# home during estate taxes



## abcxyz (May 30, 2011)

Morning,

Im kinda new to the world of legal finance and was wondering what happens to your parents principle residence during the wind down of their estate? My mother passed away a while ago and upon my fathers passing my family plans to maintain and live in his (my childhood) home. Is there any legalities or loop holes i need to explore to transition this properly. thank you


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## MoneyGal (Apr 24, 2009)

There are no tax consequences. Upon the death of the second owner, the house is deemed to have been sold at fair market value. As gains on a principle residence are not taxable, there is no tax due as a result of that deemed disposition. 

You will be deemed to have acquired the house at the fair market value. 

The best way for you to determine FMV is to have an actual appraisal undertaken, which should run you in the range of $250. Alternately, you could use comparable real estate listings or sales, as I know CRA will accept these as determination of FMV. 

So long as you maintain this house as your principal residence, there are no taxes due if you dispose of (i.e., sell, gift) the house to another person or people.


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## I'm Howard (Oct 13, 2010)

This could become a nightmare if siblings fight over how it should be treated, some want it kept, some want it sold, some want buying out, others want to buy them out but don't have the money, I have seen instances like this become extremly fractious and split families.

No Taxes are due because it is a Principal Residance, but ongoing costs will be associated with it until the final disposition.

Real Property can become Real Problems.


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## Rico (Jan 27, 2011)

Depending on the situation, wouldn't being put on title make the transition even easier (it just goes to the next "owner")?


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## MoneyGal (Apr 24, 2009)

Rico said:


> Depending on the situation, wouldn't being put on title make the transition even easier (it just goes to the next "owner")?


No. Don't do this. If it is not your principal residence, the gain is not tax-free. You would be introducing capital gains taxes into a situation where none would otherwise be payable. 

Likewise, don't decide to "sell" it to a family member for less than FMV.


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## I'm Howard (Oct 13, 2010)

FMV Moneygal is worth what you can get and the problem is how do you arrive at that value, especially since within the same immediate area it is possible to have a range of houses from $400,000 to several millions.?????

Good point about name on deed, i know several people who have done just that thinking property would passs through automatically, in one case it is a Sister trying to ensure Her Brother gets no part of the $500,000 Semi in the Beach that is currently occupied by her 94 year old mother.


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## MoneyGal (Apr 24, 2009)

I'm Howard said:


> FMV Moneygal is worth what you can get and the problem is how do you arrive at that value, especially since within the same immediate area it is possible to have a range of houses from $400,000 to several millions.?????


In the case being discussed here, it isn't that important to get an accurate FMV. So long as the house is occupied as a principal residence, FMV will never come into play. 

That being said, if and when the house ceases to be a principal residence, the gain (if there is one) will be calculated from the deemed disposition and deemed transfer of the asset. 

Accordingly, in that situation, it is in your interest to have a "high" FMV. So, if you are able to find comparable properties which range from $400K to "millions," then pick a house worth millions, print off the real estate listing or details of the sale, and file it away.


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## OhGreatGuru (May 24, 2009)

Putting the title into Joint ownership now would have tax consequences (mostly for the survivor) that need to be examined very carefully. But it would keep the house out of probate. If you knew when your father was going to die; transferred ownership a few months beforehand; and moved in within a year of the transfer; there would be no capital gains tax issues. Anything else would ultimately have some consequences, because the period of ownership during which it was not your residence would not be eligible for capital gains exemption when you ultimately sell it yourself.

PS. If the house passes through the estate, and is therefore subject to probate, you are going to need an estimate of the value for the probate court anyway.


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## MoneyGal (Apr 24, 2009)

Good points! 

For the purposes of probate, you want a "low" FMV.


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## fraser (May 15, 2010)

We have recently gone thru this in British Columbia. My advice to you is to see a family lawyer and get your fathers will and assets in order. This will save you significant dollars in probate fees and legal fees. Don't delay. And make sure to cover off the tax consequences with the lawyer. The trick is to get all assets registered jointly in your father's name and in yours or your siblings) so that they will not attract probate.

If everything is set up propertly you will be able to avoid the hassle of probate- and the probate fees and legal fees that go with probate.

We actually filed our own probate-very simply process that saved us about 4K in legal fees. We still had to pay something like 6K in probate fees-fortunately most assets had been set up as joint with the siblings and were not subject to probate. 

This of course assumes that there are no family issues pertaining to the estate. If so, all bets are off!


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## Rico (Jan 27, 2011)

fraser said:


> The trick is to get all assets registered jointly in your father's name and in yours or your siblings) so that they will not attract probate.


This is what I was thinking of . . . but as usual professional advice is always prudent.


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## sags (May 15, 2010)

My wife inherited some farmland in Saskatchewan. It has been in probate for about 8 months. Does anyone the average length of time to probate a farm?


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## I'm Howard (Oct 13, 2010)

I am confused by what qualifies for probate and what does not, as I had been under the assumption that if the item was left directly to someone in a will, it was not subject to probate, but my Friend was left the house by his brother, six months later, no action, and Trust Company says it is due to TO being bogged down with Probate Action??

My Father is 92, failing health, has a sizeable amount of assets, all Stocks, Bonds, Cash, common sense says that He would save considerable monies by giving most of the monies now, but He like many others, are unable to do that.


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## Four Pillars (Apr 5, 2009)

I'm Howard said:


> I am confused by what qualifies for probate and what does not, as I had been under the assumption that if the item was left directly to someone in a will, it was not subject to probate, but my Friend was left the house by his brother, six months later, no action, and Trust Company says it is due to TO being bogged down with Probate Action??


I believe everything goes through probate with a few exceptions.

Jointly owned property doesn't have to go through probate.
Registered accounts (ie RRSP) with a beneficiary avoid probate.

I'm sure there are more examples.


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## fraser (May 15, 2010)

I would definately seek professional advice as quickly as possible-time is not on your side. In our case, an associate recommended a very good family lawyer. We did not use this lawyer's services for the actual probate process-we had other issues to resolve. But the advice we did get enabled us to be fully prepared for probate and shielded us from a good chunk of the probate tax.

We found that the do it yourself probate package from Staples was very good. Even if we had decided to use a lawyer for probate, this kit was very good as it described the process, the filiing requirements, and reviewed a number of scenerios. After reading it we just went ahead and did our own. The kit provided blank copies, on CD, of all the documents that we need to file. We simply filled in the information.

The first thing we were required to do was go on line and do a will seach on the provincial database to ensure no other wills were on file (other than the one we had). After that, it was a matter of getting the will, a complete list of assets, identifying the executor, providing a notorized statement that we had sent copies of the will to everyone mentioned in the will (we had to provide their names and addresses). There was an additional paper required for real estate but this did not apply to us...it may have been a title and lien search. We paid our filing fee. The people at the courthouse were very helpful (do NOT go at month end or on a Monday or a Friday) and in fact notorized for a fee some of our documents. Eight weeks later we got a call, went to the court and paid the probate fees. A week later we got the release-essentially a paper signed by a judge saying all is in order. The process looked daunting at first but when we broke it down by each submission it became rather straightforward....but we had all of the necessary documents, wills and there were no family issues. This was a BC probate, I am certain all provinces differ in terms of time that it takes to process.

It has been just over a year now and I cannot remember all of the details about what was included in probate. We managed to keep most of it away from probate and thus easily accessable and not taxed. This is a key area where you probably need expert advice.


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## kcowan (Jul 1, 2010)

I'm Howard said:


> I am confused by what qualifies for probate and what does not, as I had been under the assumption that if the item was left directly to someone in a will, it was not subject to probate...


That is incorrect. It is the estate that is subject to probate. The will determines the disposition of the estate. Things that pass directly (not through the estate)
are not subject to the terms of the will and avoid probate. 


Four Pillars said:


> Jointly owned property doesn't have to go through probate.
> Registered accounts (ie RRSP) with a beneficiary avoid probate.


Life insurance policies with a beneficiary named.
Any investment held in joint names.

Note that land transfer tax is waived only if the beneficiary is immediate family.


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## LBCfan (Jan 13, 2011)

sags said:


> My wife inherited some farmland in Saskatchewan. It has been in probate for about 8 months. Does anyone the average length of time to probate a farm?


I suspect you are confusing probating an estate with settling an estate. The probate process simply means the courts have determined that the will is valid and that the executors are granted legal authority to settle the estate according to the terms of the will.

Normally, in Sask, Letters of Probate are granted within weeks or a couple of months (after petition for probate).

Settling an estate can take years.


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## fraser (May 15, 2010)

We were very, very fortunate. At the very early signs of the onset of dementia in my mother, my father had wills updated and POA's executed for him and for my mother, and all assets etc. identified/recorded.. They also had prearranged funerals. My father passed away and my mother became incapacitated prior to her death.

I cannot begin to tell you how much emotional stress this saved us over the course of time. The family practice lawyer that we engaged for a property sale walked us through what would have transpired had my parents not had this forsight-both emotional stress plus about a 9 month delay and 30K odd extra in legal fees plus additional probate tax.

We immediately went home and got our affairs in order. It is one of the kindest things you can do for your surviving spouse or children. The trick is not to plan to do it, or think about doing it. The trick is to get it done. When we changed accountants, this is one of the first items on the checklist that she reviewed with us and does so every year.


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## sags (May 15, 2010)

Thanks for the info........I did have the two confused.


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## Eclectic12 (Oct 20, 2010)

I'm Howard said:


> [ ... ]
> 
> My Father is 92, failing health, has a sizeable amount of assets, all Stocks, Bonds, Cash, common sense says that He would save considerable monies by giving most of the monies now, but He like many others, are unable to do that.


My mom at 83 also failing health, is in the same situation. Like many others, she is aware of the tax situation but is reluctant as she doesn't know how much she will need and for how long.


Her compromise is that every once in a while, she's given gifts ranging from $1k TO $10k to the beneficiaries. It's not a lot but at least part is avoiding the "all in one year or two" big tax bill at death. 


Cheers


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