And there could be a price to pay if your math is off in skipping income-tax instalment payments.
What happens if you skip income-tax instalment payments, or turn 65 while receiving a surviving spouse’s cheque from the Quebec Pension Plan? These were among recent reader questions addressed this week.
Q: I was married to my partner of 32 years when he died three years ago, after which I received his Quebec Pension Plan (QPP) benefits of about $500 a month. In June I turned 65 and was shocked to discover that payment was being discontinued, and I would continue receiving a QPP pension of only $176 a month. This is a major income hit for me, one I did not see coming, and it does not seem fair. Can I challenge this?
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A: Retraite Québec, which oversees QPP, says that generally a surviving spouse’s pension for someone under 65 has both a fixed and variable component. The fixed part is determined by the age of the surviving partner, and whether he or she has dependent children or disabilities. The variable part is determined by the pension received by the deceased contributor at the time of his or her death. The latter amount is based on years of employment and total QPP contributions made.
When the beneficiary of a surviving spouse’s pension turns 65, and becomes eligible for the federal Old Age Security (OAS) pension and possibly Guaranteed Income Supplement (GIS) as well, the fixed component ends and a new calculation takes effect. From that point on, the beneficiary receives 60 per cent of the unadjusted pension of the deceased contributor if he or she did not contribute to QPP and has no pension of their own. If the surviving spouse does have a QPP pension of their own, they’ll get 37.5 per cent of the deceased’s pension as well, up to a combined maximum (currently $1,258.49 a month).
You always have the option of appealing, but it’s unlikely Retraite Québec would make an exception to its established procedure in such cases.
Q: I am 78 and my financial situation has changed in 2022, since I stopped working in March. I received statements from both the federal and provincial tax departments telling me what quarterly instalment amounts to pay, based on last year’s tax information. I’ve done the math and I believe I have already submitted sufficient tax money to both with the March and June instalments. Am I obliged to still pay what they say? If not, do I have to tell them I won’t be paying?
A: You’re not obliged to pay the instalment amounts or to inform the tax departments you won’t be doing so, but there could be a price to pay if your math is off. Both tax departments can charge daily interest, and possibly penalties, on underpayments and missed deadlines by taxpayers subject to instalment payments (the next of which are due Sept. 15).
Both agencies have the same approach on this: If your net tax payable to them exceeded $1,800 in either of the last two tax years, and is headed in that direction again this year, instalments will be considered applicable.
Q: A sibling recently passed away, after a long illness. She was single, lived alone in a rented apartment and stopped working years ago. We found a will and it named a friend as liquidator. My family is OK with this, but a bit worried about the friend accepting the role, since we are pretty sure our sister had a lot of debt. Is the friend at any financial risk in accepting the liquidator role? Would he, or we, be responsible for any debts left unpaid?
A: The liquidator role can be a lot at the best of times, and a potentially messy estate could make it particularly demanding. There are precise steps to follow, inventories to complete, an estate account to open, searches to do, tax returns to file. Often, lawyers and notaries are brought in to guide the process. It’s too much for some people, and they have the option of quitting at any time. If the friend is committed to doing a thorough job, there should be no financial risk to himself or the heirs. If it’s done haphazardly, and the heirs accept the succession without an accurate portrait of the deceased’s finances, they could be responsible for the debts.
“The only person who really knows the state of the estate would be the executor (liquidator). It is their responsibility to get a full understanding of what is owned and what is owed,” said David Edey, author of Executor Help: How to Settle an Estate, Pick an Executor and Avoid Family Fights (davidedey.com).
“If the executor discovers there are insufficient funds to pay all taxes and debts and still fulfil the directives of the will, he’ll need to get legal advice. Taxes and debts must be paid prior to any other distributions. If the estate is seen as insolvent, you might need professional advice from a bankruptcy trustee.”
The Montreal Gazette invites reader questions on tax, investment and personal-finance matters. If you have a query you’d like addressed, please send it by email to Paul Delean at gazpersonalfinance@hotmail.com.
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