Assignment: Taxation on Death
Review the case below and answer the questions that follow.
Background
Today is June 15, 2022. You are the financial planner for Mr. Ahmad and his family. The Ahmad family live in Whitby, Ontario.
On May 5th, 2018, Mr. Ahmad got married to Sarah. This was Mr. Ahmad's third marriage.
On May, 4th, 2022, Mr. Ahmad died.
Prior to his death, Mr. Ahmad was thinking of selling his business and then retiring.
At the time of his death, Mr. Ahmad had a large investment portfolio, spread out over several accounts: a RRSP, a TFSA and a Non-registered investment account.
Mr. Ahmad also owned his prinicipal residence jointly with Sarah. Mr. Ahmad, Sarah, Sarah's two children (from a previous marriage), and Mr. Ahmad's 4 children (from his first marriage) all live together in the same house until Mr. Ahmad's death.
In anticipation of a call from family members and the Estate Executor for Mr. Ahmad, your decide to review the client's file very carefully. Reading through the file, you make the following notes:
RRSP Account-Worth approximately $1.2 million on the date of death. The named beneficiary on the account is Wife #1. Book value of the investments are $450,00.
TFSA-Worth approximately $45,000 on date of death. There were no named beneficiaries on this account.
Non-Registered Investment Account-Worth $750,000 on the date of death. Book value (original cost) of these investments was $475,000.
Life Insurance Policy--Purchased by Mr. Ahmad 6 years ago. Worth $500,000 face value. The named beneficiary is Wife #2.
Principal Residence-Worth $2.4 million on the date of death. The original cost was $2 million. This house was joined jointly with Wife #3.
Business Interest-Mr. Ahmad owned this business jointly with his brother. Valued at $3.25 million on the date Mr. Ahmad died. (Business original cost was $1.5 million).
Mr. Ahmad's most recent will was dated prior to his marriage with Sarah.
Task
1. Did Mr. Ahmad have a valid will when he died?
2. Who inherits the money from Mr. Ahmad's RRSP?
3. Who does Mr. Ahmad's TFSA go to after his death?
4. Who receives Mr. Ahmad's life insurance proceeds?
5. As a result of Mr. Ahmad's death, what are the tax consequences, if any, regarding the business?