What Happens When an Estate Has Assets but Not Enough Cash?
On paper, Sarah* was inheriting a $2 million estate.
In practice, the combination of a highly appreciated cottage, a large RRSP, and no available cash left the executor facing a substantial tax bill and difficult decisions.
Her family’s experience shows how an estate can create financial pressure when taxes and liquidity are not planned for in advance.
Written By Tiffany Woodfield, Financial Advisor, TEP®, CRPC®, CIM®
The Hidden Tax Bill Behind a $2 Million Inheritance
Sarah inherited what she believed was a tax-free estate worth $2 million, including a cottage and a large RRSP.
What she didn’t realize was that her parents’ estate owed a significant tax bill before anything could be distributed. The cottage triggered a large capital gain because it doubled in value over the many years her family owned it. And the RRSP was fully taxed as income.
There was no cash set aside to pay the tax bill, forcing the executor to sell assets quickly.
This forced sale created unnecessary stress for everyone involved.
The estate value had dropped substantially before it reached her. But with better planning, the family could have reduced the tax and avoided a rushed sale of the assets.
The lesson to learn from Sarah’s family is that proper planning involves looking at exactly what will happen when you pass and how the estate will need to be settled. Then create a plan that will avoid the rushed sale of valuable assets.
Why This Matters
Many families in BC own valuable assets but have limited cash available to settle an estate.
A cottage, investment property, business, or registered account can create a significant tax liability at death. Just because there’s no inheritance tax, doesn’t mean taxes don’t matter.
Understanding where the money to pay the final tax return will come from can protect executors and beneficiaries from rushed decisions.
The goal should be to leave an estate that can be settled without unnecessary financial pressure and that aligns with your values.
If Sarah’s family had planned for the taxes by purchasing a life insurance policy or doing other types of tax planning, the sudden forced sale of the family cottage could have been avoided.
Key Tools
No proactive estate-planning tools were implemented.
Planning options that could have helped include:
- Estate tax and liquidity analysis
- Life insurance to provide estate liquidity
- Beneficiary designation review
- Will and executor planning
- Advance planning for the cottage and RRSP
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Read More:
💎 Who Needs to Do Estate Planning in Canada?
💎 How Is Estate Planning Beneficial to Families in Canada?
💎 What Is the Purpose of a Trust in Estate Planning?
About the Author
TIFFANY WOODFIELD is a senior financial advisor, estate-planning expert, and dual-licensed portfolio manager based in Kelowna, British Columbia. She is the co-founder of SWAN Wealth Management, where she helps Canadian and cross-border families build lasting wealth, reduce tax risk, and create meaningful legacies.
As a TEP (Trust and Estate Practitioner) and portfolio manager, Tiffany works closely with successful professionals, business owners, and internationally mobile families who want to enjoy a more flexible, work-optional lifestyle. She combines deep technical expertise in wealth management with a strong focus on mindset, personal development, and purposeful decision-making.
Tiffany has been a contributor to Bloomberg TV and has been featured in major national and international publications, including The Globe and Mail and Barron’s, for her insights on retirement planning, cross-border wealth issues, and estate planning.
Professional designations:
- TEP® – Trust and Estate Practitioner
- CRPC® – Chartered Retirement Planning Counselor
- CIM® – Chartered Investment Manager
*Names have been changed to protect the identity and privacy of the individuals in this story. Please seek the advice of professionals before taking action. This case study is for educational purposes only.