Inheritance is the distribution of an individual’s property after their death. The situation can get complicated if a person dies without a valid will. The first thing to know is that you don’t have to pay money to transfer the house to your name if you inherit a house.
Inheriting a house can be daunting with added complexity if you live in another country or city. In addition, if you live in another city, it can be hectic for you to travel again and again. So, it is better to know what will happen before starting the process.
If you want to make it a secondary residence where you don’t live but come for a few days in a year, you may have to pay for an ownership transfer. You might get confused about property rights if you recently inherited a house in another city. This article will help you understand everything about inherited property.
What Type of Lawyers Help You with an Inherited House?
If you have inherited a house through a legal will, you don’t have to get a lawyer, but if you have received the property after the owner’s death and there are multiple heirs, a real estate lawyer can help you go through all the formalities. It should be kept in mind that you have to provide substantial evidence to prove your right in the case of an inherited house without a will.
If there is no will, that means that someone has died ‘intestate’, and a provincial law will come into action, such as:
Alberta – Wills and Succession Act
British Columbia – Wills, Estates and Succession Act
Manitoba – Intestate Succession Act
New Brunswick – Devolution of Estates Act
Newfoundland and Labrador – Intestate Succession Act
Nova Scotia – Intestate Succession Act
Ontario – Succession Law Reform Act
PEI – Probate Act
Quebec – Civil Code
Saskatchewan – Intestate Succession Act
This law applies to inherited property whose owners died without a will or intestate. The minor taxes are added to own the property legally.
A real estate lawyer can give you whatever legal advice is required. In addition, they can help you in selling the property and enhance your knowledge about all the taxes involved.
Many law firms are also there to help you as they specialize in property-related matters. Legal matters may be distinguishable depending upon many factors, like the nature of the property, multiple heirs, your rights over the property, etc. They can recommend the type of lawyer to help you with your inheritance issues.
Before going to a lawyer, you should always ensure that you have all the documents ready to ensure smooth proceedings and reduce hourly costs.
What Are the Property Taxes Involved Once You Inherit A House?
There is often confusion about inheritance taxes and other expenditures regarding inheriting a house. However, there are some rules that you should be aware of when you inherit a home.
Canada Has No Inheritance Tax
In Canada, you don’t have to pay to inherit a house if you are a resident of Canada. However, if you decide to move into your inherited house, some costs include property tax, mortgage payments, repairs, insurance payments, etc. The Canada Revenue Agency (CRA) takes the taxes or returns before the property is transferred to the beneficiary.
Capital Gains Taxes
If you don’t want to live in the house and decide to sell it, you are then obligated to pay capital gains tax. This income is the taxable income you pay on the sale’s profit. You will be taxed from when you inherited the home to when it was sold. It should be noted that if the inheritor uses the house as a primary residence, they will not have to pay any estate taxes for assuming ownership of the property.
Estate Administration Taxes
Estate administration tax on the estate’s assets is the probate fee, which you pay to the court to formally accept the will or, if the deceased died without any will, appoint a person to act on the court’s behalf.
The executor seeks the probate fee, and the beneficiary has to pay a portion of the estate administration tax. In addition, the executor has to pay the deceased income tax returns, if any, from the estate before the inheritance comes into effect. If the executor fails to get the CRA clearance certificate, they are liable to pay all the taxes.
Inheritance Tax Exemptions
There are certain tax exemptions that you get once you inherit a house. Lifetime Capital Gains exemption and Principal Residence Tax exemption are the two types of tax exemptions that you can use once you start living in the inherited house as your primary residence.
Lifetime Capital Gains Exemption
Lifetime capital gains exemption is the total amount a person can deduct in their lifetime as a part of the exemption. You don’t have to deduct the whole amount instantly. You can deduct slowly and as per your need. This exemption is a boon when you inherit the property.
Principal Residence Tax Exemption
A principal residence tax exemption is the exemption you get where you don’t have to pay capital gains on the sale of the inherited house. The property or the home must be your primary residence, and you should live there to avail yourself of these tax exemption benefits.
Are There Extra Costs Involved With Inheriting A House?
A few extra expenditures are involved when you inherit a house, these are not inheritance taxes, but you should be aware of them.
If you want to sell the house, there are fees that you need to pay. These are REALTOR® fees, inspection fees, lawyer fees, probate fees, etc. Sweetly offers programs that allow you to quickly and easily sell your house or test the market with confidence.
A probate fee is an important fee that is the fee to administer the estate. So, even if you are not paying any inheritance tax, you must pay the probate fee.
Your newly inherited property’s assets will be taken into account. The assets include real estate, bank accounts, stocks, investments, vehicles, etc.
What Steps Should You Take Once You Inherit A House?
Once you have started handling the inheritance process, it is best to talk to your siblings or the other heirs who have the ownership to negate any issue related to the property later. They might want to explore more or different options.
Call Home Insurance Provider
If you want your home fully protected, you should contact the home insurance provider. If you have inherited the house due to the owner’s death, you will need to provide a death certificate to the home insurance provider for the records.
If your name is uninsured under the previous policy, you have to make a new policy to be insured. You must manage the documentation properly if you want to sell the property.
Lock Change for Safety Purposes
Once you gain all the rights over the house, it is recommended for you to change all the locks of the house because house keys are easy to spread. Anyone could have a house key, like your relatives, friends, or companies, so it is better to change locks and feel secure in your inherited house.
Changing the locks will also give you a sense of ownership and safety in the house. You will start considering it your home.
Get a Fair Market Value Evaluation
As soon as you get the rights over the property, it is best to get a fair market value assessment of your property if you want to sell. If you know the worth of your property, it would be easy for you to sell it if desired now or later. You can contact your real estate agent to gain all the information needed.
You should contact a qualified professional to understand not only the value of the property today, but to also help you understand the extra costs you have to bear if you decide to sell the house.
A real estate agent like those at Sweetly can help you assess the market value.
Maintain The Home
It is necessary to maintain the home because if you don’t maintain its exterior landscaping and interior issues, the cost of the house will get reduced, and you surely don’t want that to happen. Once a week is also sufficient to handle the house. Handling here means cleaning and cutting grass, shovelling snow, checking for leaks, etc. In terms of maintenance, an ounce of prevention is worth a pound of cure, and maintaining is always much cheaper than fixing.
How Can You Sell The Inherited House?
If you decide to sell the inherited house, there are many options to list it.
It is recommended that you contact a real estate agent who will help you understand the selling process. Sweetly works throughout Canada and can connect you with a local REALTOR® that can provide you with a ballpark value of your home. If you would like to sell directly to Sweetly, we also offer our Swift Sale, wherein Sweetly purchases your house for market value, less our fee.
You should contact a real estate lawyer to help you understand if there is any property dispute you don’t know about. A real estate lawyer will help you understand any legal aspects associated with your house and provide a smooth home sale.
What To Do If The House Has Multiple Heirs?
You may not be the sole owner or heir. If the house you inherited has multiple heirs, there are a few points you should be aware of before proceeding. You may run into problems if you don’t have a good relationship with the other heirs.
If you want to sell the house or rent it, you have to share the profits you get with any other heirs. Therefore, you need to keep a track record of the property for future purposes; this way you can claim your share and avoid any conflict between you and your siblings or other heirs.
If you decide to keep the house, it is best to talk to the other heirs about their demands. You can give them a monthly amount or the profits of rental income. If you rent or mortgage the inherited property to a mortgage company, you are liable to share every detail with the heirs, such as mortgage balance, loan balance, etc.
What to Do If You Want To Keep The Property But Your Relatives Want To Sell It?
This is a common situation where one heir wants to keep the property, and the other wants to sell it. Disputes can happen when the heirs don’t solve their differences and keep on deciding things differently.
Usually, if the person dies without any will, the property is equally distributed among the heirs. However, if the person has a will, it is distributed according to the will.
If a sibling or the heir wants to sell their share of the property and you don’t have the amount to buy that share, then you have no right to stop them from selling it. However, it isn’t easy to find a customer who will be interested in buying half a property. This can lead to disagreements.
If you want to keep the house, another option is to stay in the house and give a certain pre-decided rental amount to your sibling or the heir.
Can I rent my Inherited House?
Yes, you can rent the house if you don’t want to live there. However, you must get the consent of all the heirs related to that house. They also need to be involved in the process because they will get a share too.
The rental amount you will get from the property must be shared with the siblings or the other heirs of the property. In addition, any amount that is gained through the property has to be shared.
You may or may not get a good tenant. If you get a bad tenant, they can cause problems for you. In that case, you need to document everything properly for future purposes.
What Is The Inheritance Law For Foreigners?
The Liberals proposed an inheritance law in 2021 with a tax targeting the foreigners who have left the residential property.
If a foreigner gets a share in the inherited property that is more than 50% of the market value of the property or estate, then the estate is required to give an account to CRA within ten days of inheritance. Then, CRA issues a clearance certificate, and the process is completed.
There are some different additional laws for foreigners that one should know. If you are a non-Canadian, it is always best to take the help of a legal expert to understand everything and manage things accordingly.
Conclusion
Inheriting a property in Canada is not difficult if you do the process by the law. It is best to consider help from some financial advisor, REALTOR®, or legal expert to manage everything on your behalf because they have more experience in this field. They can help you with their knowledge and answer any queries you may have.
If you are considering selling your inherited house, it is best to consult with a real estate agent. You should also contact a good lawyer to chart out the next steps if you still face issues regarding the property.
