Archive for November, 2013

This is more problematic since a corporation can continue after the death of the shareholder/owner – but maybe not for long.  Incorporation is usually done for two reasons:  lower tax burdens on business income and a perceived (albeit incorrect) perception that all liabilities of the corporation are that of the corporation only.

It is imperative that a succession plan and an estate plan be in place to keep the corporation a going concern and solvent. The death of a small business shareholder triggers certain events:

  • The equity in the business is now the property of the deceased shareholder’s estate.
  • If there are bank loans in place pre-death, the guarantees shift post-death. The estate of the deceased shareholder becomes the de facto guarantor of the loans of the business.
  • The appointment of an estate representative of the deceased shareholder’s affairs is very important because he/she may have to oversee the day-to-day business affairs until the business is sold or closed.
  • Any salary paid to the deceased shareholder (as President or CEO) pre-death doesn’t have to continue post-death. However, if the family income of the deceased was close to 100% of the income of the household, this becomes problematic.
  • In cases like the above, any payments post-death to a spouse (without any reasonable (legal) right to receive this payment) is a capital drain on the business and may be questioned.
  • If the deceased shareholder was an Officer of the business and had signing authority at the bank for cheques, the estate representative needs to meet the bank officials armed with both a death certificate and a copy of the will of the deceased. The will should corroborate and name the estate representative as the person who will replace the deceased as signing authority.
  • Hopefully there is a good management team in place to keep the business operational (as a going concern) until a decision on its future can be finalized.
  • The estate representative should meet (post haste) with the company management team to introduce himself/herself and get a very concise explanation of the activities of the business and pressing issues.

More to come on this important topic.

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As gruesome as the topic seems, it is a contingency for which a succession/estate plan must be made.  The death of a proprietor means that the proprietorship is over. The T2125 return must be prepared up to the date of death and this is filed in accordance with the rules for filing a deceased person’s return:

  • 6 months after the date of death or April 30th (of the following year) whichever is sooner.

This return is called a “terminal return” and a copy of the last will and testament of the testator (the deceased) must accompany the T1 return along with a copy of the death certificate (provided by the funeral home).

It is important that an experienced estate representative be appointed as the business may be closed as at the date of death, there may be contracts to complete, trade receivables to collect and payables and statutory filings to make.

The assets and liabilities of the proprietor would become estate liabilities and estate assets and must be properly accounted for.

 

Death can be sudden, or expected. Death fills us with grief at the loss of a friend or loved one. It can be very stressful for those of us who are charged with the highest of fiduciary duties – being the executor/executrix of an estate.

Your duties are:

  • Bury the dead! Make the arrangements with the undertaker as per the wishes of the deceased.
  • If the will is to be probated, prepare a list of assets and liabilities as of the date of death. This is given to a lawyer who will prepare this for presentation to the probate court. A fee is required.
  • Send copies of the death certificate to employers, pension providers, investment firms and creditors attesting to the death of the person and that you are appointed as estate representative.
  • Check for life insurance policies. Term life or whole life policies should be given copies of the death certificate. The funds (life insurance proceeds) are non taxable proceeds and are the property of the estate for which you are the fiduciary.
  • Make certain that the will you have is the latest will. (I assume that is another reason for having the estate probated as the will must be submitted with the estate holdings).
  • Arrange to dispose of personal assets in an orderly fashion.
  • The funeral director’s fee may be paid before the estate is settled. Check with the estate lawyer however.
  • Take a copy of the will and death certificate to the deceased individual’s bank. The account should be closed and any funds transferred to an estate account. Cheques should be printed in the name of: “The Estate of________”
  • A T1 return (terminal return) needs to be prepared up to the date of death.
  • Any income received post-death form part of the estate proceeds.
  • A T3 trust return for the period post-death to date of settlement of the estate must be prepared.
  • The income taxes due by both the individual and the estate needs to be assessed by the CRA before any beneficiaries can be paid and a TX19 Clearance Certificate issued.

This is a big job. Make sure you understand what you are getting into before you accept the appointment.