Second homes bring capital gains tax headache
By AdvocateDaily.com Staff
The rise in second homeownership and in property values generally means more testators and heirs need to consider the effect of capital gains tax, Toronto estates and trusts lawyer Suzana Popovic-Montag tells the Globe and Mail.
The article explains that a second home, unlike a primary residence, may be a taxable asset, which means capital gains tax is assessed on any increase in its value. Popovic-Montag, managing partner at Hull & Hull LLP tells the newspaper that unfortunately, there is no way around that fact.
“Whether you gift the property, or you sell the property [to your heirs], or you put it into joint tenancy, or you give it by will, you will have a capital gains hit for the owner of the property,” she says.
Popovic-Montag said that can cause problems in estate planning since the tax burden will ultimately fall on the estate of the deceased if heirs can’t afford to pay the bill during the testator's lifetime.
“We see it now particularly because there has been such an escalation of property values,” she says. “Many people, more than in the past, have a second property or vacation property, and it amounts to a substantial portion of their estate.”