Be careful how you transfer the family cottage

In 1981, our Federal government abolished the ownership of two properties by a couple, with the principal residence exemption on both properties. Now, people can claim only one property as a principal residence.

The problem for many Canadians today is how to minimize the tax impact, especially considering the large increases in property values over the past 30 years in many parts of the country.

One way to cope with the possible tax impact is to buy life insurance, since the benefit will be paid tax-free, and depending how much insurance you buy, it may cover most or all of the tax liability.

But the main question is whether to transfer title while the owners (typically parents) are alive, or just wait until they pass and leave it to the Estate.

There are several answers. One is that, if two parents are registered owners and title is registered in both names, if one passes, the tax on any gain is deferred until the death of the second parent.

But there is no one answer that fits all families, so you need to do some planning, and understand that even if the property ends up falling into the Estate, it won’t necessarily be catastrophic. Make sure to get some advice!

This ad ran in the Richmond News on November 22, 2013.