Question:
I am dealing with an estate where our father has a piece of property in Vancouver and the amount of cash in the estate is small. The title to the property is currently in his name and the property has been rented out for the last 30 years. For the following scenarios I would like to know what the tax consequences would be and/or at what rate much taxes would be charged in each scenario. The property has been appraised at approx. $600,000. I don't wish to have to sell the property in order to distribute our father's wishes. 1. If the title to the property remains in the estate's name, how long can the property remain in that name? 2. If the title to the property was to be transferred into the names of all the immediate children (the local beneficiaries)? 3. If a company was to be created and title was to be transferred to the company?
Answer: Tuesday, March 23, 2010
The title to the property must be transmitted from the deceased's name into the name of the executor(s), which requires probate of the will. The value of the real property plus the value of any other property (cash, et cetera) owned in the deceased's name is the basis for the probate filing fee of approximately 1.4% of the value of the estate. There is no property transfer tax payable on the transmission.The title to the property can remain in the executor's name for as long as the executor is alive, subject to the executor's duty to wind up the estate and do what is best for the beneficiaries. If the estate holds the property, and continues to rent it out, for example, then the estate must file ongoing income tax returns. The executor (the estate) can sell the property ant time after the title has been transmitted to the executor.
If your father resided in the property up to the time of his death, and his children are beneficiaries of his estate, then the title may be further transferred to the child(ren) also without property transfer tax. If your father did not so reside, then property transfer tax is payable at the rate of 1% on the first $200,000.00 of fair market value, and 2% on the balance.
If the title is transferred to a company, then property transfer tax is payable regardless of residency of the deceased.
Don't forget that if the property was not your father's principal residence, then federal tax is payable on the capital gain in the year of your father's death, regardless of what the estate does with the property. If there is not enough cash in the estate, or in the pocket(s) of the beneficiary(ies), to pay the tax bill, then the federal government will expect the property to be sold to pay your father's capital gain tax.
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