There are many tax-planning tips for death and estate, but not much is written about the death of your accountant who has been taking care of the family’s finances for decades.
I just read a statistic that says 43% of financial advisors are over the age of 55, and are approaching retirement. Even my own experience with new clients tells me that there are more than a few well-established financial advisors getting ready to retire in the Greater Vancouver Area.
If you suspect that your current accountant is readying for retirement or is suffering from poor health, it is time to develop a contingency plan and put it in place. Your accountant has a lot of family financial information that will be important for tax planning when it comes to your retirement, estate planning, and eventual death.
Examples of important financial history are endless, but more common ones would be the value of assets that were inherited from parents, the cost base of recreational land purchased decades ago, losses incurred from past investments, and principal residence exemptions that have been claimed recently.
I recently began working with a corporation whose accountant died suddenly of old age. The accountant was a sole proprietor and did not have another accountant named to deal with client-file management and distribution in the case of emergency. My new client and I spent a considerable amount of time piecing together pertinent information based on available financial records, legal records, and the CRA database.
What can a client do when their professional accountant becomes incapacitated or dies? In British Columbia, CPABC (the regulatory body for CPA in BC) now requires that all sole practitioners either name an Assistant Accountant or gives CPABC the authority to assign one in times of emergency. Even with an Assistant Accountant in place, the client is not likely to obtain needed information right away.
What can the client do?
- With electronic documents, ask your accountant to provide electronic versions of all your returns going forward and as far back as possible. Store the records somewhere safe.
- Keep electronic copies of all your brokerage statements and real estate purchases.
- Keep electronic copies of all your tax assessments.
- Death of your accountant may not be an adequate reason to file late. CRA may give you some leniency on the late-filing penalty, but this is not written in stone. Find another accountant as soon as possible and file on time.
- CRA has a lot of past tax-filing information online now. Call CRA to obtain pertinent information, if needed.
- Talk to the current accountant about what the backup plan in case of incapacity – this task is much harder than it sounds.
- Start the interviewing process for a new accountant while the current one is able to assist fully in the transition process – again, this step could be difficult, especially if the current accountant has become a good friend over the years.
Whatever steps a client takes, be mindful that CRA may not waive late-filing penalties due to death of your accountant.