Purchasing a Home and Your Financial Planning
Canada is known for its relatively high taxes, and effectively managing your family's finances involves careful consideration of various tax-related factors. Real estate often constitutes the primary asset for many individuals, making it imperative to engage in comprehensive financial planning when buying a property. Decisions regarding property ownership and how to hold the title should be made based on your unique circumstances, those of your spouse, and other significant family members. Factors to take into account include personal status, residency, family status, income, financing needs, health, the intended use of the property, and estate distribution plans.
For instance, some individuals mistakenly assume that changing property ownership is a straightforward process. However, altering ownership has tax implications from the outset. Even if the transferor gifts the property to the transferee without cost, it is still treated as a transfer at fair market value for tax purposes, potentially triggering immediate capital gains tax unless specific conditions are met, such as the property being a principal residence. Furthermore, if the property carries a mortgage, adding or removing property owners necessitates bank approval. Different banks may have varying policies; some permit direct mortgage assumption, while others require a refinancing process, with approval not guaranteed.
Similarly, many parents, once their children reach adulthood, aspire to transfer property into joint tenancy as a means of passing down their assets while avoiding probate fees. Nonetheless, this seemingly uncomplicated approach involves complex legal considerations and may not necessarily result in the property being passed to the children as the parents desire.
Consequently, it is crucial for everyone, particularly those contemplating the purchase of investment property, to seek advice from both an accountant and a lawyer to conduct thorough financial planning before acquiring real estate.
Disclaimer:
This document is provided for reference purposes only and does not constitute legal advice. For specific issues, please consult with your lawyer.
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