SPIS

I thought these were dead, but then I saw one on a deal the other day.

A Seller Property Information Sheet is a form designed to give buyers additional information about the house. It asks sellers to list any known defects, pending work orders or tax increases, oversight by any regulatory body such as conservation authorities, etc. The idea is that, if you disclose everything up front, you reduce your liability. Here’s the problem: it doesn’t reduce liability, primarily because they are often filled out wrong.

If you don’t say anything about the sprinkler system, believing it to be fine, the buyers have the responsibility of making sure that they do an inspection before closing. If it fails after closing, you are better protected as long as you didn’t hide any defects.

If, however, you say on the SPIS that there are no issues with the sprinkler system, and it turns out that there are, you have now been untruthful. This will cause a much bigger problem down the line, even if you honestly believed that there were no problems.

If you are selling and are asked to sign a SPIS, be very careful.

Are you an artist? Then you definitely need a will.

When Sylvia Plath died, her executor was her ex-husband’s sister. This sister was, effectively, given full authority to determine Ms. Plath’s writing legacy. Ms. Plath likely listed her as her executor at a time when she was still married; we may never know if she wanted her to remain as her executor, or if she simply forgot that it was set up this way, and we will never know if her literary estate was managed in the way that Ms. Plath wanted.

Artists have unique considerations when it comes to estate planning. There is not simply money; there are also copyright and trademarks, and the ability to licence or sell artworks for years or decades to come. It is particularly important to choose not only the executor of your financial estate, but who will manage your artistic legacy.

What happens if your inheritance is late?

With estates, and assets, becoming increasingly complicated, it is not uncommon for it to take some time to distribute assets out to beneficiaries. Sometimes, this can take several months; sometimes, several years. If your inheritance is sitting in a bank account for an extended amount of time, what are your rights?

In Ontario, we have what is informally known as the “executor’s year”: basically, the executor of an estate has one calendar year to start distributing assets, after which the beneficiary is entitled to interest on their inheritance back-dated to the date of death. While this timeline can be extended with justification, generally, as an executor, you should work to have the assets distributed as quickly as is practical.

Protect yourself from fraud through title insurance

A few weeks ago, I mentioned title insurance as a common cost on a purchase. What is title insurance?

Basically, title insurance protects against things you have no control over. The big one is fraud; if someone impersonates you and puts a fake mortgage on your house, or sells it, then your title insurance will fix things.

 

It also protects against a former owner doing work without a permit, or a neighbour building something onto your property.

 

Given the small cost of title insurance, it’s generally well worth it.

Happy Canada Day!

We hope that you have a safe and happy holiday weekend.

Can you save capital gains tax by selling your cottage to your kids for $1?

Tax time is around the corner. In honour of that, I thought I would write about something tax-related.

In Canada, when you sell real estate, you have to pay capital gains tax on a portion of the money you earned on it; the only exemption is for your principal residence. If you own a cottage, and also own a home in town that is designated as your principal residence, you will pay capital gains tax when you sell the cottage.

 

Sometimes, people think that they can avoid paying capital gains tax by selling the cottage to their children for $1. After all, they’ll be leaving it to the kids in their will; why not sell it now, have it in their names so there’s no probate tax, and sell it for a dollar so there’s no capital gains tax because there was no gain? The problem: CRA will assign the sale fair market value for tax purposes. Even if you only got $1, they’ll treat it as if you got whatever the going rate would have been, and you’ll still owe the capital gains tax. (Also note, this also applies if you add them jointly on title with you; you’ll pay the equivalent of whatever percentage you give them.)

 

The bottom line is that, before making any decision like this, have a good long talk with your accountant and lawyer to ensure that you will achieve the objective you are trying for.

Happy Canada Day!

We wish you all a very happy Canada Day and hope you are able to enjoy a relaxing long weekend.

Who says wills can’t be fun?

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

Save

Are you in the majority?

Survey 2You may not want to be. A recent survey found that 72% of Americans have either no will or an out-of-date will (done before a major life event such as having a child, for example).  I imagine the same statistics hold true for Canadians. In this case, you most definitely want to be in the minority, and have an up-to-date will.

Save

Why bridge financing can be a very good thing

OLYMPUS DIGITAL CAMERA

I’ve had more than one sale this spring get extended, from one day to one month. When a client’s sale doesn’t close as scheduled, it can have serious consequences if they were counting on using those funds to buy something. Fortunately, none of them were affected seriously, either because they weren’t buying or because they had already closed their purchases through bridge financing.

Bridge financing basically gives you an advance on your sale proceeds. If you were expecting to get, say, $100,000.00 at the time of your sale, you borrow that money a week or two early, pay a higher rate of interest, and then pay it back the day your sale closes.

There are some definite benefits to doing this. First, the cost of the interest is more than compensated for by the decrease in stress. You know that your purchase is going to close, and likely earlier in the day, because we don’t need to wait on your buyer to be ready; we only need to wait for your money to come in.

Second, in the worst case scenario of something happening on your sale, you at least can already get into your new home. Your buyer will usually be covering your interest, so there would be no financial loss to you.

If you have the option to close your purchase and sale on different days and qualify for a bridge loan, you should seriously consider it.

Save