Foreign executors

bridge-1I have many clients with children who live abroad. This makes things complicated when they want to have their child who lives in England or the United States act as the executor of their estate, because the courts in Ontario have broad powers to require what is called a bond. Basically, the courts can say that the executor has to pay into court an amount equal to the value of the estate; executors can get around this by buying a bond, or a type of insurance policy, to cover the amount. The cost of the bond is not reimbursed when the money is released from the estate to the beneficiaries, so it is a loss to the estate.

Generally, the court will not require a bond if the executor is in Ontario, other parts of Canada, or even a commonwealth country such as England or Australia. Generally, the court will require a bond if the executor is anywhere else.

If you are thinking of naming a foreign executor, in addition to the difficulty of acting from afar, keep bonding in mind.

First-time buyer rebates on Land Transfer Tax

sale-2I get asked a lot about rebates for first-time buyers. The rules can be a bit complex, which is why it happens fairly regularly that someone thinks they qualify when they don’t. Here are the basic rules:

  1. You have never owned property anywhere in the world. That means never, anywhere. Not “not in the past five years.” Not “I owned a property in another country.” Not even “I went on title to my parents’ condo in Florida.” You can’t ever have been on title to any property, anywhere.
  2. You do not, or did not, have a spouse who has owned property at any point while you were spouses. The key point to remember here is that Ontario’s Family Law Act has two definitions of the term “spouse” – one is that you are legally married, and one that is expanded to include two people who have been living together for at least three years or have a child together. For Land Transfer Tax, the broader definition is used, which means that if you have been living for at least three years with your partner in a house that they own, you are no longer eligible for the rebate. Even if you break up, you lost the right to the rebate during your relationship and cannot get it back.

It’s really important to be aware of the rules, and to be sure that you fit into them, before assuming that you’re going to get the full rebate. If you’re not sure, ask your lawyer at the beginning so that you aren’t budgeting for money you won’t get.

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Common law is not married

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I return to this topic frequently because it bears repeating: if you are common law, in Ontario, you have no inheritance rights. If your house is owned by your partner, you could get kicked out after they die. You will get none of their assets. You will have to sue their estate for anything.

It’s harsh, but it’s the law. If you are common law, get a will.

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Reverse Mortgages

reverseBecause of Remembrance Day tomorrow, I’m posting about real estate today.

You see these commercials once in a while: happy older couple who are able to stay in their home because of the magic of a reverse mortgage. But what is a reverse mortgage?

Basically, it’s a mortgage that you don’t pay until you die or sell your home….but that you can’t refinance either. These mortgages can be extremely restrictive, and so it is particularly important that you read through the fine print to ensure that you are comfortable with the terms. You could end up in a mortgage with fairly high interest compared to the average market rates that you can’t pay out as long as you’re staying in your home. They can be beneficial to a person who has very low cash flow because of a fixed income, but significant equity in a home that has recently increased drastically in value. However, it is critical that you read all of the details. If you are going ahead, you need to go ahead with full knowledge.

Disability savings accounts

piggy-bankIf you are on Ontario’s disability savings program, there are options for saving funds. There is a plan called the Registered Disability Savings Plan that allows you to invest up to $100,000.00 for your personal use, which will not affect your ability to stay in the ODSP program. You have to set up a formal plan through a bank or financial planner, but if you have come into significant funds and want to stay in the program, it’s worth talking about.

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Some quick advice when buying from an estate

tombstoneIt comes down to one point: ask if the executor has gotten their probate order back yet. If they haven’t, there is always a chance that the closing could be delayed, because the seller cannot sell until that order has been returned by the court. If they have it, it’s smooth sailing.

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Who says wills can’t be fun?

funCheck out this video for some good ones – including Toronto’s Great Stork Derby.

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Renting to own

for-rent-4These are becoming increasingly popular as a way for purchasers to get into the housing market before they have a down payment ready. The danger, however, is getting financing down the road when it’s time to close the actual purchase.

Many lenders are very hesitant to loan money to purchase these properties, so it is crucial that you talk to a mortgage broker at the beginning of the deal, and keep in touch with the broker as the years pass. It would be heartbreaking to get to the end of the term, have paid all your money, and not be able to get a mortgage.

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Your photocopy of your will is not your actual will

photocopierSo don’t write changes onto it, thinking that they’ll be effective.  For that matter, a typed will that required witnesses needs any changes to be initialled by you and by two witnesses.

If you want to make changes to your will, your best plan is to see a lawyer to make sure it’s done properly.

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Remarried? Then you don’t have a will any more

just-marriedSo many people are surprised to hear that marriage automatically revokes a will. For a first marriage, this is not such a big deal; when I got married, I would have wanted my husband to inherit from me if I hadn’t updated my will at that time anyway.

The problem arises when this is your second or later marriage, especially if you have children from a prior marriage. Because the rules on intestacy in Ontario are that your spouse gets the first $200,000 of your estate and then shares the rest with your children, you could throw your entire estate into chaos by signing a marriage licence.

Picture this: you are in your seventies, and recently widowed. You are comfortable financially, and meet someone who is equally comfortable financially. You both want your children from your prior marriages to inherit your respective estates, and both have wills that state that. But then you decide to get married. Now, your new spouse is your primary beneficiary, purely by accident, and no matter what your children do, they will not get the majority of your estate.

The only solution to this, unless the law in Ontario is changed, is to get a will done before you marry in contemplation of marriage, or immediately after you marry. It’s critical. Don’t procrastinate on this.

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