Staying Afloat In The Worst Of Times
After a loved one dies, you may find it tough just to stay upright. Here’s what you need to know to keep your financial world in order while you take the time necessary to deal with the loss.
After a death has occurred, it’s often difficult to navigate through the labyrinth of red tape generated by the government, financial institutions and assorted bureaucrats. In order to make the situation easier on yourself and family members, it’s helpful to assess the tasks you have to complete by breaking them down into steps, and tackling them one by one.
Focus On Short-Term Needs
If the funeral wasn’t pre-planned, ask for assistance from a relative or friend, suggests Robert Satchwill, a volunteer and former board member of the Memorial Society of Edmonton and District. Too often, people get talked into expensive frills because they feel it’s unseemly to bargain over a loved one’s coffin or funeral services. So let harder heads prevail.
• Don’t assume the bank will allow access to a deceased person’s account to cover funeral expenses. Set up a joint account specifically for the funeral well in advance.
• Veterans’ families may be entitled to government help for funerals or burial costs and for grave markers. Contact Veterans Affairs Canada at 1-800-465-7113 or their website.
• If money is urgently needed, put in a claim with insurers right away. They usually pay beneficiaries within 30 days of receiving a death certificate or equivalent.
• When writing the obituary, consider that they usually contain information such as place of birth, date of death, occupation, accomplishments and a list of survivors in the immediate family.
• Some airlines offer discounted fares for family members traveling to funerals. Proof of the loved one’s death is required, however.
Get The Proper Documentation
The will should name an executor to distribute the estate according to the deceased person’s wishes, and to collect and pay debts.
Key documents include birth, marriage and death certificates. The death certificate allows life-insurance benefits to be claimed and enables the executor to start the process of settling the estate. The process of applying for a death certificate varies provincially. Service Canada’s section on personal loss has links to provincial service centres that provide death certificates.
As a rule of thumb, you can register a death (with the help of a funeral home) and receive a “proof of death” certificate or a funeral director’s death certificate, either of which should be adequate for most transactions. In some cases, you may need a certified copy of the death certificate. This document is provided by the province.
• If a thorough search hasn’t managed to turn up a will, you must apply to the courts to distribute the estate.
• Is the executor unable or unwilling to do the job? “If you haven’t appointed a backup executor, the person who steps forward must be approved by the courts,” says Sandra Foster, a registered financial planner and author of You Can’t Take It With You: Common-Sense Estate Planning for Canadians.
• You’ll need to have proof of death for almost every transaction, so get many copies of the documents-perhaps a dozen or more if the estate is complex.
• Make a list of key information that you will likely be asked for again and again, including social insurance number (SIN), bank account numbers, and assets and liabilities.
Details, Details, Details
Many bureaucratic tasks accompany the death of a loved one. Here’s a sample of what you’ll need to do:
• Cancel benefits: For Old Age Security (OAS) and Canada Pension Plan (CPP), call 1-800-277-9914.
For Quebec Pension Plan (QPP) benefits, call 418-643-5185 (Quebec City), 514-873-2433 (Montreal) or 1-800-463-5185. For Employment Insurance, call 1-800-206-7218 or visit the Service Canada web page. You can request Payment of Benefit on Behalf of a Deceased Person via Internet. Have the person’s SIN on hand when you call.
• Cancel the SIN by taking it to the nearest Service Canada Centre or by sending the card, along with a copy of the death certificate or proof of death, to Service Canada Social Insurance Registration (PO Box 7000, Bathurst, N.B. E2A 4T1). If you don’t have the card but know the number, write it on the death certificate.
• Cancel the passport. To do so, return it to Passport Canada (Foreign Affairs and International Trade Canada, Gatineau, Que. K1A 0G3); include a copy of the death certificate and a letter stating whether you want the passport destroyed or returned.
• Cancel credit cards. If balances are owed, check whether the cards have insurance policies to cover the debts.
• Transfer car ownership and cancel the driver’s license. As rules for transferring ownership may vary among provinces, contact your provincial vehicle-licensing organization for details.
• Cancel Medicare and health-services cards.
Apply For Pensions And Other Benefits
In some cases, when a spouse or common-law partner dies, you may be eligible for benefits from the government or your partner’s former employer. But pursue this avenue as soon as possible, advises Foster. If you apply for a survivor’s pension from CPP 18 months after your partner’s death, for example, payments are retroactive for only 12 months. You lose six months of benefits.
• If you are 60 to 64 years of age, have a low income, and your spouse or common-law partner has died, you may be eligible for a survivor’s allowance.
• If your spouse or common-law partner contributed to CPP (and/or QPP), you may be entitled to a one-time death benefit of as much as $2,500, depending on how much he or she contributed-and for how long.
• You may also be eligible for survivor’s benefits from CPP (and/or QPP).
• Call your partner’s company about any group-insurance benefits, pensions or salaries owing. At the very least, you should get a rebate of pension contributions, with interest.
Death And Taxes
When people die, it’s as if they have sold all of their property (“deemed disposition”) unless, that is, the property is rolled over to a spouse, says Dave Loewen, a tax partner with PricewaterhouseCoopers in Winnipeg. So if the family cottage cost $100,000 in 1972 and is worth $300,000 when the owner dies, the estate must pay tax on the “capital gain” of $200,000-assuming the cottage was not the principal residence. One of the few exemptions is the family home. “Even if there’s a gain on the principal residence, you don’t have to pay tax on it,” points out Loewen.
When it comes to RRSPs and RRIFs, the government acts as if the deceased has cashed them in, so when the final income-tax return is prepared, that money will be taxed as income. The exception: A spouse may roll RRSPs into his or her own registered plan, or become the recipient of RRIF payments.
• The final tax return is due April 30 of the following year, or six months after the death, whichever is later. Visit the Canada Revenue Agency web page on what to do in the event of a death.
• If you’re under 70 when your spouse dies and you don’t need the annual income from a RRIF, it can be converted to an RRSP to shelter it from being taxed until the RRSP matures.