PART II - West Vancouver BC Canada Couple with Life

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Daid Stoller has added one more caveat about the life estate.  Tht is - who pays the cost of maintenance of the estate.
david ingram
-----Original Message-----
From: David Stoller [mailto:[email protected]]
Sent: Sunday, December 21, 2003 5:53 PM
To: [email protected]
Subject: RE:  West Vancouver BC Canada Couple with Life Estate -children want to know what is best income tax wise -------- from www.jurock.com ask an income tax expert guru specialist advisor consultant taxman
Life Estates have one other problem,. Who will pay for the maintenance and any special assessment is the person living in the unit has a life interest. Capital expenditures fall to the residual beneficiaries where as the day to day costs fall to the resident.
David Stoller
 
 
-----Original Message-----
From: [email protected] [mailto:[email protected]]On Behalf Of [email protected]
Sent: Sunday, December 21, 2003 2:48 PM
To: CENTAPEDE
Subject:  West Vancouver BC Canada Couple with Life Estate -children want to know what is best income tax wise -------- from www.jurock.com ask an income tax expert guru specialist advisor consultant taxman
 
 
My question is: Canadian-specific
QUESTION: My parents are pensioners aged 75(mom) and 82(dad) and live in West Van in their condo which is worth about $450k.  The condo is under my mother's name and is my parents' only major asset.  My mother has prepared a will (by a lawyer) which grants living privillages to my father if she passes away, but has willed the condo to me and my sister(50/50). We would like to know what steps we should take now to minimize estate and other taxes when my mother/father pass away?  Should the title be transferred (sold?) to the children now?  What are the tax liabilities? What is the best approach?
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david ingram replies:
 
Under the rules of the life estate, you and your sister will inherit the property tax free.  If you are lucky, and it doubles in value, the whole $900,000 will be income tax free to you. The only exception would be that they may be deferring the property taxes and you may have a  property tax bill to pay. This was not always true.  When Capital Gains first came in, Revenue Canada taxed the capital gains for life estates, even if occupied by the surviving spouse.  The Jean Smellie case (a good name for it) was the one which caused parliament to exempt the life estate from capital gains tax when occupied by the surviving spouse.
 
In the meantime, your mother and father can continue living in it without even paying the property taxes which makes it easier to get by on a small or fixed inocme.
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The following statement is not going to be popular with some and will be very popular with others.
 
I do not like life estates.  They are a throwback to a time when women were left a life estate because "they" were unable to look after their affairs. A life estate stopped a wife or a daughter from getting married and their new husband's getting control of the property.
 
And indeed, if your mother were to die, leave the property to your father and he were to remarry, it  well could be that his new wife would inherit the property from him.  
 
A cheaper method because it keeps the property out of the hands of the probate people is for you to all be on the property now as joint tenants with right of survivorship / successorship. In other words, all your names would be on the property. If mom died, it would be owned by you and sister and father.  If you were killed tomorrow in an automobile accident, your sister, mother and father would own it. If dad died, your mother and you and your sister would own the property.
 
If you have another document that says that your name is on the property for estate purposes and that you have no financial interest in the property and will not list it as an asset or pledge it for security, until the final parent dies, there is no capital gains. You do not own the property. Your name is on for estate purposes only to avoid probate fees and other costs.
 
This also works very well in the United States.  In fact, the 706 US estate return  actual form has a place for percentage of ownership in a joint tenancy.  It is not uncommon to see .01% 0% listed.
 
Hope this helps.  Two West Vancouvcer lawyers I could recommend are David Stoller at 801 Park Royal South (604) 922-4702 and / or Bill Spohn at 1100 Park Royal South (604) 926-8681.
 
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver,  BC, CANADA, V7T 1A2
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 
[email protected]
www.centa.com www.david-ingram.com
 
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Your name has been added to our email list because of an enquiry we have received,  we may not answer your question but 
another similar question will be as we lump them.
 
You may find more answers at www.centa.com
 
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
 
This from "ask an income tax and immigration and bankruptcy expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,  Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
  Alaska,  Alabama,  Arkansas,  Arizona,  California,  Colorado, Connecticut,  Delaware, District of Columbia,  Florida,  Georgia,  Hawaii,  Idaho,  Illinois,  Indiana,  Iowa,  Kansas,  Kentucky,  Louisiana,  Maine,  Maryland,  Massachusetts, Michigan, Minnesota,  Mississippi,  Missouri,  Montana,  Nebraska,  Nevada, New Hampshire,  New Jersey, New Mexico,New York, North Carolina,  North Dakota,  Ohio,  Oklahoma,  Oregon. Pennsylvania,  Rhode Island,  South Carolina,  South Dakota, Tennessee,  Texas,  Utah, Vermont,  Virginia, West Virginia, Wisconsin, Wyoming, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec City, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Yukon and Northwest and Nunavit Territories,  Mount Vernon, Eumenclaw, Coos Bay and Dallas  Taxman and Tax Guru Your name has been added to our email list because of an enquiry we have received,  we may not answer your question but 
another similar question will be as we lump them.
 
You may find more answers at www.centa.com
 
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
 
 
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