After the loss of a loved one, numerous tasks need attention before surviving family members may move forward with their lives. During the estate administration process, it may be necessary to handle the disposition of the decedent’s primary residence. What most people may not understand is that any increase in the value of a home here in Canada from the date of death could end up being taxable.
Wait. A person’s primary residence should be free from any taxes on the increase in its value under Canada law. Yes, it is true that if an individual’s home qualifies and is designated as his or her primary residence, any value increase does not result in a tax liability. However, that only applies during a person’s life.
Upon the death of a homeowner whose primary residence qualifies for the tax break, it no longer belongs to him or her under the law. The estate is considered a separate entity, which means that the ownership transfers from the individual to the estate after death. For this reason, it is crucial to obtain a value for the home as of the date of death. Any increase in value from that day forward will incur a tax obligation.
During the estate administration process, the executor of the estate will need to inform anyone who will receive a disbursement from the sale of the home that taxes could be due. It may be possible to mitigate any taxes due depending on the circumstances. In order to ensure that heirs and beneficiaries receive the maximum amount possible from the estate, it would be beneficial to work with a lawyer experienced in probate.