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Losing a loved one

  1. Know where to begin
  2. Understand the impacts of inheritance tax
  3. RRQ: Know what you are entitled to
  4. Review your balance sheet and budget
  5. Make or review your will

When a loved one dies, we'd like time to stop and take a moment to get over the shock. However, the harsh reality is that during the mourning period, you also have to handle the administrative and financial aspects of death. Here's how to look after the basic elements in 5 steps.

There are numerous things you have to do immediately: certify the death, obtain a death certificate, make an urgent decision regarding organ donation, read the last wishes of the deceased, contact a funeral home.

The following things will be easier if the deceased has made a list of possessions and important documents. If you're the liquidator (formerly called executor), or if your spouse died without a will, you'll have a host of organizations and institutions to contact.

Steps to take with institutions and service providers. The liquidator must contact the financial institutions where the deceased had bank accounts, credit cards, investments, insurance. Remember that all joint accounts will be frozen until the estate is settled.

Service providers (telephone, television, Internet) and others (magazine subscriptions for example) must also be notified.

Steps to take with governments. If the deceased was receiving benefits (welfare, CSST, employment insurance, etc.), government departments and agencies should be contacted.

Various documents must be returned to their issuers: social insurance card, driver's licence and passport. These steps are necessary to prevent fraud or identity theft.

If the deceased was working, it's important to contact the employer to make sure all amounts owing are paid to the estate: salary, vacation days, life insurance.

Useful links

It's important to know that when a person dies, tax officials consider all their assets as if they were converted into cash. It's as if the deceased had sold his or her car and home and had liquidated his or her RRSP. The total can add up, and taxes must be paid on that amount before any items are distributed to heirs.

Residence

The fiscal impact depends on the type of property and your status in relation to the deceased. For example, if your spouse or your father left you his principal residence, the estate won't have to pay tax on capital gains. However, if your father left you a secondary residence, a tax on capital gains will be charged on the amount of the estate.

The capital gain is the difference between the price paid at the time of acquisition of property and its fair value at the time of sale. For example, a cottage purchased for $50,000 in 1980 and worth $100,000 in 2010, generates a capital gain of $50,000, half of which is added to taxable income.

Investments

If you inherit registered savings from your spouse, you can transfer them without penalty into yours. However if your uncle has left you his RRSP, it's automatically de-registered, and the tax will be charged to the estate.

If you're the designated beneficiary of the deceased's life insurance policy, you'll receive the money tax-free as this amount doesn't belong to the estate.

If you're dealing with a complex estate, don't hesitate to consult a financial planner to explain all the tax aspects that affect you.

You'll need this information to take stock of your financial situation and adjust your budget accordingly (Step 4).

The Régie des rentes du Québec administers 3 survivors' benefits.

If you have paid the funeral expenses of a relative who has made sufficient contributions to the pension plan, you're eligible for the death benefit. This is a one time payment of $2,500 maximum.

If it's your spouse who is deceased and he or she has made sufficient contributions, you're entitled to a survivor's pension. This monthly amount varies depending on several factors. If you're in charge of a minor child whose parent has died, you'll receive an orphan's pension ($69.38 per month in 2011) until the child is 18.

N.B.: Survivors' benefits are taxable.

Once these matters of inheritance, tax and survivor pension are clarified, you can proceed to Step 4.

Useful link

Régie des rentes du Québec: Survivors' benefits

If your spouse has died, your financial situation has now changed completely. Working with numbers in times of grief may seem beyond your strength. However, it is crucial that you have a clear picture of your situation to avoid financial pitfalls you really don't need.

The balance sheet gives you an overview. It consists in making a list of what you own (your assets) and what you owe (your liabilities). To do this, use the Your personal balance sheet (PDF, 175 KB) tool.

If your net worth is positive, you can breathe easy and put off some financial decisions until later, but not all. If you have dependent children, taking out life insurance helps ensure their financial security in case of death. Likewise, you may want to quickly take out salary insurance or critical illness insurance to protect your savings in case of disability or health problems. Consult your financial planner about this.

However, if your net worth is negative, take the time to get back on track.

First, make a monthly budget to have a clear idea of your income and expenses. Look at what expenses you can cut back, and start paying off your debts.

Tools and tips

Your personal balance sheet

Calculate your net worth by listing what you own and what you owe.

Do the math - Your personal balance sheet

The importance of a monthly budget

How to establish an effective budget in 3 steps

Read article - 3 steps to drawing up a monthly budget

Your budget

This tool shows you how to calculate your earnings and expenses, and draw up a monthly budget balance sheet.

Do the math- Your Budget

Debts to pay?

To help you decide where to start, check out the 5 steps to organizing your finances.

Read tip - 5 steps to problem-free finances

My budget tool

Available exclusively to Desjardins caisse members, the My budget management tool gives you an accurate picture of your everyday income and expenses.

Learn more - Budget management tool - My budget

A sad event like a death in the family is also an important time for you to review your estate.

If you don't have a will, you should look after making one. Among other things, it will greatly facilitate things for your liquidator and your heirs.

If you already have a will, the death of a loved one will likely change the situation. The house or investments you've just inherited increase your wealth. How do you wish to dispose of those assets when you die? Take time to talk with your financial planner and your lawyer, in particular to mitigate the tax bite at the time of your death.

Useful links

The Desjardins Personal Financial Index

Measure your financial skills and knowledge.

My index - Budgeting, debts, savings, insurance...
My index 2 - Have you taken control of your finances?
My index 3 - Spending, saving, protecting your assets...

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