Land transfer ripoff taxes

[rgkv]

Well this just about beats them all!!!!!
My mother passed away last year, my brother and I inherit the house, I have been here the last 8 years so mother could die at home, I am now buying my brother out and will keep the home...
MY FAMILY"S HOME!!!! WHERE MY FAMILY LIVED AND PAID TAXES FOR 56 YEARS!!!!! AND I HAVE TO PAY LAND TRANSFER TAXES!!!!!!
This is fucking bullshit..........

 

[Frosty]

it's called double dipping. politicans are scumbags.

 

[KBear]

Can't you buy your brother out for $1 on title, and have some separate agreement to pay him whatever the amount is. It seems hard to believe they would charge the full land transfer tax, x2 in Toronto, when you are just removing someone from title on the property. Do we have any real estate lawyers here.

 

[rgkv]

Can't you buy your brother out for $1 on title, and have some separate agreement to pay him whatever the amount is. It seems hard to believe they would charge the full land transfer tax, x2 in Toronto, when you are just removing someone from title on the property. Do we have any real estate lawyers here.

mother died, house is part of estate, I inherit half of the estate, buying brother out means I only pay half the transfer taxes { still about 35 hundred bucks!!!!} the hole things being handled by the estate lawyer, he's not happy about it either....

Lawyer has informed us that the goverment will challenge us on less than market value deals for their share of the money
we agreed on a price less than market value {about 30 grand] and the subject has already come up at the bank....

 

[Thunderballs]

It might be more tax efficient to sell it within the estate, assuming you and your brother are named in the estate for inheritance.

 

[landscaper]

Can't you buy your brother out for $1 on title, and have some separate agreement to pay him whatever the amount is. It seems hard to believe they would charge the full land transfer tax, x2 in Toronto, when you are just removing someone from title on the property. Do we have any real estate lawyers here.

the tax man pays special attention to non arms length transfers... and the executor of the estate would be on the hook for penalties as well as the taxes. If the transfer had happened prior to her death it would have been easier to do ie., transfer the property for 1 dollar but not after death

 

[doggee_01]

sorry but i think you are fucked the tax man will have his pound of flesh...only real way out is to do it before death.....

 

[oldjones]

I think there is a way out: don't transfer title; that's what triggers the tax. It would mean you and your bro would have to do a brotherly deal based entirely on brotherly love and trust and keep it as the family home, not your personal property. If you did, you'd avoid that tax. Perhaps you've considered that and rejected it already, meaning you've chosen the tax route to make this inheritance your own. It's too bad you have to come up with the cash to acquire it legally, but that is how such stuff works.

 

[landscaper]

I think there is a way out: don't transfer title; that's what triggers the tax. It would mean you and your bro would have to do a brotherly deal based entirely on brotherly love and trust and keep it as the family home, not your personal property. If you did, you'd avoid that tax. Perhaps you've considered that and rejected it already, meaning you've chosen the tax route to make this inheritance your own. It's too bad you have to come up with the cash to acquire it legally, but that is how such stuff works.

The only problem with this is that the home is in the estate and listed in the will. The executor is required by law to ensure the wishes of the deseaced and all laws are followed. If there is a descrepancy after the fact the executor is responsible. Title transfered at death so I don't think there is an option

 

[gymbum1]

I bought a new house a couple years ago. The GST at the time was included in so you don't see it. When you go to the lawyers and see the break down its incredible how much tax you pay. GST was huge and land transfer tax was crazy combined about $90,000 then property taxes $9000 a year you can tell I don't live in the city of Toronto. Plus 13% HST after income tax at 46% no wonder I'm considering leaving Canada.

 

[fun-guy]

Being an executor of a will is a fucking thankless, high risk responsibility. If anyone is ever asked to do this, ask them to consider naming a lawyer as the co-executor.

I know of two people who become PERSONALLY liable for significant money owing to CRA over their well intentioned acting as an executor for a friend/neighbour. For no reward.

I agree it's a thankless job if you're not paid for it because you will have suspicions from family members.

If you don't know what you're doing, I highly recommend letting a professional do it, not necessarily a lawyer, they charge way too much. I've settled many estates over the years but I put in the effort to educate myself and learned as I went to the point I'm quite confident now, never had any issues, but I do refer to an estate lawyer for answers when I'm unsure about something. There is a laundry list items to complete, roughly between 60 to 70 items depending on complexity of the estate, and even more depending on where assets are located.

 

[fun-guy]

I think there is a way out: don't transfer title; that's what triggers the tax. It would mean you and your bro would have to do a brotherly deal based entirely on brotherly love and trust and keep it as the family home, not your personal property. If you did, you'd avoid that tax. Perhaps you've considered that and rejected it already, meaning you've chosen the tax route to make this inheritance your own. It's too bad you have to come up with the cash to acquire it legally, but that is how such stuff works.

So what are you saying that upon death the home stays in the estate? Who manages the estate, for how long and at what fee? When will it leave the estate? Upon sale to a third party? I'm not an estate lawyer and don't know if there's a time limit upon death to settle the estate. Is it possible for the brother to gift his share of the house to his brother and have a written agreement that upon sale he will get his 50% of the sale?

 

[landscaper]

Well if you as a layman are wiling to risk your PERSONAL assets for the nominal fee you get paid, then you can do it and HOPE for the best. But estate law is VERY complex and fraught with pitfalls that you simply CANNOT educate yourself on.

One guy I know is now on the hook for a beneficiary's unpaid taxes that arose from the beneficiary's fraudulent sworn statements to the executor attesting to his tax situation etc. There was NO way possible for the executor to learn of the beneficiary's problems as they had not become public record at that time. Ten years later, the layman executor of this small estate ($300k of a house, car and small savings account) is on the hook to the CRA for $100k of the (now bankrupt) beneficiary's back taxes, penalties, interest etc. It has gone to court at a cost of $20k already and the guy has NO option but to pay. He is a simple employee with an income of $85 k and now has to mortgage his own house to pay.

He earned $2,000 for a LOT of work. He said it was simply NOT worth the work even IF he didn't have any legal liability.

Another story I know is not as bad but proves it is not worth the risk.

He should have an out as far as the sworn statement goes, fraud is fraud and in this case it appears the estate was a victim of fraud. Have the police investigate the issue and get a reported on the CRA, they tend to play hardball to improve their statistics when they can the light of day or a news report tends to make them see reason

 

[fun-guy]

Well if you as a layman are wiling to risk your PERSONAL assets for the nominal fee you get paid, then you can do it and HOPE for the best. But estate law is VERY complex and fraught with pitfalls that you simply CANNOT educate yourself on.

One guy I know is now on the hook for a beneficiary's unpaid taxes that arose from the beneficiary's fraudulent sworn statements to the executor attesting to his tax situation etc. There was NO way possible for the executor to learn of the beneficiary's problems as they had not become public record at that time. Ten years later, the layman executor of this small estate ($300k of a house, car and small savings account) is on the hook to the CRA for $100k of the (now bankrupt) beneficiary's back taxes, penalties, interest etc. It has gone to court at a cost of $20k already and the guy has NO option but to pay. He is a simple employee with an income of $85 k and now has to mortgage his own house to pay.

He earned $2,000 for a LOT of work. He said it was simply NOT worth the work even IF he didn't have any legal liability.

Another story I know is not as bad but proves it is not worth the risk.

On face value just by reading what you posted requires further clarification, obviously there's more to it than posted. I always make sure taxes are paid on all taxable assets that are passed through an estate to beneficiaries, that's part of my process and there are ways to ensure that, obviously this guy didn't know what he was doing. Regardless, there are tens and tens of thousands of estates that have been settled by ordinary people ove the years with not hitches.

 

[fun-guy]

The executor was deemed to be a trustee and was deemed to be ultimately responsible for the legal disbursement of the funds.

Cra did not allege impropriety against the executor. No malice, negligence etc. The cra simply claimed an absolute responsibility for the executor to send the money owed the cra to the cra, not the beneficiary.

And as the estate no longer has the money, they went after the executor and were successful.

What you have stated above is absolutely correct and that's the first rule I learned when I started out learning the executor responsibilities and liabilities, my real estate lawyer made that clear to me from day one.

 

[toguy5252]

You may wish to clarify this situation with your lawyer. Firstly there is no LTT when property is transferred from an estate to a beneficiary so when it passes out of the estate there is no tax. If you purchase a one half interest from your brother there is tax but why shouldn't there be. what is the difference if you buy real estate from your brother or me? Yo are still buying real estate and therefore there is LTT. If your brother was to gist it to you there would not be LTT unless there was a mortgage on the house in which case you would pay LTT on 1/2 the value of the mortgage only. it may be a little more complicated than you think and you should discuss in more detail with your lawyer.

 

[toguy5252]

Well if you as a layman are wiling to risk your PERSONAL assets for the nominal fee you get paid, then you can do it and HOPE for the best. But estate law is VERY complex and fraught with pitfalls that you simply CANNOT educate yourself on.

One guy I know is now on the hook for a beneficiary's unpaid taxes that arose from the beneficiary's fraudulent sworn statements to the executor attesting to his tax situation etc. There was NO way possible for the executor to learn of the beneficiary's problems as they had not become public record at that time. Ten years later, the layman executor of this small estate ($300k of a house, car and small savings account) is on the hook to the CRA for $100k of the (now bankrupt) beneficiary's back taxes, penalties, interest etc. It has gone to court at a cost of $20k already and the guy has NO option but to pay. He is a simple employee with an income of $85 k and now has to mortgage his own house to pay.

He earned $2,000 for a LOT of work. He said it was simply NOT worth the work even IF he didn't have any legal liability.

Another story I know is not as bad but proves it is not worth the risk.

It is likely somewhat more complicated than your friend is telling you. there should be no distributions from an estate until taxes are settled and you have a certificate from CRA. Trustees can rely on the certificate and it sounds like your friend may have distributed too soon regardless of whether or not there was fraud.

 

[fun-guy]

Toguy, there is no tax on a principal residence only when it's passed to the beneficiaries, all other properties are taxed. Second, after it was passed to the two brothers tax free from the estate, then one brother wanted to buy out the other brother. When you buy out a partner in real estate you have to value it at fair market value, so he has to pay LTT on half of the fair market value of the house.

 

[fun-guy]

It is likely somewhat more complicated than your friend is telling you. there should be no distributions from an estate until taxes are settled and you have a certificate from CRA. Trustees can rely on the certificate and it sounds like your friend may have distributed too soon regardless of whether or not there was fraud.

I agree with you, thus my comment before that his poor friend didn't know what he was doing.

 

[toguy5252]

Toguy, there is no tax on a principal residence only when it's passed to the beneficiaries, all other properties are taxed. Second, after it was passed to the two brothers tax free from the estate, then one brother wanted to buy out the other brother. When you buy out a partner in real estate you have to value it at fair market value, so he has to pay LTT on half of the fair market value of the house.

You are thinking about income tax. The OP was talking about Land Transfer Tax which has nothing to do with whether or not it was a principal residence. There is LTT on the value of the consideration. A party is entitled to make a gift in which case the value would be zero unless there was a mortgage in which case it would be the value of the mortgage because the assumption of the debt of another ie the transferor is consideration.