Farm Succession / Inheritance Question

[teejk]

With the caveat that legal advice you get for free on the Internet is worth less than you paid for it...

Canada has no federal estate tax. Ontario has a provincial estate tax. You can read about it here:
Estate Administration Tax

The tax is 0.5% of the first $50,000 of value and 1.5% on the rest. For real estate it is the "unencumbered value," which means net of any mortgage. So you would have to get the property appraised and then pay taxes on the appraised amount.

You are going to want to get professional legal advice. Even without the estate tax, it is very much in your interest to ensure that the title to the property is transferred properly. It's worth having someone who does it all the time handle it.

Your estate tax is very low, around here you'd pay more than that in title and recordation fees to transfer ownership of a property.

Is there anything Canada doesn't tax? Even in tax crazy Wisconsin they killed the "death tax" years ago. In fact we even have a "transfer on death" deed now for real estate. Let's the owner designate the recipient but still hold entire title to the property until death...I think is preferable to a JTWS transfer because it avoids probate and the full value at the date of death becomes the tax basis (instead of say 50% date of death value for the dead person, 50% date of gift value for the ultimate transferee)...important if property values are increasing...that's assuming of course that the entire value of the estate is less than the current exemption of around $5.3 mil). But take the advice and seek Canadian estate tax planning counsel.

 

[2LaneCruzer]

2x

If she owned it free and clear (sans mortgage) she could sell it to you for a pittance ($1) ... this avoids estate taxes, but creates an issue in terms of your cost basis in the property should you elect to sell it at some future point.

Not a bad idea. You might also consider having her place it in joint tenancy with your wife, which means it passes by law automatically to her upon her mother's death. It does require something called "severance of joint tenancy", which in this country means that you have to file an estate tax form and a death certificate, and have it recorded at the courthouse. Normally joint tenancy does not pass under a will, so you avoid not only probate, but a possible contest of the will.

 

[sixdogs]

All three of you better get to an estate attorney ASAP. I'm thinking this afternoon. The person you want will be skilled in trusts and estates and don't go to a local real estate attorney. Lots of advice these days, especially over the internet is dangerously wrong. I do not know Canadian estate law but the attorney will advise trust vs will and sale or inheritance. Better do this fast as things can go wrong and what you think will happen doesn't necessarily have to happen.

 

[chado613]

Thank you all for the info!

 

[JSanders10]

You've said your wife's name is already on the deed?
So, there's already joint ownership in the property. You're halfway there.
Best to get it all transferred before the death, as that avoids any probating of wills. My sis and I did that with my mother before her death and make it ALL so much more simple.

 

[2LaneCruzer]

He said the MIL's name was on the deed. That means the property will pass through the will, which means probate. By all means see an attorney versed in estate planning...but keep in mind that if the property is transferred prior to death, it won't ordinarily go through probate and the same goes for joint tenancy.

 

[JSanders10]

Yep, you're right... except there is still time to change that now.

And yes, consult an attorney or estate planner.

 

[erda]

My advice is that you need to consult an accountant and a lawyer both of whom specialise in "farms". The situation is far more complex than it may appear. I dealt with a similar situation when my father passed away. The old saying especially in regards to tax and legal advice, "you get what you pay for" is true!

For example: did your MIL actively farm the land? How long has she owned the farm? Both of these questions will lead you down the road of capital gains exemptions. You cannot purchase it for $1 as someone has suggested-CRA deems all sales to be a "fair market value" and that would trigger capital gains.

 

[JamesHW]

We consulted an estate lawyer on my Mom's place (80 acre non-working farm) when we took over the property taxes for her and the lawyer advised she put us on the deed, essentially making us co-owners. When she passed away 10 years later the property simply became ours and the property was not considered part of her estate.

 

[sixdogs]

To the OP on this...let us know how you make out and what you do.