2.2 Financial Situation: Income, Expenses, Assets, Liabilities, and Capital Needs at Death

Quick Answer: A Life 1.1 financial fact-find lists current and future income and expenses, liquid versus fixed assets, liabilities with payment terms, capital expenses that arise at death (funeral, income taxes, debts, education or legacy funds, charitable gifts), and additional resources at death (existing life policies plus a pension or guaranteed-annuity lump sum).

Personal situation without dollars is a story. Dollars without humans is a spreadsheet that insures the wrong person. CISRO’s Life contents put financial situation beside personal situation inside the same sub-component so the representative cannot skip either column. This section stays inside 1.1: you are inventorying. Present-value income replacement, inflation assumptions, and “how much term versus permanent” are later skills.

Mapping the household in dollars

Current and future income

Write gross and a working net for each earner, plus non-employment cash that would change at death.

Current income is what the T4, T2125, rental statement, and support order show this year. Future income is the path: raises, parental leave, a known contract end date, a child aging out of support, Irena’s care costs rising, Anika’s grid, Tomasz’s layoff risk. A self-employed contrast file (Raj at $118,000 net) would show this year’s net and a range for next year, not a municipal grid. Commission and bonus belong in the file with a note on how many years they have been real.

Do not treat Irena’s OAS as “household income you can spend on the mortgage.” It is her money, already in the adult-dependent story. Do not treat support received as Anika’s human capital; if the Calgary payor dies, that $400 per month is a different person’s insurance file.

Current and future expenses

The couple’s monthly burn is about $15,400 against about $16,300 of household net. That tight gap is the point: blended-family files often look “high income” until support, two properties, childcare, and elder care are on one page.

Future expenses are not a second lifestyle lecture. They are dated changes: Marek’s support ending, Sofia’s childcare ending, Irena’s PSW hours increasing, a mortgage renewal in 2028. Death rewrites the expense path — unpaid caregiving becomes invoices — which is why 1.1 records both the current budget and the budget that would exist after a death, even before you run a formal needs model.

Assets: liquid versus fixed

CISRO asks for assets (liquid and fixed). Liquidity means “can this become cash in days or weeks without wrecking the survivors’ housing.” It is not the same as “has a market value.”

A representative who adds the house to “cash available at death” has misclassified a fixed asset. Selling the Edmonton home to bury Tomasz would move Anika, Sofia, Leila, and Irena. The condo could be sold, but not this week, and a sale without a spousal rollover crystallizes the gain.

Liabilities, including payment terms

A balance of “$485,000 mortgage” without terms is incomplete. Payment terms change whether survivors can keep the asset.

• Edmonton mortgage — $485,000. Contractual payment $2,850 monthly, 23 years remaining, 4.6% fixed until 2028, then reset. Closed-mortgage penalty if they refinance in a hurry. The lender may allow assumption; it may not. Record the reset date.
• Condo mortgage — $180,000. 5.1%, 18 years, about $1,150 monthly. If Anika keeps the rental, this debt can stay as an income-property loan. If the condo is sold or transferred without planning, the gain and the discharge interact.
• HELOC — $15,000 outstanding on an $80,000 limit, prime plus 0.5%, demand. Demand means the remaining term can become “today.”
• Car loan — $12,400, 6.2%, three years. Often due on death or on sale of the vehicle.
• Support is not a loan principal, but it has a remaining term (Marek’s dependency; six years of spousal). Capitalizing support is a later needs step; listing the term is 1.1.

Unrecorded terms create fake solutions: “they have equity of $225,000 in Edmonton” does not pay a funeral if the mortgage is closed and the HELOC is called in the same month.

Capital expenses arising upon death

CISRO’s list is closed for exam purposes. Capital expenses arising upon death are:

1. Funeral expenses — use a realistic Canadian figure until quotes exist. This file uses $15,000.
2. Income taxes — terminal T1 items: deemed dispositions, RRSPs that do not roll, unpaid instalments. If Tomasz’s condo does not roll to Anika (estate, then to Marek, or an election out), half of the $210,000 gain is a taxable capital gain; this file identifies about $42,000 of tax when rollover is incomplete. If the condo and RRSP do roll to Anika, identified tax can be much smaller — which is why beneficiary designations are financial facts, not stationery.
3. Debt repayment — amounts survivors want gone because one income cannot carry them. Anika’s working assumption: clear the Edmonton mortgage, HELOC, and car loan ($485,000 + $15,000 + $12,400 = $512,400) and keep the rental mortgage if the condo is kept.
4. Setting up education or legacy funds — RESP is only $31,000. The file still wants about $80,000 of capital for Marek’s remaining Ontario schooling plus Leila and Sofia. A “legacy” can also be Irena’s care capital if family will not house her.
5. Charitable donations — Tomasz’s $25,000 Heart & Stroke intention is a death-triggered capital amount once he states it. Whether it is a will gift or an insurance designation changes tax, not the need to write the number down.

Identified capital expenses if Tomasz dies, using Anika’s debt-clearing assumption: $15,000 + $42,000 + $512,400 + $80,000 + $25,000 = $674,400. That total is not the insurance recommendation. It ignores ongoing income replacement for Anika’s household and Nadia’s household. It is the 1.1 capital list. Mixing CPP death benefits into this list is the wrong chapter (existing government coverage). Mixing a 10-times-salary shortcut is the wrong sub-component (articulating needs).

If Anika dies, funeral is still about $15,000, the Edmonton mortgage is still $485,000, and income-tax on Tomasz’s condo is not triggered by her death. The expensive new item is replacement care (PSW plus after-school), which shows up first as a future expense path and then as a need. Her group life of $236,000 is a resource, not a capital expense.

Additional resources available upon death

CISRO names two families of resources in 1.1:

• Existing life insurance policies — Tomasz: group $142,000 plus individual term $250,000. Of the term, $100,000 is irrevocably Nadia’s under the order, so Anika’s household must not count $250,000 as its own. Anika: group $236,000, no individual policy. Bank-sold mortgage life, if any, is listed here as a policy and examined later for exclusions and declining balance.
• Lump-sum payment from an employment pension or guaranteed annuity — Tomasz’s employer plan is defined-contribution; the account is $188,000, payable to the named beneficiary at death (a lump sum, not a lifetime employee cheque). Anika’s plan is defined benefit: the death benefit may be a survivor pension rather than a lump sum — record the booklet fact, and do not invent a commuted-value cheque. Neither person owns a guaranteed annuity that pays a death lump sum today.

Resources actually available to Anika’s household if Tomasz dies, if she is named on group and on the DC plan: $142,000 + $150,000 + $188,000 = $480,000, against $674,400 of identified capital expenses before income replacement. The gap is the point of the inventory. Nadia’s $100,000 is a resource for the Ontario household, not a double-count for Edmonton.

TFSA, non-registered accounts, and the house are assets, already counted. Do not add them again as “additional resources at death” or you will double-count. Government death and survivor benefits are assessed with existing coverage, not stuffed into this 1.1 resource pair.

The 1.1 financial skill is classification: income versus expense, liquid versus fixed, balance versus term, capital expense versus resource, and whose name is on each cheque.