Succession planning

Not much more than a month remains of this glorious ski season. You’ve contributed to your TFSA and your RRSP, and now you’re asking yourself how you could improve your long-term financial situation. I asked Daniel Duchesne, a member of my wealth management team, to shed some light on an important subject.

Many people have acquired a chalet (a secondary residence) in this area. The purchase is often associated with happy times spent as a family, with friends and loved ones. The chalet is part of the family wealth and quite often, the parent-owners want to keep it while they live and pass it on to their children upon their death.

Like any real estate that is not a principal residence, doing this will trigger – if its value has increased over the years – a capital gain at the point of its sale or transfer.

The tax laws deem that a taxpayer is assumed to have disposed of their goods prior to their death. So from a tax perspective, it’s equivalent to having sold the property. The tax on the capital gain will have to be paid by the estate.

The price paid for the chalet back in the day was $250,000. At the time of the death, its market value is estimated to be $750,000. According to the will, the inheritors become the new owners of the secondary residence. The government also has the right to its share, which is a net amount estimated to be about $125,000 (25 percent of the capital gain).

As you can see, it might be wise to consult a professional who specializes in estate planning to put a strategy in place to avoid this kind of surprise.

Happy spring skiing!

Special collaborator

Daniel Duchesne MBA, AVA, Pl. Fin. | Vice-President & Specialist in Estate Planning |  Financial Security Advisor |  Services Financiers RBC Gestion de Patrimoine Inc.


Francis Couillard38 Posts

Francis Couillard est Vice-président, gestionnaire de portefeuille et conseiller en patrimoine. Vice-President, Portfolio Manager & Wealth Advisor.


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