Q: I am unmarried and own two houses that I have willed to my two sisters individually. What are the taxes that should be considered if I pass away and the houses go to my sisters?
A: Although I don’t profess to be an expert on taxes (you should consult an accountant for a definitive answer), you will need to consider the following taxes:
1. On the death of an individual who owns a property that is not their principal residence (only one of your houses can be a principal residence), there is a deemed disposition of the property and capital gains taxes are due on the increase in value from the date of purchase to the date of disposition.
This is only applicable to the one house and should be included when the estate accountant files taxes for the deceased.
2. If a property is left to an individual in a will, then once it is transferred to the estate it can subsequently be transferred to the beneficiary without land transfer tax because it is exempt for the purposes of administering an estate.
3. The third tax that must be considered is estate administration tax (also known as probate fees).
The estate must be valued which will consider the value of both properties and a tax will be due and payable before anything can be transferred.
This amounts to approximately 1.5 per cent of the value of the estate (houses, bank accounts, investments, etc,…).
This is one of those taxes that must be paid up front.
Just remember, two things you can’t avoid: death and taxes.
Jeffrey Cowan is the principal of Cowan Law and can be reached at email@example.com.