Thursday, October 30, 2014

Retirees' options for accessing home equity

I've come across a very good article at Caregivers Solutions Magazine (one of my very favourite Canadian publications), written by the Professional Chartered Accountants of Ontario, that talks about two ways that seniors can get cash flow based on the equity they own in their homes. Click here to read it. If you're wondering about reverse mortgages or lines of credit, check out this article for some answers.

My additional suggestion is that if you decide to take one of the steps described in this article, make sure you understand the impact it may have on your estate, particularly if you are thinking of leaving your home to someone.

Specialized drafting is best left to the lawyers

Recently lawyer Chris Staples, who blogs at Estates and Elder Law in Canada, posted an article about why the drafting of wills is best left to lawyers. The logic behind this is simple: the law is complicated and even the smallest of language mistakes can lead to an outcome not contemplated or wanted by the testator. Click here to read Mr. Staples' article.

In the article, Mr. Staples discusses the Ontario case of Budai v. Milton, in which the testator had his will written by a retired financial planner. The will was not straightforward, in that it contained some paragraphs drafted completely by the financial planner (as opposed to being standard or boilerplate clauses). Unfortunately, drafting of legal documents is not something that non-lawyers should do. The court struck down a clause that said a beneficiary could not challenge the will in any way.

If your will requires specialized drafting because you have a very specific wish or unusual request, make sure that it's drafted by an experienced wills lawyer.


Sunday, October 26, 2014

Can you use your will to change joint ownership of property?

Below is a question that illustrates a question that arises frequently among those planning their estates. It involves trying to work around a joint property designation.

"We are trying to draw up a will. If one spouse dies, we want to divide their portion of joint assets (50%) among the surviving spouse (50%) and two adult children (25% each). Our concern is will the assets (house, property) have to be forced liquidated to pay out the children? How can this be avoided?"

You are making a fundamental error in your planning. That mistake is trying to make a will control joint assets. The legal nature of a joint asset is that ownership on the death of one owner is already determined while both owners are alive, and your will does not affect this. Regardless of what your will says, on the death of one of the joint owners, the property will pass to the surviving joint owner.

Therefore, if you really want the children to receive a share of the joint property, the surviving joint owner will have to sell the property to pay out the children.

I hesitate even to type this next paragraph, as I do not know your situation, your assets, or the rest of your estate-planning goals. Changing the ownership of the property to tenants in common might be a solution to your question. However, making a change like that is not something that should be done without first working through tax consequences and other possible outcomes. Make sure you understand any downside to any changes you make.

Every estate plan is a combination of a will, joint property designations, beneficiary designations, wishes and goals. I strongly suggest that you sit down with an experienced estate planner, and possibly an accountant, to discuss your situation. There may other ways to achieve your goals or address your concerns.

Posts with more than 200 comments are "full"

Hello readers,

A number of the posts on this blog have a couple of hundred comments on them. The system here only allows 200 of them to show up, though it doesn't prevent anyone from continuing to add comments even after 200 has been reached. When I see a post that has 200 or more comments, I add a note in bright red in the body of the post to do my best to alert anyone who wants to leave a question or comment.

However, some of you post on those threads anyway. When that happens, the system tells me that a comment has been made on the thread, but I can't access it. So, if your question or comment has gone unanswered, it could be because you added it to a thread with too many comments.

You can always add your question to another post.

Lynne

Friday, October 24, 2014

Preparing a final tax return

This article from www.widowed.ca contains information and detailed instructions to help someone file a tax return for a spouse or other loved one who has passed away. It is practical and useful information that any executor or widowed spouse will find essential. Click here to read it.

However, in my experience, an awful lot of widowed folks find it extremely difficult, if not impossible, to carry out detailed paperwork shortly after the death of their spouse. It's not that they aren't smart enough or capable enough; it's more that they are overwhelmed with the adjustments they must make to being on their own. Sometimes paperwork such as a tax return can be the last straw for someone who is struggling.

If you are struggling, call an accountant to complete the return. Don't feel that you must do everything yourself. There is nothing wrong with asking for help, particularly with complex paperwork such as tax returns and probate applications. An accountant will be able to provide you with all the advice and information you'll need.

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