FP Answers:
The good news is that inheritance money is received tax free. But there are a lot of things for you to consider with the inheritance, such as how financially dependent you want to be on the inheritance. How much money will you actually receive after tax is paid through the estate, your parent’s lifestyle and health spending, and the possibility of a new spouse?
You should be thinking about how to tax shelter as much of the money as you can today and in the future when it comes to planning how to integrate your future inheritance with your current investment plan. This means making the best use of your RRSP and TFSA, which are both tax shelters. Let’s see what happens if you follow the RRSP contribution strategy first to see how dependent you would be on the inheritance. To do this, I am assuming you are an Ontario resident earning $90,000 per year and paying about $18,000 in tax and another $5,000 for Canada Pension Plan and employment insurance , leaving you with $67,000 net per year.