most crucial piece of advice I can offer after receiving an inheritance is not to rush.
It can be tempting to immediately spend or invest money you’ve inherited. Depending on your family situation, you may have been told about your inheritance in advance or it could come as a complete shock, especially if the individual’s passing was unexpected.
This representative is responsible for communicating with beneficiaries, handling legal paperwork, and transferring the inheritance to the listed recipients.
ARE THERE ANY TAX IMPLICATIONS?
One of the first things you’ll need to do after receiving an inheritance is to figure out your tax liability, or the amount of tax debt you owe.
Canada does not have an official inheritance tax and many assets, such as tax-free savings accounts (TFSAs), certain life insurance payouts, and personal property, can be passed on to beneficiaries without tax.
For taxable assets, such as real estate or certain investments, the CRA will take out their share of taxes before leaving you with the rest of the money.
The executor should inform you of the taxes you owe on your inheritance. If you’re still unsure, it’s best to contact a tax professional to avoid running into any surprises.
HOW SHOULD YOU USE YOUR INHERITANCE?
Not sure what to do with your inheritance? Here are a few smart ways you can spend or invest this money to get the most out of it.
1. Invest in tax-advantaged accounts
Money received from an inheritance in Canada is not considered taxable income. Despite this, it’s still a good idea to put this money towards maximizing your contributions to tax-advantaged accounts, such as:
TFSAs
Registered retirement savings plans (RRSP)
First home savings accounts (FHSA)
All of these accounts can be used as investment vehicles and allow your money to grow in a tax-deferred or tax-free account.
2. Start a business
Have you always wanted to start a business? Instead of applying for a small business loan, potentially risking your credit and paying high interest rates, you can use your inheritance as a way to start your entrepreneurial journey.
Just be sure you do your research and create a solid, actionable business plan. You shouldn’t jump into any business venture blindly.
3. Contribute to your child’s RESP
It’s never a bad idea to invest in your child’s future by opening or contributing to a registered education savings plan (RESP).
Although RESP contributions cannot be deducted from your taxable income, these payments could make you eligible for the Canada Education Savings Grant (CESG), which provides free government money that your child can use once they start their post-secondary education.
4. Set money aside for an emergency fund
A recent survey commissioned by the Healthcare of Ontario Pension Plan (HOOPP) revealed that 44 per cent of participants between the ages of 55 and 64 said they have less than $5,000 in savings.
Whether you’re in your 20s or close to retirement, having an emergency fund that can cover three to six months’ worth of living expenses is essential. If you fall ill, become injured, lose your job, or fall victim to other emergencies, this money can help make sure you’re able to keep up with your bills.
5. Pay down high-interest debt
If you have high-interest credit card debt, personal loan debt, or a car loan that involves owing more than the vehicle is worth, consider paying it down with your inheritance. Paying off high-interest debt can save you a lot of money on interest payments in the long run.
6. Donate to charity
If you’re already in a financially sound position or simply want to give back, consider donating your inheritance to charity. By doing so, you can claim a number of charitable tax credits on your income tax return.
WHAT’S THE BEST WAY TO HANDLE AN INHERITANCE?
Ideally, the best way to use your inheritance is to put it in an investment vehicle so it can continue to grow. However, if you have high-interest debt or a dwindling emergency fund, it’s best to take care of these items first.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
