Akeno is a 65-year-old retired accountant. He is divorced and has a 40-year-old son who is financially independent. Thanks to years of diligent…

Upon death, an individual is deemed to have disposed of all capital property at its Fair Market Value (FMV). This "deemed disposition" triggers a capital gain on assets that have appreciated in value. In Akeno's case, both his cottage and his non-registered shares, held for 30 years, would have substantial accrued capital gains. Fifty percent of these gains are taxable and must be reported on his final income tax return. Given the long holding period and significant asset values, this tax liability is likely to be the largest single financial obligation his estate will face, potentially creating a liquidity shortfall.

A. Loss of income: This is not a significant risk because Akeno is retired and his only son is financially independent, meaning no one relies on his income for support.
B. Debt repayment: While the $100,000 mortgage is a liability the estate must address, the tax liability from the deemed disposition of over $800,000 in appreciated assets will almost certainly be much larger.
D. Estate creation: This term refers to the process of building an estate through savings and investments. Akeno has already created a substantial estate; the risk at death is its preservation and distribution, not its creation.

1. IFSE Institute, Life Insurance (LLQP) - Core Curriculum, 2023.

Module 6: Taxation, Section 6.4: Taxation at Death. This section explains the principle of deemed disposition, stating that capital property is considered sold at fair market value immediately before death. It highlights that the resulting capital gains can create a significant tax liability for the deceased's final tax return, which is a primary concern in estate planning.

2. Canada Revenue Agency (CRA), Guide T4011, Preparing Returns for Deceased Persons, 2023.

Chapter 3, "Deemed disposition of property". This official guide specifies: "When a person dies, we consider that the person has disposed of all capital property right before death... You have to report any capital gain or loss in the final return." This confirms that the capital gains on Akeno's cottage and investments are realized and taxed upon his death, creating a major financial liability.