Page 18 - Real Estate Now May-June 2022
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Inheriting a Home: What You Should Know




               Michelle McNally courtesy REALTOR.ca
                      hen a loved one passes, you may find yourself the inheritor of their property. Whether you intend to keep
                      the home or sell it, the process of handling someone else’s real estate can feel like a huge responsibility,
             Wespecially on top of the other emotions you’re processing.

             Jason Heath, managing director and Certified Financial Planner (CFP) at Objective Financial Partners Inc., says more
             people are opting to keep their inherited home due to climbing real estate prices. Often their biggest question about
             inheritance centres around what to do with the property once it’s in their possession.

             “I find a lot of times people inherit a home and [some] of the considerations [are] ‘Do I keep it? Do I rent it out? Do I
             sell it?’” said Heath. “I think because real estate prices, in a lot of parts of Canada, are going up so much, there are more
             people trying to keep and rent the house out rather than sell it.”

             Are you or someone you know in this position? You’re in luck, Heath shares his knowledge about what you should
             know about home inheritance.

             The first steps and deciding what to do next
                                                         In most cases when someone passes away, the person’s children
                                                         are the ones inheriting the property and are the executors of
                                                         the estate, explains Heath. At this time, the executors may need
                                                         to settle the estate and go through the legal process that entails
                                                         any required probate and tax filing with the government. Once
                                                         that process is complete, the asset belongs to them, and the
                                                         executors can choose what to do with the property from there.
                                                         There are a few options when it comes to inherited real estate—
                                                         you can sell the home, keep it as a personal use property like
                                                         a  cottage,  or  rent  it  out  as  a  source  of  income.  Heath  says
                                                         it’s important to consider the use of the property, and what
                                                         that will mean for you in terms of expenses, maintenance,
                                                         insurance, and taxes.

             “If you’re going to keep the property, how are you going to use it?” he asks. “If you’re going to keep it as a rental
             property, is it actually a good property for that purpose? Is it a bit of a hassle because it’s older and needs repairs and
             work done?”

             Understand potential capital gains taxes and expenses
             Generally, if you’re the heir of a home that was the principal residence of the person who died, there are no tax
             implications to think about, Heath explains. However, if the home was used for another purpose, such as a rental or
             recreational property, there may be federal taxes to pay.
             Canada has no inheritance tax, but you may be required to pay capital gains tax, which would start accruing after the
             home is inherited, so long as it was not used as a primary residence. The capital gain is calculated based on the fair
             market value of the property when it was inherited and the growth in value when it’s sold.
             Heath also notes there may be other costs involved with property inheritance, such as a provincial probate fee worth
             a small percentage of the estate’s value. If you plan on keeping the property as a vacation home or a source of
             rental income, you’ll also need to think about annual property taxes, insurance, utilities, condo fees, if applicable, and
             regular maintenance costs.


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