Tax Strategy: It’s usually impossible to change liquidator named in a will
MONTREAL — Changing a liquidator and the tax consequences of owning two properties were among the topics raised in the latest batch of reader questions. Here’s what they wanted to know.
Q: “My father recently passed away. He named a financial institution as co-liquidator but they tell me their fee is a minimum of $20,000. What are the chances of dumping them?”
A: Not good. Notary François Bernier of Mackenzie Investments said the Quebec Civil Code stipulates that it’s the prerogative of the deceased (also known as the testator) to designate one or more liquidators and their choice normally prevails over the opinion of the heirs. “It is only when the liquidator is unable to assume his responsibilities, neglects his duties or does not fulfill his obligations that the heirs can ask the court for a replacement,” Bernier said. The exception may be wills drafted in such a way that co-liquidators can switch financial institutions at their discretion, but that doesn’t appear to be the case here.
Q: “We just sold our house and bought a condo apartment in Montreal. We also purchased a condo in Florida four years ago. Does this arrangement affect our Canadian tax situation? We do not earn any money in the U.S. or rent out our condo there. When we sell the place in Florida, will this affect our Canadian tax situation?”
A: Your Montreal home was covered by the principal-residence exemption until the time of sale, so no taxes will be owed on the disposition. Your next decision will be deciding which of the two condos to designate as principal residence as of the time you sold the other property. (The Florida property would be eligible, even if you’re there less than 180 days per year). How much each one appreciates is central to that decision, which you don’t have to make until you sell one or the other. Selling a Florida property does trigger tax-filing obligations (and possibly taxes) in the U.S. You’ll also have to report it to Canadian tax authorities, whether or not you designate it as principal residence. If it’s not your principal residence, you may also owe capital-gains taxes here when you sell it.
Q: “I am under the impression that when my children sell my house after I die there will be capital gains owed, whereas if I sell it now, there won’t. The house was purchased for $24,250 and now is worth about $400,000.”
A: If it’s your only property, it will be covered by the principal-residence exemption for as long as you live there, which means no taxes owed. The only way the kids will get taxed is if it takes a while to sell after your passing and actually goes up in value. (They’d pay tax on the appreciation from the date of death to the date of sale … likely a small amount, if at all).
