How Much Will Actually Reach Your Kids? Modelling Your Estate After Tax

The Gap Between What You Have and What They Get

Grace and Tomas Delgado, a couple in their early seventies in Saskatoon, had a clear sense of their net worth. A paid-off home, a comfortable RRIF each, a non-registered portfolio, and some cash added up to a number they were proud of. What they had never examined was a far more important figure: how much of that would actually reach their three children after tax.

"We knew what we had," Tomas says. "We had absolutely no idea what our kids would get. We just assumed the two numbers were basically the same. They aren't."

That gap — between the gross value of an estate and the net amount that lands in heirs' hands after the final tax return is settled — is the part of estate planning families most often overlook. The Delgados decided to measure it.

Their assumption is an easy one to make, and it is worth naming because so many of us share it. When we picture leaving money to our children, we picture the number on our statements moving over to them more or less intact. We do not picture a final tax return standing in the doorway, taking its share before anyone inherits a dollar. "We'd been mentally promising the kids a number that didn't actually exist," Grace says. "The real number — the one they'd see — was smaller, and we'd never bothered to find out by how much." That single act of curiosity, measuring the real number, is what set everything else in motion. You can measure your own in the TrackMoola planner.

Gross Estate Versus Net-to-Heirs

The distinction is simple to state and easy to ignore. Your gross estate is everything you own at death. Your net-to-heirs is what is left after the estate settles its final tax bill and other costs. In Canada there is no separate inheritance tax, but the final return — driven by the deemed disposition of capital property and the inclusion of registered accounts in income — can take a real bite.

For the Delgados, two things stood to shrink the gross figure most: large unrealized gains in the non-registered portfolio, and two sizeable RRIFs that would eventually be brought into income.

Modelling Their Own Picture

Rather than guess, the Delgados brought their real accounts into TrackMoola and explored the difference between gross estate and net-to-heirs. The planner let them see, for their own situation, how the final tax return would carve into what they hoped to pass on.

The illustrative starting point, with no particular planning, looked like this:

"Seeing that more than three hundred thousand dollars would never reach the kids was a wake-up call," Grace says. "It wasn't that the estate was small. It was that we'd never looked at the after-tax number."

A Few Moves That Grew the Net Figure

With the gap in plain view, the Delgados explored several well-established, perfectly ordinary approaches to increase the amount that would actually reach their children. None of these involves anything exotic.

• Deliberate RRIF drawdown in lower-income years. By taking somewhat larger RRIF withdrawals during their lower-bracket retirement years — and using or gifting the after-tax proceeds — they reduced the registered balance that would otherwise stack onto a final return at top rates.
• Using TFSAs more fully. They shifted money into their TFSAs over time. TFSA assets generally pass to heirs without the income inclusion that hits a RRIF, making them a tax-efficient way to hold and transfer wealth.
• Gifting during their lifetime. They began making measured gifts to their children while alive, both to enjoy seeing the impact and to gradually shrink the portfolio facing a future deemed disposition.
• Reviewing beneficiary designations. They confirmed that registered accounts and insurance named beneficiaries directly, helping certain assets pass smoothly.

Here is the high-level before-and-after they explored. Again, these are illustrative figures specific to the Delgados.

The difference — roughly $128,000 more reaching the family in this illustration, or about $43,000 more per child — came not from earning more or taking on risk, but from understanding how the after-tax picture worked and adjusting in advance.

What struck the Delgados was how ordinary each lever was on its own. Taking a slightly larger RRIF withdrawal in a low-income year is a choice millions of retirees can make. Moving savings into a TFSA over time is something most Canadians are encouraged to do anyway. Gifting to your own children carries no gift tax in Canada. Reviewing beneficiary designations costs nothing but an afternoon. "None of these were exotic," Tomas says. "Stacked together, and started early enough, they moved the per-child number by tens of thousands. That's what got our attention." The leverage came from the combination and the timing, not from any single dramatic stroke.

Why Account Type Matters So Much

The exercise also taught them that not all dollars are equal when it comes to passing them on. A dollar in a TFSA, a dollar in a RRIF, and a dollar of long-held stock in a non-registered account each behave very differently at death. The TFSA dollar tends to pass most cleanly. The RRIF dollar may be pulled into income. The stock with a large embedded gain triggers a deemed disposition. Realizing this changed how the Delgados thought about where to hold what, and which accounts to draw down first during retirement. It is exactly the kind of nuance that is invisible until you can see your accounts side by side — which is precisely what they did in the TrackMoola planner, watching how each type of dollar flowed differently to their heirs.

The Reframe That Stuck With Them

The Delgados' mindset shifted in a way that surprised them. They stopped thinking about their estate as a single lump sum and started thinking in terms of net-to-heirs.

"Once we started asking 'what does this decision do to the per-child number?', everything got clearer. It's a completely different question than 'how big is our estate?'"

That reframe — measuring success by what actually reaches the people you love, after tax — is the heart of estate planning. And the only way to manage a number is to be able to see it.

The reframe also changed how they talked about money as a family. The Delgados decided to be open with their adult children about the plan — not the exact dollar figures, but the philosophy. They explained that they were drawing their RRIFs down deliberately, leaning on TFSAs, and beginning to gift while alive, all so that more would reach the next generation efficiently. Their children, far from feeling awkward, were relieved to understand the thinking. It also gently prepared everyone for the eventual settling of the estate, which tends to go far more smoothly when the family is not blindsided. "Talking about it took the taboo out of it," Grace says. "And it meant the kids understood that a gift today and a smaller surprise later were part of the same plan, not a sign anything was wrong."

It Is Not Only About Tax

The Delgados are careful to point out that minimizing tax is not the only goal, and should never crowd out the bigger picture. They are not draining their accounts to leave the largest possible inheritance; they fully intend to enjoy their retirement, travel, and spend on the things they value. The point of modelling net-to-heirs was never to live smaller. It was to make sure that whatever they did not spend reached their children as efficiently as possible, rather than leaking away to an avoidable tax bill. Seeing the after-tax picture simply let them be intentional — to spend with confidence and give with purpose, instead of guessing.

Why Your Numbers Will Differ

It is worth saying plainly: the Delgados' figures have nothing to do with yours. The mix of registered and non-registered assets, the embedded gains, the number of heirs, provincial costs, and your own goals all combine into a picture that is unique to you. There is no universal answer, and the right moves for one family can be wrong for another.

What does carry over is the value of seeing your own gross-versus-net picture early, and the wisdom of confirming any plan with a qualified financial planner, accountant, and where appropriate a lawyer. A planner helps you see; professionals help you act.

Try It Yourself

If you have never modelled the difference between your gross estate and what your children would actually receive after tax, that single number may change how you plan. Bring your real accounts into the TrackMoola planner and explore your own net-to-heirs picture — then take what you learn to your professional advisors. Knowing the after-tax number is the first step to growing it.