Dengler’s daughter, Lori Dengler, said it’s “criminal” that some $225,000 locked in her mother’s registered and life income funds was deemed income on the day she died.

“To me it amounts to a death tax and there is no way around it,” Lori said in an interview with QMI Agency.

Her mother had no spouse and no dependants under 18 years old to whom she could transfer the savings she amassed after working at the University of Western Ontario for 31 years. Sandy retired eight years ago at the age of 59 and chose to leave her estate to her daughter Lori.

“It’s a single parent thing, it’s not fair,” she said.

Michael Hartt, an investment and retirement advisor at RBC in Toronto, says there are lessons to be learned from the Dengler story.

“There’s was no (tax) minimization strategy put in place,” he said.

Retirement income funds (RIFs) and life income funds (IFS) are registered investments, meaning the money is subject to taxes once it’s removed.

“Those were two sheltered accounts that grew tax-free and the government’s got to get their money at some point in time,” Hartt said.

Lori’s frustration stems from the fact that her mother typically received annual tax refunds, so had she lived long enough to use up more of her savings, the government wouldn’t have obtained such a generous lump sum amount.

While there’s no way to escape the taxman entirely, there are things that can be done to ensure loved ones get the most possible.

Hartt said a financial planner could have run a few possible scenarios by Sandy earlier in her retirement. With all the facts, she might have chosen to take out funds from her RIFs and LIFs little-by-little every year, opted to buy insurance to cover the costs of the eventual taxes, gifted the money or set up a trust for her daughter with lower probate fees.

Lori said the insurance recommended to her mother would have been "horrendously expensive."

Alternately, placing the cash into a non-registered savings plan would have allowed Sandy to almost seamlessly transfer the money to her daughter using a joint tenant with right of survivorship clause.

Unfortunately there’s no blanket answer and the best solution could have involved moving a lot of money around, Hartt said.

“You might end spending more by trying to avoid the probate fees and taxes,” he said.

Thornhill, Ont.-based estate lawyer and co-author of Where There's an Inheritance, Les Kotzer, sees a lot of wills in his practice and says he’s astounded by the lack of planning he sees on a daily basis.

Lori fears other single retirees might wind up in the same situation as her and her mother.

She said her mom may have done things differently if only she had more time.

www.torontosun.com/money/2010/08/25/15134771.html

Aug. 25, 2010