Bill 7 $400 a day for hospital stay

[mimico_polak]

with regards to capital gains...my understanding was that if a property is inherited there is no capital gains until such time that it's sold? if that's the case, can't the BIL just pay the amount when it's sold from the proceeds of the sale?

My understanding is this…owner of cottage dies when it’s worth (let’s say 500k), but cottage was bought for 100k.

Someone has to pay the tax on the 400k. Either the estate before releasing everything, or the person that inherited it. In this simple scenario it’s about 100k.

Then the start number is 500k for the new owner and whatever gains are calculated off the next sale price - 500k.

 

[nobbie48]

Same here. Which is frustrating as they're in their early 70s and don't believe in having a will, PoA or anything like that. They're basically hoping that we just take care of things, and happen to agree with my sis on the split.

I'm really not sure how to broach this subject, and last time we did we got met with frustration and hostility 'oh so you guys are just waiting for us to die right?'

Ugh...

It took three years to settle my M-I-Ls will because my dispicable brother in law tried taking over the estate. He promised his mother he'd do all the right things.

Reality: He owed money all over the province so he originally got his mother to let him live in the family home as long as he wanted. The estate would be settled when he moved out. Since he didn't inherit anything the creditors couldn't go after any assets. The problem is the executor is on the hook for decades. It backfired on B-I-L. He ran up so many legal bills the house had to be sold to pay them.

Money brings out the worst in people.

 

[ReSTored]

When the parents eventually die, my friend has already received x dollars and their sibling gets that amount prior to splitting anything else. Not sure what happens if x exceeds the value of the estate.............

Well, I hope they used a lawyer to sort out and document the details on this and all siblings signed off on it. I can see many future issues in terms of the "fixed price" they agree to, the actual present market value, who gets credit for paying the CG taxes, future market value upon the death of the last parent and the value of other estate assets. Could be a nightmare.

 

[crankcall]

In Ontario there is no inheirtance tax. If you inhierit a house/cottage/farm , its yours , your reponsible for the property taxes ect going forwartd but there is no capital gain trigger.
You will only pay capital gains when you sell the property , calculated on the value of when you got it and the new value. If I remember correctly those capital gains at that point are about 50%.
Keep the cottage, your fine

If theres a Will...........

 

[mimico_polak]

In Ontario there is no inheirtance tax. If you inhierit a house/cottage/farm , its yours , your reponsible for the property taxes ect going forwartd but there is no capital gain trigger.
You will only pay capital gains when you sell the property , calculated on the value of when you got it and the new value. If I remember correctly those capital gains at that point are about 50%.
Keep the cottage, your fine

If theres a Will...........

So what happens if the cottage is inherited by me…who pays that tax bill?

 

[GreyGhost]

In Ontario there is no inheirtance tax. If you inhierit a house/cottage/farm , its yours , your reponsible for the property taxes ect going forwartd but there is no capital gain trigger.
You will only pay capital gains when you sell the property , calculated on the value of when you got it and the new value. If I remember correctly those capital gains at that point are about 50%.
Keep the cottage, your fine

If theres a Will...........

You can transfer to a spouse at adjusted cost base but I dont think (and cant find a good resource) that says you can pass it to a kid at that price with a future cg tax bill. Everything I can find says deemed disposition at death and estate pays cg tax and then transfers property at current market value.

As for mps question about who pays, the estate technically but if there wasn't enough money in it to cover the bill, I would assume there is some process where MP could transfer money in to cover the bill without needing to sell the cottage. I dont know the mechanics of this process but I cant imagine the system would force an estate that is cash poor and real estate rich to liquidate a property.

Edit:

This is the best summary I could find right now.

Canadian Inheritance Tax on Property: What You Should Know

Are You Inheriting A House In Canada And Not Sure What Your Next Steps Are? Inheriting Real Estate Can Be Complicated; This Guide Can Help Direct You:

buttonwood.ca

 

[nobbie48]

You can transfer to a spouse at adjusted cost base but I dont think (and cant find a good resource) that says you can pass it to a kid at that price with a future cg tax bill. Everything I can find says deemed disposition at death and estate pays cg tax and then transfers property at current market value.

As for mps question about who pays, the estate technically but if there wasn't enough money in it to cover the bill, I would assume there is some process where MP could transfer money in to cover the bill without needing to sell the cottage. I dont know the mechanics of this process but I cant imagine the system would force an estate that is cash poor and real estate rich to liquidate a property.

Edit:

This is the best summary I could find right now.

Canadian Inheritance Tax on Property: What You Should Know

Are You Inheriting A House In Canada And Not Sure What Your Next Steps Are? Inheriting Real Estate Can Be Complicated; This Guide Can Help Direct You:

buttonwood.ca

The cottage is relatively simple. The estate comes up with the tax money, mortgage, HELOC etc. The tax is collected on 50% of the gain. Plug that into the estates other income, cashed in RIFFs and investments. Figure 25% of the gain. An accountant can clarify but I assume it can be offset by losing stocks etc.

In order to minimize probate costs I assume property can be gifted while the testator is still alive. Check with someone who really knows.

The house is free of cap gains while the owner lives there but a lot of rules changed in late 2016. The owner ceases to live in the house when they die so any increase in value between the time of death and the sale of the house is taxable.

I heard that the government gives three years to settle the taxes.

The farmhouse and a couple of acres is CG free. The rest is subject to CG taxes.

 

[nobbie48]

Same here. Which is frustrating as they're in their early 70s and don't believe in having a will, PoA or anything like that. They're basically hoping that we just take care of things, and happen to agree with my sis on the split.

I'm really not sure how to broach this subject, and last time we did we got met with frustration and hostility 'oh so you guys are just waiting for us to die right?'

Ugh...

I'm under the impression your parents are expecting you and your sister to split the estate 50/50.

Some ugly scenarios your parents might have to consider:

Have you ever gone anywhere in the same vehicle as your sister? What if a Marco Muzzo kills the two of you?

Without a will, every cousin, in-law, friend, ne'er do well jumps on the gravy train.

What if a spouse goes nutso, drugs, alcohol or infidelity and pushes for a bigger share stating all the stuff they supposedly did for mom and dad?

You really should have an odd number of executors.

What if mom or dad starts losing it but the other is OK so all is under control. The one that is OK gets hit by a bus and there's no one of sound mind to sign things off.

Tell them that regardless of their wishes for last rights you're going to give them sky burials, chop them up and leave the pieces on a hillside for the vultures.

Most spousal wills are survivor based. The surviving party gets the estate, largely tax free. Then the survivors will takes over.

Estate planning is needed as well. I'm planning to dump some RIFF content so it doesn't get the full hit later on.

My F-I-L had three income properties, one for each kid but the deal went sour because he left everything to m M-I-L who couldn't take care of them, selling them off. IMO he should have given the houses to each of the kids but the rent went to the mother. It would have instilled more of a work ethic in two of the kids. I got the pick of the litter.

 

[Mad Mike]

I can see how my response is cruel or minimizing the issue, but your last (added?) paragraph sums it up well.

This is nothing more than posturing, same as threatening CUPE strikers with $4k/day fines for being on strike 'illegally'. No one will collect, no one will chase this down.

They'll send you a letter, and then that'll be the end of that.

This is a broken system that requires massive inflow of cash, and more importantly proper management to make sure that it doesn't go to waste and pay the executives.

I don't think it needs a massive inflow of cash -- it needs to get organized, it needs uniform procedures, and it needs clear guidelines -- mostly it needs leadership. Currently it's run by a bunch of independent charities operating as LIHNs, funded by taxpayers.

It's very disorganized, SOPs differ from area to area, and it appears staff are afraid or not empowered to make many decisions. I don't know how many times I've asked a question that needed to be escalated for answering or direction.

 

[ReSTored]

So what happens if the cottage is inherited by me…who pays that tax bill?

Your surviving parent's estate pays the tax bill. You might be able to gift a cottage to avoid probate fees, but you're not able to avoid CG tax on the gain. The adjusted cost base of the cottage = the original purchase price + any capital improvements over the years - the net selling price or evaluation = the CG and the estate pays tax on 50% (at present) on that.

Everything your surviving parent owns is deemed to disposed of when they die and all taxes are due as part of the estate management. The executor of the estate has a legal responsibility to ensure that all taxes or fees are paid, that a final tax return is done and that a CRA Clearance Certificate is secured. Any screw ups on estate management by the executor fall back to the executor, so you need to secure the right resources to ensure it is done correctly, which will include a lawyer, an accountant or a trust company.

If I were you I'd prepare a summary of your parent's assets and call a few lawyers, accountants and trust companies to enquire about requirements and fees. If you want a turnkey option then hire a trust company, overall their fees might be slightly higher, but they will do everything for you. Any time spent now investigating options, which includes getting your stubborn father to do a proper will and prepare and keep current a list of his assets, will pay you huge benefits in the future.

 

[crankcall]

The way around capital gains is have your name on the deed now , when your parents pass the surviving owner , owns the property . This is legal and often done .
I’m on a couple properties , our family lawyer will NOT put my brother and I on moms condo . His reason is that is her principal residence, I have a accident and get sued for everything with my name on it , that could include her condo if my name was on it .
The other properties will just transfer.
Our lawyers job is to protect us from outside threats , and each other LOL


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[backmarkerducati]

For property, does it matter if the property is the primary residence at the time of death or not? If so, that may impact a cottage.

 

[crankcall]

so here is the skinny from an Ontario lawyer ( not me lol)

The federal capital gains tax is a major hurdle to passing on a family cottage. It can result in a large tax bill or even double taxation. If the cottage is given to children during the parent’s lifetime or on death or perhaps sold to children at a discounted rate, the government views it as having been sold at fair market value. The parents will pay capital gains taxes on the difference between the fair market value and the adjusted cost base, which is the value of the cottage when the parents bought it plus any capital improvement expenses (e.g., renovations).

One way to minimize capital gains tax is by transferring an undivided interest in the cottage to the children over several years. This way taxes are only paid on the portion transferred each year and the tax bill can be spread out over several years, hopefully at a lower tax rate than if transferred in its entirety in one year.

For some owners, another way to limit capital gains tax is to designate the cottage as the parents’ principal residence to take advantage of the principal residence exemption for capital gains. Each couple can designate one principal residence at a time, which need not be where they live full time. If the value of the cottage has increased more than their home, it may be advantageous for the parents to designate the cottage as their principal residence for some or all the years of ownership.

Capital gains tax can cause double taxation in the next generation. If the parents sell the cottage to the children for less than fair market value, the parents will still pay tax on the fair market value, not the discounted value. Then when the children sell the cottage they will pay capital gains tax on the difference between their sale price and the discounted price they bought it for – even though the parents have already paid tax on the difference between the discounted price to the children and the fair market value at the time they transferred the cottage.

There is a way to avoid this double taxation. The parents can sell the cottage at full market value to the children and take a promissory note from the children for the amount they wish to discount, then forgive the promissory note on death.

 

[Mad Mike]

In Ontario there is no inheirtance tax. If you inhierit a house/cottage/farm , its yours , your reponsible for the property taxes ect going forwartd but there is no capital gain trigger.
You will only pay capital gains when you sell the property , calculated on the value of when you got it and the new value. If I remember correctly those capital gains at that point are about 50%.
Keep the cottage, your fine

If theres a Will...........

Ya, there is a tax there -- just not called an inheritance tax.

The Ontario Estate Administration Tax, is assessed on the total value of a deceased estate, in excess of $50K -- charged to you when the estate comes out of probate. The tax is $15 per thousand value of the estate which includes the value of Real estate, cars, motorcycles, boats etc, cash, securities, etc.

If I recall, my BIL paid $30K in Ontario Estate Tax and another $65K in capx taxes when his dad died this summer. Total estate value around $2m.

You can plan around some of this tax, but like death, it's hard to cheat it.

 

[nobbie48]

so here is the skinny from an Ontario lawyer ( not me lol)

The federal capital gains tax is a major hurdle to passing on a family cottage. It can result in a large tax bill or even double taxation. If the cottage is given to children during the parent’s lifetime or on death or perhaps sold to children at a discounted rate, the government views it as having been sold at fair market value. The parents will pay capital gains taxes on the difference between the fair market value and the adjusted cost base, which is the value of the cottage when the parents bought it plus any capital improvement expenses (e.g., renovations).

One way to minimize capital gains tax is by transferring an undivided interest in the cottage to the children over several years. This way taxes are only paid on the portion transferred each year and the tax bill can be spread out over several years, hopefully at a lower tax rate than if transferred in its entirety in one year.

For some owners, another way to limit capital gains tax is to designate the cottage as the parents’ principal residence to take advantage of the principal residence exemption for capital gains. Each couple can designate one principal residence at a time, which need not be where they live full time. If the value of the cottage has increased more than their home, it may be advantageous for the parents to designate the cottage as their principal residence for some or all the years of ownership.

Capital gains tax can cause double taxation in the next generation. If the parents sell the cottage to the children for less than fair market value, the parents will still pay tax on the fair market value, not the discounted value. Then when the children sell the cottage they will pay capital gains tax on the difference between their sale price and the discounted price they bought it for – even though the parents have already paid tax on the difference between the discounted price to the children and the fair market value at the time they transferred the cottage.

There is a way to avoid this double taxation. The parents can sell the cottage at full market value to the children and take a promissory note from the children for the amount they wish to discount, then forgive the promissory note on death.

There were a number of changes in late 2016 regarding the principle residence eligibility. My daughter went to school with too many foreign students that owned principle residences while living in mom's principle residence. The government caught on.

Changes include how much time is spent living there, age of owner etc.

A friend with a house and cottage needs to consider the split disposition thing for the cottage but he doesn't trust his sole heir to not abuse the equity, using it for a HELOC to get a bigger MB.

If the cottage value transfer doesn't work look at RRSPs / RIFFs. If you don't need the income it's great to see them grow with minimal withdrawals but when you kick the bucket EVERYTHING is immediately on the tax table at max rate. Bleed off a bit extra year by year to ease the pain.

My lawyer gave me, IMO, very sound advice. "Don't try to rule from the grave" "Here it is junior. Blow it and it's gone."

 

[GreyGhost]

A friend with a house and cottage needs to consider the split disposition thing for the cottage but he doesn't trust his sole heir to not abuse the equity, using it for a HELOC to get a bigger MB.

Can you get a HELOC on fractional ownership? I don't think the bank would love that as a stake in a cottage is pretty illiquid and they like fast and easy money in exchange for a low rate. Now, if kid got sole possession of one property, that could obviously support the loan.

If they think their heir sucks with money but wants to support them, there are more complicated solutions available. Leave the assets to a trust which provides the kid a place to live and an income but no financial access to the underlying assets. Obviously there are associated costs so the estate needs to be above a certain size to justify this approach.

 

[nobbie48]

Can you get a HELOC on fractional ownership? I don't think the bank would love that as a stake in a cottage is pretty illiquid and they like fast and easy money in exchange for a low rate. Now, if kid got sole possession of one property, that could obviously support the loan.

If they think their heir sucks with money but wants to support them, there are more complicated solutions available. Leave the assets to a trust which provides the kid a place to live and an income but no financial access to the underlying assets. Obviously there are associated costs so the estate needs to be above a certain size to justify this approach.

Junior is poster boy for Dunning Kruger Effect. Dad's hoping for a miracle, you know, ask enough people and a genie pops out of a bottle with the solution.

The "HELOC" would have to be a back alley deal at 25%. Banks need controlling interest.

 

[crankcall]

Way too many people think they have a Rockefeller estate when most of us and our families largely have Flintstone estates . The convolution and 12 hiers named to split grannies 500k .
And then you have the self made dad that is sure the kids are idiots and create a trust to look after 2mil . Your dead , let it happen .


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[justride]

Maybe one way of extending the hospital stay without paying?
Only choose the long term facilely that is best for you family situation. Closer to family is usually the best option. If there are only two locations you prefer than only choose the two. So Don't pick 5 locations! You don't want the other 3 locations! So if the hospital wants to release the your Mom or Dad you can state that you are waiting for a "room" at the long term residence that you chose and works for your family.

There will be pressure from the hospital social worker about them wanting to release the "patient'.
Home care will come up- What ever they say about home care support is a good and manageable is BS!
They will say the one location you want has a long waiting list - You state that one specific location is best for your family and will not choose other locations due to undue hardship that will cause the family. You must be adamant about the only location you want.

The hospital might release the patient to a "in-between" facility. Sort of like a transitioning place from the hospital and term ie The ReActivation Centre at Jane and Church in Toronto. You can voice which in-between facilty you would like but there are not many. Only other one is at/near Trillium Hospital near Sherway Mall (Not 100% sure). All the best!

 

[GreyGhost]

Maybe one way of extending the hospital stay without paying?
Only choose the long term facilely that is best for you family situation. Closer to family is usually the best option. If there are only two locations you prefer than only choose the two. So Don't pick 5 locations! You don't want the other 3 locations! So if the hospital wants to release the your Mom or Dad you can state that you are waiting for a "room" at the long term residence that you chose and works for your family.

There will be pressure from the hospital social worker about them wanting to release the "patient'.
Home care will come up- What ever they say about home care support is a good and manageable is BS!
They will say the one location you want has a long waiting list - You state that one specific location is best for your family and will not choose other locations due to undue hardship that will cause the family. You must be adamant about the only location you want.

The hospital might release the patient to a "in-between" facility. Sort of like a transitioning place from the hospital and term ie The ReActivation Centre at Jane and Church in Toronto. You can voice which in-between facilty you would like but there are not many. Only other one is at/near Trillium Hospital near Sherway Mall (Not 100% sure). All the best!

That is exactly the obstinance that got us to the point of shipping people hundreds of kilometers from support. At this point, getting them out of hospital beds is more important than what the family prefers. Needs trump wants.