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Friday, December 30, 2011

Will I lose my home when my aging father passes away?

I received this question from a reader about tax on a property inherited from a parent. Though I have blogged several times about this topic, it's worth covering again. Here's the question :

"I live with my 82 year old father. He intends to leave this house, our principal residence, to me on his death. If he passes, will I lose my home? I don't have very much money to pay any taxes and my father is not in a position to leave much behind. "

To answer this query, I'm making some assumptions. I'm assuming that your father is making a will stating his intention to leave the house to you, or that in the absence of a will you are the only child. I'm making these assumptions because your question is about tax and I want to focus on that.

Because the house is your father's principal residence, there is no tax on the transfer to you. In Canada our inheritances are not taxable so there is no tax when you receive the house.

That's all simple enough, but let's look at a worst case scenario. If your father leaves behind debts such as mortgage, credit cards, loans or unpaid income tax, the house could have to be sold to pay all of that first.

Even if you put the house in joint names this would not prevent the loss of the house if there were debts or taxes. This is because inter-generational joint property is still considered to be in the parent's estate.

2 comments:

  1. Hi Lynne, On a similar issue. I live with my mom in her principal residence. It is paid for and she has no debt. She is currently planning out her estate. She intends to pass on the house to me after her passing, and her remaining assets divided up equally amongst the other siblings. Having read some of your other articles regarding inter-generational joint tenancy not working as true joint tenancy, what is the best and most definitive way for her to pass on her house to me without having to incur probate cost and deal with unwanted conflicts from other siblings ?? Will alone, Joint Tenancy + Will, or Joint Tenancy + Deed of Gift ? Does clarifying the house transfer in her will, means the house will need to be probated. Any help & pointer appreciated ? Thanks!

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  2. Hi, I'm answering this question as a separate blog post on January 6, 2012.

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