Do you have to pay HST?

Barrie always has a lot of new construction going on. New homes in Ontario are subject to HST on the purchase price. Usually, this is built into the offer price, so that you don’t end up having to pay extra, but that always factors in that you’ll qualify for the provincial and federal HST rebates on a new home. If you are buying a brand-new home, you may entitled to a rebate, but only in specific circumstances:

  1. You must intend to live in it as your primary home. It can’t be a cottage or other seasonal residence.
  2. If you are not going to live there, an immediate family member of yours (or of your spouse’s) must intend to live there. You can allow your brother to live there and get the rebate, but you can’t rent it to a friend.

If you don’t meet these requirements, you may end up paying a lot in HST that you weren’t budgeting for. If you aren’t sure whether you qualify, as a professional accountant before you go firm on your offer.

The pooled trust: an equitable solution, rather than an equal one

I have a lot of clients who have young children, and often, they are spaced a few years apart. When this is the case, a great solution might be a pooled trust.

A pooled trust keeps everything in your estate in one big trust, with money available for all of your children from the common pot. It’s held that way until the youngest child reaches a certain age, usually around 22 to allow them to finish a college or university degree. The advantage is that the younger children are not penalized for having greater costs to be paid out of trust – often, you would have been helping your children with tuition costs, etc., so older ones may have had that benefit before your death while younger children have to pay for education expenses out of their own trusts before having money for other purposes. Pooling a trust means that younger children get that same advantage; the trust is then split apart when the youngest child reaches a specified age, and each child has their own trust for their own expenses from that point.

If you have more than two children, or your children have a larger gap between them, a pooled trust might be the right solution for you.

Left behind

I have had many occasions where purchaser clients arrived at their new home to find it full of items that the vendor left behind; most recently, a buyer client of mine agreed to allow the seller to leave behind a boat that couldn’t be moved because of the weather, which was only removed the very last day the seller was permitted to leave it there. (And the seller left behind some junk along with the boat, that he conveniently forgot to remove when he picked his boat up.) As a seller, you can only leave items if you have specifically agreed to do so in your agreement of purchase and sale. This includes construction materials; though it is easy to assume that the buyer would want leftover paint or trim, if the buyer doesn’t want it, you could be on the hook for the cost of removal after closing. If you aren’t sure, ask – before closing.

Estate planning is for everyone

Many people feel that estate planning is only for the very rich, or those with highly complex family situations. This is simply not the case. Most of us, if we knew what will happen without a will, would go running to the nearest lawyer to have a proper will drawn up.

Are you in a common law relationship? Are you in a second marriage? Are you in a relationship with someone who is not the other parent to your children? Are you separated? Are you divorced? Do you have life insurance? Do you have young children?

These are just a few of the common situations that would be made very difficult if you die without a will. Do yourself – and your loved ones – a favour, and get one done.

Why you shouldn’t add your kids to the title of your house

One of the most common questions I get asked is how difficult it is to add an adult child to the title of your house. The correct question, though, isn’t whether it’s easy to add them on title. The correct question is whether it’s the right thing to do. And the answer is, usually not.

There are a lot of things that can go wrong by adding someone on title. The very first is that you no longer have sole control over the asset. Quite literally, your house is no longer your own. In Ontario, any joint owner can, without notice to anyone else on title, sever a joint tenancy and make the house owned as tenants in common, which means that they can gift, sell, or bequeath their share to someone else. This can make your life very difficult.

Second, your house is now someone else’s asset. This means that their share can be claimed by creditors during a bankruptcy, or a spouse on divorce or death.

Third, and perhaps most important, you probably won’t even save the taxes you think you’re saving by doing this. Most people want to do this in order to save money on probate taxes. However, by giving someone what is, legally, an investment property, you have made your principal residence – otherwise completely exempt from capital gains taxes – subject to them. Capital gains tax is significantly higher than probate tax, so if the market goes up at all, which it has a habit of doing, you could end up paying far more than you would have through probate taxes.

As always, get advice before jumping into this. The attempted cure might end up being worse than the perceived disease.

Forget the money. Get a will for your kids.

One of the most tragic stories I ever heard was of a couple who were in a fatal car accident on the way home from the hospital with their newborn daughter. The baby survived without a scratch; both parents died. What made it even more tragic was that the parents did not have wills, and so to that tragedy was added another, of multiple family members fighting in court over who had the right to be the baby’s guardian.

The reason I heard this story was that my partner told it to me multiple times while I was pregnant with my first child. My husband and I had done wills shortly after moving in together, but hadn’t gotten around to redoing them after they were revoked when we got married, knowing that we were planning to start a family fairly soon. After several months of regular reminders, we finally sat down, had a VERY long discussion about who to pick, contacted them to make sure they were okay with being chosen, and then signed new wills. And just in time: our son was born about six weeks after we signed them, almost four weeks earlier than expected. Life has its own plans.

Choosing a guardian is not an easy task. In fact, it was probably one of the most difficult decisions we had to make. It’s hard to even think about not being there for your kids, let alone dwell on the subject long enough to decide who would raise them for you. But not making a decision is so much worse – and is its own decision. For one, only family members have a right to apply, so that takes out any friends who might be better suited, for geographic reasons or otherwise; also, any family member can apply, including ones who are completely unsuitable. If you have converted to a different religion, or your family is not in Ontario or even Canada, it becomes even more critical to have a guardian named.

Choosing a guardian is a difficult decision. Refusing to choose one, in not doing your will, does not make the problem go away.

Watch your taps

A few years ago, my husband and I went to visit his family at Christmas. What we didn’t realize was that, just before we left, a toilet that got flushed did not stop running. We returned four days later to find it running, immediately turned it off, and gritted our teeth when the very large water bill arrived the next month. One thing we were grateful for, however, was the fact that there was a note attached to our door from the local water department, letting us know that water had been running in our house for (at that point) two days straight, and that we should check to see where the leak was.

These people would probably have appreciated a note like that. In the end, they will be on the hook for over $4,000 in extra costs, and it appears the City of Toronto will not allow them to pay in instalments to ease their burden.

Do you have a soon-to-be high school grad at home? Time for powers of attorney!

It’s an exciting time of year: high school graduation is just around the corner. Your teenager is about to spread their wings and (hopefully) become an independent adult, whether heading off to college or university or going into the workforce. One extra thing that you should be thinking about as they get ready to leave the nest, even if only temporarily, is powers of attorney.

In Ontario, anyone over the age of 16 can make a power of attorney for personal care (which includes medical care), and anyone over the age of 18 can make a power of attorney for property (which includes bank accounts). Without these documents in place, it can be extremely difficult for anyone, including a parent, to step in and make decisions on someone’s behalf in the event of incapacity. Accidents can happen, and any of us could find ourselves unable to make decisions temporarily or permanently. Having a will is important; having a power of attorney is crucial. An 18-year-old might not have enough assets to think of a will as necessary, but they should definitely get powers of attorney.

Refinancing is math

Pure and simple. How much will you save on interest, vs. how much will you pay in penalties? Reading the fine print before you sign your mortgage in the first place will help immensely, because then you will know what sort of penalty to expect. But the bottom line is that you should never assume what your penalty might be, because it’s almost always going to be a bit higher.

Separated or divorced? You NEED to update your will

We had another client recently who received a windfall; her former husband hadn’t updated his will, and they were separated without a separation agreement and not yet divorced, so she inherited everything on his sudden death.

I can just about guarantee you that that is not what he wanted.

In Ontario, divorce doesn’t revoke a will; it simply removes the divorced person from the will. So, if you left everything to your spouse, alternatively to your brother-in-law, he’s going to inherit even if your former spouse won’t. If you’re separated without a separation agreement, what’s in the will stands, and also, your spouse can inherit if you don’t have a will at all.

This is one of the situations where you absolutely must update your will. You can change it again after you have your separation agreement in place, if anything needs to be in there once the paperwork is all signed, but you must protect yourself now.