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Gift tax and Capital gain tax in Canada

The estate planning process can range from simple to complex, depending on the tax rules set by the government. This guide aims to provide testators and executors with a better understanding of the expectations set by the Canada Revenue Agency (CRA) in the context of Islamic estate planning. The primary responsibility of the testator is to create the most effective estate plan possible, enabling the executor or trustee to distribute assets and manage related matters. Sometimes, the same individual may act as the testator for their estate plan and executor for other family members, relatives, or friends. It's important to note that "testator" refers to the creator and owner of an Islamic or Muslim Will, while "grantor" refers to the trust owner. Unfortunately, estate planning is often neglected, seen as an afterthought due to the legal complexity and uncertainty about future issues. Moreover, people are often preoccupied with wealth creation and tend to overlook the well-being of their inheritors. While Canada does not impose federal inheritance, estate, or death taxes, certain assets like real estate, stocks, bonds, and investments have specific tax implications for heirs. In Canada, the absence of an inheritance tax does not mean that all is clear, as individuals still need to pay the "Deemed Disposition Tax" on capital gains from properties, which is not the same but similar to an inheritance tax. The tax implications vary depending on the asset type, such as cash, capital property (e.g., houses, land, or fishing properties), registered investments (e.g., RRSP), or non-registered investments. It's important to note that the tax treatment of land or fishing properties differs from that of houses or recreational properties. Before delving further into this guide, we recommend familiarizing yourself with the definitions provided in the earlier sections. It's crucial not to confuse the terms "gifts" and "charity." While the CRA considers charitable donations as gifts for tax purposes, they are distinct from gifts given to loved ones, family members, relatives, friends, or others.

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