Handing Down The Cottage 2008

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Addressing the issues related to keeping a cottage, farm or other treasures property in the family

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  • Handing Down The Cottage 2008

    1. 1. Welcome
    2. 2. <ul><li>Family Issues </li></ul><ul><li>Protecting your Lifestyle </li></ul><ul><li>Investing for the Future </li></ul><ul><li>Retirement Planning </li></ul><ul><li>Your Legacy </li></ul><ul><li>Philanthropy </li></ul>Geoffrey Parker, CFA, CFP
    3. 3. Handing Down the Cottage
    4. 4. Handing Down the Cottage Family Wishes
    5. 5. <ul><li>Family Wishes </li></ul><ul><ul><li>What family members want? </li></ul></ul><ul><ul><li>Can each family member use it? </li></ul></ul><ul><ul><li>What are the family dynamics? </li></ul></ul><ul><ul><li>What are their respective financial positions? </li></ul></ul><ul><ul><li>Will conflicts arise over usage, funding, division of labour? </li></ul></ul>Handing Down the Cottage
    6. 6. <ul><li>Recommendation </li></ul><ul><li>Engage Your Family in a Dialogue </li></ul>Handing Down the Cottage
    7. 7. Cottage as Part of Your Estate Handing Down the Cottage
    8. 8. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Portion of your estate </li></ul></ul><ul><ul><ul><li>A small amount </li></ul></ul></ul><ul><ul><ul><li>A large amount </li></ul></ul></ul>Handing Down the Cottage
    9. 9. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Transfer during your lifetime </li></ul></ul><ul><ul><ul><li>Triggers capital gain, except to spouse </li></ul></ul></ul><ul><ul><ul><li>Exposure to another’s creditors </li></ul></ul></ul><ul><ul><ul><li>Events beyond anyone’s control - family law issues </li></ul></ul></ul>Handing Down the Cottage
    10. 10. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Transfer during your lifetime </li></ul></ul><ul><ul><ul><li>Joint tenants </li></ul></ul></ul><ul><ul><ul><li>Tenants in common </li></ul></ul></ul><ul><ul><ul><li>Non-share corporation </li></ul></ul></ul><ul><ul><ul><li>Inter Vivos trust </li></ul></ul></ul>Handing Down the Cottage
    11. 11. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Transfer during your lifetime </li></ul></ul><ul><ul><ul><li>Sell cottage to child/children – </li></ul></ul></ul><ul><ul><ul><li>At any price you like </li></ul></ul></ul><ul><ul><ul><li>Take back a mortgage </li></ul></ul></ul>Handing Down the Cottage
    12. 12. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Sell cottage to one child </li></ul></ul><ul><ul><ul><li>Now or after your death </li></ul></ul></ul><ul><ul><ul><li>At market value or at a lower price </li></ul></ul></ul><ul><ul><ul><li>Put a dollar value </li></ul></ul></ul><ul><ul><ul><li>Add an inflation factor </li></ul></ul></ul>Handing Down the Cottage
    13. 13. <ul><li>Cottage as Part of Your Estate </li></ul><ul><ul><li>Sell cottage to one child </li></ul></ul><ul><ul><ul><li>Have an agreement to “fair market value” </li></ul></ul></ul><ul><ul><ul><li>Is it an advancement of a child’s inheritance </li></ul></ul></ul><ul><ul><ul><li>You are giving up ownership, you are giving up control </li></ul></ul></ul>Handing Down the Cottage
    14. 14. Taxation Handing Down the Cottage
    15. 15. <ul><li>Taxation </li></ul><ul><ul><li>Capital Gain </li></ul></ul><ul><ul><ul><li>50 percent of any gain included in income </li></ul></ul></ul><ul><ul><ul><li>Principal residence election </li></ul></ul></ul><ul><ul><ul><li>A spousal trust </li></ul></ul></ul>Handing Down the Cottage
    16. 16. <ul><li>Taxation </li></ul><ul><ul><li>US Estate tax </li></ul></ul><ul><ul><ul><li>Could be included in worldwide property calculation </li></ul></ul></ul><ul><ul><ul><li>Potentially bigger impact if property in is the US </li></ul></ul></ul><ul><ul><ul><li>Subject of another presentation </li></ul></ul></ul>Handing Down the Cottage
    17. 17. <ul><li>Taxation </li></ul><ul><ul><li>Probate Tax </li></ul></ul><ul><ul><ul><li>On value of estate </li></ul></ul></ul><ul><ul><ul><li>No maximum in Ontario </li></ul></ul></ul><ul><ul><ul><li>Excludes: </li></ul></ul></ul><ul><ul><ul><ul><li>Real property outside province </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Property jointly held with right of survivorship </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Insurance and registered plans with designated beneficiaries </li></ul></ul></ul></ul>Handing Down the Cottage
    18. 18. Funding the Process Handing Down the Cottage
    19. 19. <ul><li>Funding the Process </li></ul><ul><ul><li>Capital gains tax a given </li></ul></ul><ul><ul><li>Other assets available </li></ul></ul><ul><ul><li>Inheritor not obligated to pay taxes </li></ul></ul><ul><ul><li>Funds to equalize asset distribution </li></ul></ul><ul><ul><li>Funds to meet expenses and capital improvements in future </li></ul></ul>Handing Down the Cottage
    20. 20. <ul><li>Funding the Process </li></ul><ul><ul><ul><li>Life insurance </li></ul></ul></ul><ul><ul><ul><li>Family Trust </li></ul></ul></ul><ul><ul><ul><li>A sinking fund </li></ul></ul></ul>
    21. 21. Summary Handing Down the Cottage
    22. 22. <ul><li>Summary </li></ul><ul><ul><li>Establish a dialogue with your family </li></ul></ul><ul><ul><li>Recognize that there will be a cost </li></ul></ul><ul><ul><li>Establish a written plan </li></ul></ul><ul><ul><li>Do not plan in isolation - part of a complete estate plan </li></ul></ul><ul><ul><li>Use professionals - estate lawyers/tax advisors </li></ul></ul>Handing Down the Cottage
    23. 23. Working with You Handing Down the Cottage
    24. 24. Your Beneficiaries Handing Down the Cottage Charity Family CRA
    25. 25. Your Beneficiaries Charity Family CRA Handing Down the Cottage
    26. 26. <ul><li>The Process </li></ul><ul><ul><li>Detail what you want to do </li></ul></ul><ul><ul><li>Review and inventory your assets </li></ul></ul><ul><ul><li>Assessment of your estate’s tax liability </li></ul></ul><ul><ul><li>Discussion of alternatives </li></ul></ul><ul><ul><li>Package to go to estate lawyer </li></ul></ul>Handing Down the Cottage
    27. 27. <ul><li>Benefits to You </li></ul><ul><ul><li>Detailed and documented analysis of your estate </li></ul></ul><ul><ul><ul><ul><li>Your family </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Your executors </li></ul></ul></ul></ul><ul><ul><ul><ul><li>An estate lawyer </li></ul></ul></ul></ul><ul><ul><li>Less time spent with lawyer = less cost </li></ul></ul>
    28. 28. <ul><li>Geoffrey Parker, CFA, CFP, CSA </li></ul><ul><li>  </li></ul><ul><li>&quot;Planning for Your Peace of Mind“ </li></ul><ul><li>  </li></ul><ul><li>905-470-9940,304 </li></ul><ul><li>[email_address] </li></ul><ul><li>  </li></ul>Handing Down the Cottage
    29. 29. Thank you
    30. 30. Handing Down the Cottage Disclaimers The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of BMO Nesbitt Burns Inc. (“BMO NBI”). Every effort has been made to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions that are accurate and complete. Information may be available to BMO Nesbitt Burns or its affiliates that is not reflected herein. However, neither the author nor BMO NBI makes any representation or warranty, express or implied, in respect thereof, takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. This report is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. BMO NBI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Ltee/Ltd. (&quot;BMO Nesbitt Burns&quot;) will buy from or sell to customers securities of issuers mentioned herein on a principal basis. BMO Nesbitt Burns, its affiliates, officers, directors or employees may have a long or short position in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO Nesbitt Burns or its affiliates may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. A significant lending relationship may exist between Bank of Montreal, or its affiliates, and certain of the issuers mentioned herein. BMO NBI is a wholly owned subsidiary of BMO Nesbitt Burns Corporation Limited which is an indirect wholly-owned subsidiary of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Nesbitt Burns Corp. and/or BMO Nesbitt Burns Securities Ltd. The comments included in this publication are not intended to be a definitive analysis of tax applicability or trust and estates law. The comments contained herein are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances. The comments included in the publication are not intended to be a definitive analysis of tax law: The comments contained herein are general in nature and professional advice regarding an individual’s particular tax position should be attained in respect of any person’s specific circumstances.

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