Ashley Galea never imagined that losing both parents in the same year would bring not just grief, but also a six-figure tax bill that swallowed nearly all of their retirement savings.
“It made me more angry than anything,” Galea told CTV News. “We lost both our parents inside 11 months and (the Canada Revenue Agency) made it clear they wanted their money.”
Her parents, Jackie and Michael Galea of Burlington, Ont., were high school sweethearts who built a middle-class life together. Jackie worked in nursing while Michael built a career in business. They raised two children, saved diligently in their Registered Retirement Savings Plans (RRSPs) and in 1998 bought a cottage that became the heart of their family life.
Jackie died suddenly in January 2023 at just 62. Eleven months later Michael died at 63. “We think my Dad died of a broken heart,” Ashley said. “They had been together so long that the heartbreak was so profound. We didn’t see it coming.”
A tax shock that could not have been expected
When Jackie died, her RRSP savings rolled into Michael’s account, leaving him with about $715,000 in registered funds. But when he passed away later that same year, the combined amount was treated as income. The Canada Revenue Agency taxed it at roughly 50%.
On top of that, there were capital gains taxes tied to the family cottage, which had been their principal residence for the last few years but not for the decades prior.
All told, the Galea children received a tax bill of $669,126. To avoid selling the cottage, they were advised to use almost all of their parents’ RRSP savings to pay the debt. What was meant to become an inheritance for Ashley and her brother became petty cash.
“This is sort of the kickback that happens if you die at such a young age with an RRSP,” Ashley said. “So, I think people need to know that maybe there is a better vessel so funds can pass onto your kids or whoever you want them to pass to.”
How Canada’s tax rules can create hidden risks
Ashley’s story highlights a key complication: When someone dies holding taxable registered investments like RRSPs or RRIFs, the CRA considerss those to have been disposed of at fair market value on the date of death. If the deceased does not designate a qualified beneficiary, such as a spouse or financially dependent child, the deemed disposition is fully taxable.
When multiple deaths occur in the same calendar year, the “terminal income” status can stack additional layers of taxation. In the Galea case, the combined incomes pushed the estate into very high marginal tax brackets, resulting in that six-figure bill.
The danger is clear: Surviving heirs may be forced to liquidate assets under duress or sell property to meet tax obligations.
Steps families can take to protect their loved ones
Estate and legacy planning is indispensable. The goal is to reduce uncertainty, minimize tax exposure and leave loved ones with stability rather than financial stress. Key steps include:
- Use spousal rollovers and proper designations: Name a spouse or eligible beneficiaries on registered accounts to allow assets to pass tax-deferred or at a more favourable treatment.
- Consider TFSAs for tax efficiency: Moving savings from an RRSP into a Tax-Free Savings Account, even if it triggers a smaller tax hit now, can prevent a top-tier tax rate later.
- Update your will regularly: Clear, current instructions reduce ambiguity and the risk of costly disputes.
- Use life insurance strategically: A well-structured policy can provide the cash needed to pay taxes without draining other savings.
- Explore advanced tools: Estate-freeze or intergenerational trusts may benefit families with significant assets.
- Communicate with heirs: Make sure your family knows about your financial situation and intentions.
- Seek professional guidance: Accountants, estate lawyers and financial planners can help model different scenarios and minimize tax burdens.
Protect your people
The story of Ashley Galea and her parents shows how quickly grief can be compounded by financial strain when families are unprepared. Thoughtful legacy planning — including proper use of RRSPs and TFSAs, up-to-date wills, life insurance and clear communication with heirs — can prevent a lifetime of savings from being eroded by taxes. By taking these steps early, Canadians can ensure that when the unexpected happens, their loved ones are spared the shock of a steep tax bill and can focus on what matters most: grieving, remembering and celebrating a life well lived.
Sources
1. CTV News: Daughter hit with $660,000 tax bill when both parents died in same year, by Pat Foran (September 26, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.