Receiving a property as an inheritance often prompts a whirlwind of emotions — gratitude, nostalgia, and sometimes, overwhelm. Especially in Ontario, with its specific set of rules and nuances, understanding what comes next is going to be really important for you when you are about to inherit a property.
Immediate Steps
When a loved one passes away, it’s the will that dictates how their assets, including properties, are distributed. If you’re named in the will, the first step is the probate process, where the will’s authenticity is verified. In the absence of a will, Ontario’s laws of intestacy determine the property’s distribution.
The Role of the Estate Trustee
The Estate Trustee (previously referred to as the Executor) plays a pivotal role. They’re responsible for settling debts, paying any taxes owed, and ensuring assets, including properties, are distributed as per the deceased’s wishes. If you’ve been named the trustee, you’ll bear this responsibility.
Potential Liabilities When You Inherit a Property
Inheriting a property isn’t just about acquiring an asset. There might be debts attached, like a mortgage or a home equity line of credit. Moreover, the property could have other liens or back taxes owed. It’s crucial to be aware of these before making decisions about the property’s future.
Tax Implications
Upon the original owner’s death, the Canada Revenue Agency (CRA) deems their property to be sold at its fair market value, which could lead to capital gains tax. However, if the property was the deceased’s principal residence, it might be exempt from this tax.
When you, as the inheritor, eventually sell the property, you’ll need to pay tax on any gains from the deemed value at the time of inheritance to the sale price.
Deciding the Property’s Future
Once all legal and financial matters are settled, you’ll need to decide what to do with the property:
- Live in it: This might be an attractive option, especially if the property holds sentimental value or is strategically located.
- Rent it out: If you’re not keen on selling or living in the property, renting can provide a steady income stream.
- Sell it: If maintaining the property is not feasible or if you need liquidity, selling is a viable option.
Seeking Professional Advice
Given the complexities associated with inheriting property, consulting professionals is advisable. A real estate attorney can guide you through legal processes, a tax advisor can help with CRA obligations. If you decide that you may want to sell the property, we’d love to hear from you as well to get a no-obligation cash offer.
A Final Though on When You Inherit a Property
Inheriting property in Ontario comes with its set of challenges and responsibilities. While it’s a tangible connection to a loved one, it also requires careful consideration and planning. By understanding the process and seeking appropriate guidance, you can make informed decisions that honour your loved one’s legacy and support your financial well-being.
