The $660,000 Wake-Up Call: Why Estate Planning Can’t Wait

The $660,000 Wake-Up Call: Why Estate Planning Can’t Wait

When tragedy struck twice in one year, an Ontario family learned the devastating cost of incomplete Estate Planning

Ashley Galea and her brother never imagined that losing both parents within 11 months would come with a price tag of $660,000. But that’s exactly what happened when their Burlington parents died in 2024, leaving behind a substantial RRSP and triggering one of Canada’s most misunderstood tax traps.

The Hidden Tax Trap in Your Retirement Savings

The Galea family’s parents had saved approximately $715,000 in RRSPs, intending those funds for their children’s inheritance. Instead, the family faced a combined tax bill of $669,126 due to RRSP taxation and capital gains on property.

Here’s what many Canadians don’t realize: when you die, the Canada Revenue Agency treats your RRSP as if you cashed it out the day before your death. The entire amount becomes taxable income, often pushing your Estate into the highest tax bracket—over 50% in many provinces.

Because both parents died in the same calendar year, the family couldn’t benefit from the typical spousal rollover provisions that normally allow RRSPs to transfer tax-free to a surviving spouse.

The Cottage Tax Trap: A Second Devastating Blow

The family’s Estate Planning nightmare didn’t stop with the RRSPs. The Galeas also owned a family cottage that had appreciated significantly over the years, and this triggered additional capital gains taxes that forced impossible decisions.

In Canada, you can only designate one property as your principal residence per family unit. For most families, this means their primary home gets the tax exemption, while vacation properties like cottages are fully exposed to capital gains taxes when sold or transferred at death.

When both parents died, the cottage was deemed to have been sold at fair market value, triggering capital gains taxes on all the appreciation since they purchased it. With only one principal residence exemption available, the family couldn’t shelter both properties from taxation.

To avoid losing the family cottage—a place filled with decades of memories—the Galeas had to use nearly all of their parents’ RRSP savings to pay the combined tax bill. The very nest egg their parents had built to provide for their children ended up going straight to the CRA instead.

The Emotional and Financial Toll

Beyond the staggering numbers, Ashley Galea’s words capture the human impact: “We lost both our parents inside 11 months and (the Canada Revenue Agency) made it clear they wanted their money.”

The family was forced to use nearly all of their parents’ retirement savings just to pay the tax bill, leaving virtually nothing for the children who were named as beneficiaries. Despite being listed as beneficiaries on the RRSP and having a will in place with explicit instructions, the government claimed its share first, leaving the family with whatever remained.

How SmartWills Helps You Avoid This Nightmare

We believe that Estate Planning shouldn’t leave your loved ones facing impossible choices or devastating tax bills. That’s why our platform guides you through critical considerations that many Canadians overlook:

1. Tax-Efficient Asset Structuring

We help you understand the tax implications of different asset types and guide conversations about strategies like:

• Converting RRSP funds to Tax-Free Savings Accounts (TFSAs) when it makes sense
• Timing RRSP withdrawals strategically during your lifetime
• Balancing registered and non-registered investments

Tax experts often recommend that families consider moving RRSP investments into non-taxable vehicles like TFSAs, even if it means taking a tax hit when funds are withdrawn, to avoid top-tier tax rates at death.

2. Life Insurance Integration

SmartWills’ Estate Planning tools help you calculate whether life insurance could offset Estate taxes, ensuring your beneficiaries receive what you intend—not what’s left after the CRA takes its share.

3. Comprehensive Beneficiary Planning

The Galeas learned that being named beneficiaries wasn’t enough—the tax obligation comes first. SmartWills helps you structure your Estate to account for these tax realities, ensuring your wishes can actually be fulfilled.

4. Professional Network Connection

Complex Estates require professional guidance. SmartWills connects you with qualified Estate Planning professionals who can develop sophisticated strategies tailored to your situation.

The Right Time to Plan Is Now

In this case study, the parents died at just 62 and 63 years old, ages when most people still consider themselves years away from serious Estate Planning. The truth is, tomorrow is never guaranteed, and the complexity of your Estate plan should match the complexity of your assets, not your age.

As Ashley reflected: “If in the end of all of this people find out that RRSPs may not be that beneficial for them, then I think this would be helpful for others to know, and for that, I think my parents would be proud of me.”

Don’t Let Your Legacy Become a Tax Lesson

The Galea family’s story is a powerful reminder that good intentions and even a basic Will aren’t enough. You need a comprehensive Estate Plan that accounts for:

• How different assets are taxed at death
• The timing of multiple deaths
• Strategies to minimize tax burden
• Life insurance and other protection vehicles
• Clear, executable instructions for your executors

SmartWills makes professional-quality Estate Planning accessible, guiding you through these critical decisions with clarity and compassion. Because your legacy should be measured in the memories you leave behind—not the tax bills your family has to pay.

Ready to protect your family’s future? Start your SmartWills Estate Plan today and ensure your loved ones inherit peace of mind, not financial devastation.