Well, not formally…….but one could argue that Canada Revenue Agency (CRA) hasn’t exactly given up the gauntlet.
There are two things that are guaranteed in life, right? Death and taxes. When you get hit with the double whammy then some really interesting things start to happen. On your final tax return all your income is pro-rated up until the day of your death and all that income is accounted for on your final tax return. What some people miss is not the typical annual things like salary income, Canada Pension Plan, Old Age Security, capital gains, dividend income and interest income….or whatever applies… but what about those registered plans that you have spent most of your life accumulating? Registered plans like your Registered Retirement Savings Plans and Registered Pension Plans (not including a defined benefit pension plan as that would work in a different way)? Well, if you have a spouse ~ and assuming your spouse is your beneficiary ~ it would roll over to them, tax-free but on second death (or your own if you are single) all those registered assets become de-registered and included as income on your final tax return.
The interesting piece here is that your marginal tax rate may be 31.15% while you are alive but once you de-register those registered funds it, typically, will put you into the highest marginal tax bracket of 46.41%. Yes, almost one half of your registered plans goes to CRA. CRA becomes one of your biggest beneficiaries at death!
There are methods to preserve that wealth for your children or whomever is the beneficiary of your Estate through estate planning methods but many options need to be weighed to consider the cost of doing so and weighing the ultimate benefit.