How to Deposit a Large Cash Inheritance in Canada
Depositing a large cash inheritance can be both exciting and overwhelming. Many Canadians wonder how they will make the most of their large cash inheritance, but the first step is to deposit it into one of your bank accounts. How do you ensure you deposit your inheritance securely and efficiently? This requires preparation and careful attention to where, when, and how you deposit it. In this article, we outline the necessary steps to take when depositing a large cash inheritance in Canada.
Preparing for Deposit
There’s a few factors to consider before depositing your large cash inheritance.
Step 1: Documentation
First, gather the necessary documentation to demonstrate your legal ownership of the inheritance money. Sufficient documentation includes a copy of the deceased person’s will, in which you are listed as a beneficiary of the inheritance you are depositing. If you have a proof of inheritance document, this will also validate your beneficiary status. This letter typically comes from the executor or estate trustee. Additionally, have a valid government-issued ID on hand to verify your identity as a beneficiary.
If the estate is being probated, you might need a Certificate of Appointment of Estate Trustee to deposit the money. This certificate officially appoints you as the executor or administrator of the estate and may be necessary for certain banking procedures.
Step 2: Consulting Professionals
We highly recommend consulting with a financial advisor and/or estate lawyer. These professionals will have an in-depth idea of the financial and legal aspects of depositing your money. They can provide expert guidance on how to deposit the money effectively to prevent any issues related to taxes or estate law.
Let a GRFS Financial Advisor help you reach your financial goals using your large cash inheritance. We’re committed to informing you about potential tax implications and how to avoid them so you keep more money in your pocket. With a diverse financial skillset, we provide investing advice to grow your wealth, mortgage advisory services to secure a competitive rate, and much more. Just let us know what your specific goals are and we’ll show you how your large cash inheritance can bring those goals to life!
Contact a GRFS Financial Advisor today!
Step 3: Choosing the Right Financial Institution
While considering your deposit, you’ve probably already decided it would go into your primary bank account. Although nothing is necessarily wrong with depositing it there, take the time to consider alternate avenues before defaulting to your primary bank account. This is because many financial institutions have policies surrounding large cash deposits.
Ask your primary financial institution about their procedures and requirements for large cash deposits. Don’t be afraid to establish a new bank account solely for your inheritance if it benefits you. Using a reputable financial institution with low fees and minimal requirements for large cash deposits will help you save more in the long run.
The Large Cash Inheritance Deposit Process
Once you’ve completed your preparation steps, it’s time to actually start the deposit process.
Step 1: Opening an Account (Optional)
If you’ve decided not to deposit your inheritance into your pre-existing bank accounts or don’t already have one, the first step is to open a new one. Depending on the size of your inheritance, you may need to open multiple bank accounts to hold the funds. Depositing the money into a diverse set of bank accounts will allow you to save and utilize the money simultaneously. For example, you deposit 50% into an Individual Retirement Account (IRA), 25% into a brokerage account for investing, and the other 25% into a normal checking account. This enables you to save and invest the funds while also having a portion available for immediate transactions.
To do this, visit your chosen financial institution and provide the necessary information and documentation. Your financial institution may have specific requirements to do this, refer directly to their website for details if possible.
The account type you choose will have a dramatic effect on how much you yield from these funds. Here are some recommended account types to deposit a large cash inheritance into for optimal savings:
High-Yield Savings Account
Money Market Account
Certificate of Deposit (CD)
Brokerage Account
Individual Retirement Account (IRA)
A financial advisor will be able to help you decide what account type suits your needs best.
Step 2: Making the Deposit
To deposit a large sum of money, there are several methods available:
In-Person Deposit: This is typically the simplest method, as bank tellers review your documentation in-person to ensure your deposit goes through. They’ll identify any gaps in your information or documentation to help you deposit the money without issue.
Wire Transfer: If the funds are coming from a different account (such as an estate account), arrange for a wire transfer. This method is especially useful for transferring large sums securely.
Before depositing, familiarize yourself with the bank’s limits for cash deposit. Deposits above a certain cash threshold will trigger mandatory reporting requirements. This is part of the bank’s anti-money laundering procedures. To avoid complications, consult with your chosen bank regarding these limits.
Remember to be careful and take the proper precautions when transporting large amounts of physical cash.
Canadian Tax Implications of Depositing a Large Cash Inheritance
Wondering what taxes you’ll need to pay when depositing your large cash inheritance? Here’s what you need to know.
When a loved one dies, a final tax return is filed on their behalf (usually by a legal representative). This return will account for all taxes related to your loved one’s estate, including the capital gains tax associated with certain accounts (such as stocks or mutual funds). Any taxes owed will be taken from your loved one’s estate, and therefore will already be paid by the time you deposit the funds.
That means the money you inherit is not taxable.
If you’re not a resident of Canada, the assets are subject to a 25% withholding tax, which will be taken from your total inheritance before it’s transferred to you. It will be the responsibility of the Canadian beneficiaries to give that 25% to the CRA.
After Depositing
So you’ve successfully deposited your large cash inheritance. What’s next? It’s important to be mindful about your spending of an inheritance. With the right strategy, you can ensure your inheritance money lasts a lifetime, so don’t spend it all in one place. Some ways beneficiaries utilize an inheritance is by purchasing a home, retiring early, and even traveling the world. The possibilities are endless. With an effective strategy to distribute the funds and build a diversified portfolio, you may even be able to achieve all three! A financial advisor will be able to guide your path when it comes to your inheritance, helping you achieve the financial goals you have for the future.