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calgary probate

In the Autumn of Our Lives

Many parents wish to leave as much wealth as possible to their kids, including real estate, other investments, and cash. However, tax issues, inheritance and probate can cause unintended complications when they are no longer able to take remedial action. Gaps in knowledge can lead to conflicts of interest, and additional taxes levied on the very people they are trying to help.

 

How Probate Fees / Real Estate Tax in Canada Work

 

The first stage in winding up a deceased person’s estate is to value it for probate i.e. estate administration tax. Parents are tempted to transfer part-ownership of their real estate to their children while they are still alive. This does not incur additional taxes provided the home is their primary residence.

However, if their beneficiaries already have principal residences of their own, they will pay tax on 50% of any future appreciation of their parent’s residence. This reduces overall family wealth. Selling a holiday cottage can be a similar misstep.

However, in some circumstances it may be possible for parents to cover future tax, by taking life insurance of a suitable value. In this case, they ‘pay future tax’ now, so their children do not have to pay ‘penalty tax’ later. Again, the pros and cons of this need careful weighing up, to make sure it does not reduce overall family wealth.

 

Comparing This Situation with the United States

 

In Canada, beneficiaries do not pay inheritance tax. However, the US federal government imposes a succession duty on all legacies or distributive shares of personal property exceeding $10,000.

Moreover, most individual states impose their own succession duties / transfer taxes on collateral / remote successions. Hence, it may make sense for parents to own real estate in Canada as opposed to the United States, in the interest of preserving family wealth.

 

Another Possibility Might Be Cashing In the Home While Alive

 

Aging parents in Canada thus have two choices when it comes to real estate. The first is to retain a 100% share until they pass on. The second could be to sell their home while alive, move to rented accommodation / with the kids, and invest the proceeds in a way that is less tax-onerous for their beneficiaries.

We are neither lawyers nor tax advisers. However, if you want to buy or sell a home in Calgary and are looking for fair value, then Stonegate Equity Ltd could broker a deal to your advantage.

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In the Autumn of Our Lives: Bernard Spragg BY Public Domain