FundRobot » Pension Funds » Who pays the tax on a LIRA after someone dies and there is a designated beneficiary?

Old   #1 (permalink)
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Default who pays the tax on a lira after someone dies and there is a designated beneficiary

I have read conflicting things online and am confused.

My step father passed away. He had a LIRA and named me as the beneficiary of it. He was not married (my Mom and him have been divorced several years, but i still considered him my step dad)

Anyway, as such, I received a lump sum of the balance of the LIRA. It looks like no tax was held or taken off -- i got the full amount sent to me via cheque from the company it was with.

Now, I have read that the the ESTATE will pay the tax owing on it when they file his last tax return for him on his behalf. And I have read that as a named beneficiary, I receive it TAX FREE (because the estate pays the tax on it) Is this true? I would just hate to think I have $______ when really, it's 30% (or whatever) less than what I actually got because I have to pay tax on it.

If the information is relevant, I always received a good tax RETURN each year because I qualified as a "low income earner" -- so it's not like i'm making a 6 figure income and got this extra money.

Any help would be appreciated!!!

ALSO-- as a side note, I am also going to be receiving the balance of his pension (as a named beneficiary) he had with his work. The company said they will probably hold back 30% withholding tax. Is that something I can "get back" from the estate (reimbursed), or do i just cut my losses on that? Would I still be subject to ADDITIONAL tax even after the withholding tax is taken?
GoldAddicted is offline   Reply With Quote
Old   #2 (permalink)
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Default who pays the tax on a lira after someone dies and there is a designated beneficiary

The value of the LIRA is to be reported on your step father's final return. The amount normally has no tax withheld, and the amount is payable when your step father's return gets filed. You will not have to report the amount on your own return

Now, here's where it gets tricky. There's a provision in the Income Tax Act that the estate and the beneficiary of the LIRA are jointly responsible for paying the taxes on that amount. In effect, if there is not enough money in the estate to pay the taxes owing, then the CRA can seize a portion of the funds that you've received from the LIRA.
PrettyHot88 is offline   Reply With Quote


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