Lucy Lukic on the Importance of Estate Planning: A Real-Life Case Study of an Ontario Family Hit With An Enormous Tax Bill

Most people in Canada know they need some kind of estate plan, but many still put it off because it feels too far away or too overwhelming. A recent situation in Ontario shows why waiting can bring some harsh surprises. In this case, both parents passed away in the same year, and their daughter was left with a tax bill of $669,000. The number shocked many people, but the way the taxes were applied followed the rules exactly as they are written.

The largest part of the bill came from the mother’s RRSP savings. When she died, her investments moved into her husband’s name. That transfer is allowed when a spouse is still living. The problem came when the father passed shortly after. When an RRSP holder dies, the full value of the account is considered income for that year unless it is transferred to a qualifying spouse. Since there was no spouse left, the entire amount was taxed like regular income. Lucy Lukic, an insurance professional who works closely with families on these issues, says this rule catches many people off guard because they assume the money simply passes to the next generation without major changes.

Lukic explains that this situation is more common than people think. “People work very hard to save for their family, but they don’t always realize how the tax rules work at the end of life,” she says. “It can feel like everything you built gets cut down at the worst possible moment.” In the Ontario case, the rate on the RRSP income ended up being close to half of the total savings. Years of careful planning disappeared almost instantly.

The daughter also faced capital gains on a property. Her parents had been living full-time at their cottage, making it their main home in practical terms. Even so, the property was still considered a secondary residence for earlier years. Capital gains applied to those years, which added tens of thousands more to the final bill. Between the RRSP rules and the property tax treatment, the daughter had little choice but to use most of the remaining savings to pay the balance.

Lukic says the goal of estate planning is not to avoid rules, but to understand how they work so families can prepare. She says a few simple choices can prevent stress later on. One of the most straightforward tools is life insurance. A policy can create a tax-free payment that covers expected taxes on RRSPs, properties, or other assets. Without that protection, families may need to sell investments or property quickly, which often happens at a loss. “Life insurance gives families room to breathe. It creates cash at the exact moment it’s needed, so people are not forced into hard decisions,” says Lukic.

Another step is looking at RRSP drawdown plans before retirement. Many Canadians keep their RRSPs untouched until age 71 because that is when they must convert them to a RRIF. This habit can create a large tax hit later, especially if both spouses pass away close together. Drawing down an RRSP earlier in retirement, even at small amounts, can lower the final tax balance. It also lets people move savings into other types of accounts with different tax treatment. Lukic notes that most people only think about this once they sit down with a planner. “The idea is to take control while you can. Small steps over a few years can make the end result much smoother for your family.”

Keeping beneficiary designations updated also helps estates move smoothly. Accounts like TFSAs, RRSPs, and life insurance policies can move directly to a named beneficiary without going through the estate. That process avoids probate fees and speeds up access to funds. If names are missing or out of date, the assets may pass through the estate instead, which can raise costs and slow everything down. A quick review every couple of years is usually enough to keep everything clear.

The Ontario family’s experience is heartbreaking, but it shows how tax rules change the future of an estate. Neither of the issues were unusual or unexpected from a legal standpoint. They were simply the result of timing and long-standing rules that treat certain assets in specific ways. With planning, the outcome could have been very different.

Lukic believes stories like this help families start conversations they have been avoiding. She says estate planning is not just for people with large portfolios. Families with modest savings often need it the most because they have less room to absorb sudden costs. In her view, the real value of planning is peace of mind. As she puts it, “You cannot control the timing of life, but you can make choices that protect the people you care about.”

If anything positive can come from the Ontario family’s situation, it is the reminder that planning ahead brings clarity and stability when families need it most. A few early steps can help preserve the legacy people work hard to build and make sure support reaches the children and grandchildren they hoped to help.