Investing in your real estate future

By Jayson Schwarz, LLM & Jacqueline Moneta, JD
October 13, 2021

This article is the final installment in a three-part series we have been writing on the intersection between real estate and your estate plan. In part one, we discussed the various ways you can own property, and how your ownership affects how your property will pass under your will. In the second part, we explored how gifting a down payment to your child can impact your estate. And in this third segment, we will explore investment properties and how to plan for their succession.

BUYING AN INVESTMENT PROPERTY

With the housing market showing no signs of slowing, investment properties are a great way to take advantage of the upside. Whether you are buying an investment property with a partner, family, friends or on your own, it’s critical to have a succession plan.
There are many different ways to purchase investment property. You may buy it alone, with a spouse or with friends. It may be your decision to use an investment vehicle such as a corporation, limited partnership or trust.

The impact of how you proceed will have ramifications with respect to income tax payable on income earned from the investment and capital gains, should the property be sold or posthumously on your estate if something should happen.
Are you buying with your partner as joint tenants, so if something happens to either, the survivor gets the property tax-free? Are you buying with a friend as tenants in common, so upon death, your estate receives your portion? Are you buying through a corporation, and if so, have you done a separate Will for personal property to exempt those shares from probate or administration? Is the property in a family trust, and upon your death, nothing happens, as the other beneficiaries continue?

As you can see, the process is not easy. The way you structure your investment portfolio is critical to your family and your future. It’s important to retain the right lawyer and accountant tax advisor. Get someone who looks holistically at your situation, and is proactive in advising you on the best route to follow.

FOREIGN PROPERTIES

With the world beginning to reopen and people looking to travel again, a condo in Aspen or Miami, or a beach house in Mexico could be both a fun and profitable venture. It is important to understand how to protect your foreign investment.

If you own property in a foreign jurisdiction, having an Ontario Will might not be sufficient. Not all foreign jurisdictions will recognize such a document as valid. The rules are different in every jurisdiction. It’s always best to play it safe and speak with a professional in the jurisdiction where you are buying the property, to ensure your investment will be distributed the way you intended. In some cases, it might be enough to simply have a second Will covering only your foreign assets. It is important, though, that if you have multiple Wills, they are professionally drafted so that they are coordinated with each other, and neither revokes the other.

No matter how or where you purchase your investment it’s important to have a team that can advise you. Your lawyer should be able to quarterback your transaction and make the process of finding foreign estate and tax advice, and closing your deal, as dreamy as your new vacation rental.

About Jayson Schwarz, LLM & Jacqueline Moneta, JD

Jayson Schwarz LLM and Jacqueline Moneta are with Schwarz Law Partners LLP. To suggest topics for future columns or ask questions, visit schwarzlaw.ca or email info@schwarzlaw.ca.

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