{"id":2119,"date":"2024-07-02T15:09:01","date_gmt":"2024-07-02T15:09:01","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management\/?p=2119"},"modified":"2026-07-08T20:00:57","modified_gmt":"2026-07-08T20:00:57","slug":"how-to-navigate-real-estate-as-part-of-family-wealth-transfers","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management\/2024\/07\/02\/how-to-navigate-real-estate-as-part-of-family-wealth-transfers\/","title":{"rendered":"How To Navigate Real Estate As Part of Family Wealth Transfers"},"content":{"rendered":"<p>Read full article <a href=\"https:\/\/www.theglobeandmail.com\/investing\/globe-advisor\/advisor-news\/article-how-to-navigate-real-estate-as-part-of-family-wealth-transfers\/\">here<\/a>.<\/p>\n<p>Transferring real estate holdings within families is often complex. But whether it\u2019s the disposition of a primary home, cottage or rental property, the process is one more Canadians and their financial professionals will have to plan for extensively.<\/p>\n<p class=\"c-article-body__text text-pr-5\">During the next two decades, more than US$84-trillion globally is expected to be passed on between generations. The transfer of real estate is bound to be a significant consideration in this country as\u00a0<a href=\"https:\/\/www150.statcan.gc.ca\/n1\/pub\/36-28-0001\/2024003\/article\/00004-eng.htm\" target=\"_blank\" rel=\"noopener\">the asset class represents about 55 per cent of overall household wealth<\/a>, according to a Statistics Canada report published in March.<\/p>\n<p class=\"c-article-body__text text-pr-5\">Although financial advisors don\u2019t deal with Canadians\u2019 real estate investments directly, they\u2019ll play an increasingly key role in helping families sort through the reasons and goals for real estate transfers, the timing, and who wants the property and will take care of it.<\/p>\n<p class=\"c-article-body__text text-pr-5\">Rather than waiting until a family member of an older generation dies, advisors and their clients should use the 40-70 rule to start this process, says Darius Muica, senior wealth advisor and associate portfolio manager with Lakeview Wealth Management at Wellington-Altus Private Wealth Inc. in Burlington, Ont.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cYou need to have a conversation about what will happen to your real estate holdings with your children if they\u2019re 40 years of age or older or if you are turning 70, whichever is earlier. Certain things take time to plan if you want to do them in a tax-efficient manner,\u201d he says.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cThere are many important issues to discuss, and then you can go ahead and implement strategies through tax and legal professionals. The conversation in the family is crucial,\u201d Mr. Muica adds.<\/p>\n<p class=\"c-article-body__text text-pr-5\">The most straightforward transfer is using the principal residence exemption, which many Canadians rely on to leave the bulk of their estate. Passing this property on through inheritance is considered a sale of a primary residence and exempt from capital gains.<\/p>\n<p class=\"c-article-body__text text-pr-5\">In contrast, a living inheritance arrangement of a cottage, rental property or other non-primary residence triggers capital gains taxes, which are the responsibility of the estate to pay.<\/p>\n<p class=\"c-article-body__text text-pr-5\">Yet, even those with existing plans in place for bequeathing such properties must now revisit those calculations. As of June 25, the capital gains inclusion rate will rise to 66.7 per cent on financial gains in excess of $250,000 from the current 50 per cent threshold for individuals.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cThat\u2019s effectively a 33 per cent jump in taxes for anybody who owns rental properties or cottages. The landscape has changed,\u201d Mr. Muica says.<\/p>\n<p class=\"c-article-body__text text-pr-5\">Among the nuances to consider are attribution rules. These apply to scenarios, for example, in which income-generating properties are inherited or a non-primary residence is transferred to a living spouse \u2013 although there are significant differences in how the rules apply depending on the case.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cWhen you transfer ownership, it\u2019s considered a deemed disposition. Whether it\u2019s [transferred to] your spouse, child or grandchild, it\u2019s equivalent to you selling the asset to another individual. Once you transfer a deemed disposition, there are capital gains,\u201d says Carolina Henao, financial planner with ROCA Financial Solutions Inc. at Sun Life Financial Investment Services (Canada) Inc., in Richmond Hill, Ont.<\/p>\n<p class=\"c-article-body__text text-pr-5\">In situations in which property is transferred or gifted to a spouse, attribution laws allow them to defer capital gains taxes until the property is sold. That\u2019s not the case for children and grandchildren. \u201cYou have to dispose of the asset at the fair market value,\u201d she says, noting that the taxes will be incurred then.<\/p>\n<p class=\"c-article-body__text text-pr-5\">When there are multiple properties or a portfolio of real estate holdings, one possibility is moving the assets into a formalized corporation and affecting an estate freeze. In this approach, the future growth of the assets is passed along to a designated party (such as grandchildren), as well as the tax liability.<\/p>\n<p class=\"c-article-body__text text-pr-5\">But Mr. Muica says this process is fraught with tax burdens and other hurdles. \u201cUnless you bought the properties initially in a corporation, I don\u2019t think it\u2019s worth moving into a corporation structure now.\u201d<\/p>\n<p class=\"c-article-body__text text-pr-5\">Life insurance policies are playing an increasing role in situations in which a family wants to keep a cottage or secondary property and must cover the capital gains triggered by a transfer.<\/p>\n<p class=\"c-article-body__text text-pr-5\">A life insurance plan payout is tax-free and can be used to cover at least part of capital gains. That could make the difference in keeping the property in the family, Mr. Muica says.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cNot everybody will have cash to cover the tax event and ensure that the properties won\u2019t be sold,\u201d he says.<\/p>\n<p class=\"c-article-body__text text-pr-5\">With more families transferring ownership while owners are still alive, there are unique considerations that have far-reaching consequences, Ms. Henao notes.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cThe loss of control is a major one. When you transfer ownership to your children or grandchildren, you can lose complete control over that property and on deciding what happens to it,\u201d she says. \u201cFor instance, you have a cottage you love to go to every summer. If your child decides to sell that property six months from [when it\u2019s transferred], there\u2019s nothing you can do.\u201d<\/p>\n<p class=\"c-article-body__text text-pr-5\">Divorcing spouses may also make a claim against the property, she adds. \u201cIf your child is going through a divorce, they might have to sell [the property] just to pay the spouse.\u201d<\/p>\n<p class=\"c-article-body__text text-pr-5\">Splitting ownership between children also presents complex challenges.<\/p>\n<p class=\"c-article-body__text text-pr-5\">\u201cIf one has spending issues, the asset may be accessible to their creditors,\u201d Ms. Henao cautions. \u201cAll of these are considerations that people need to understand. Once you\u2019re releasing control, things can happen and you need to be aware [of them].\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Transferring real estate holdings within families is often complex. But whether it\u2019s the disposition of a primary home, cottage or rental property, the process is one more Canadians and their financial professionals will have to plan for extensively.<\/p>\n","protected":false},"author":149,"featured_media":2131,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","content-type":"","footnotes":""},"categories":[35,28],"tags":[],"class_list":["post-2119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-estate-planning","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How To Navigate Real Estate As Part of Family Wealth Transfers - Lakeview Wealth Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management\/2024\/07\/02\/how-to-navigate-real-estate-as-part-of-family-wealth-transfers\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How To Navigate Real Estate As Part of Family Wealth Transfers - Lakeview Wealth Management\" \/>\n<meta property=\"og:description\" content=\"Transferring real estate holdings within families is often complex. 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