Helping Clients Reach Financial Security
"No Matter What"
Keep the Cottage in the Family
and his brother Rob and sister Jill, are all in their early 40's
and truly wish to keep the family cottage in the family.
Their parent s Jack age 68 and Muriel age 65 have had a cottage near Bellville for nearly 30 years.
They all have a great working relationship with the cottage and have discussed the succession of the cottage to the family so that the grandchildren can enjoy the cottage in the future.
Their major concern is the capital gains tax to be paid on the cottage upon the death of the parents.
What are their options? Do nothing, transfer to the kids, transfer to a personal corporation, or obtain tax free dollars?
To easily calculate
Capital Gains Tax and determined that they
could see in the future that they could need as much as $100,000 of tax
free dollars in order to pay the government. Taking in to consideration
of the financial wealth of their children and their financial commitments
education for children, mortgages etc.. the cottage would likely
have to be sold to produce the cash necessary to pay the necessary
tax required, should something happen to both Jack and Muriel
in the near future or down the road. Should they leave the cottage
in their will equally to Les, Rob and Jill Revenue
Canada's interpretation. it will not be considered a gift
Taking into account that Les, Rob and Jill would have to start today saving money to pay this future tax bill to keep the cottage in the family, they would have to save nearly $263 per month and based on their current marginal tax rates of 46% and estimate high return of 9% (calculate yourself) it would take them twenty years to accumulate an account of tax free money to pay the estimated tax bill of $100,000. Les , Jill and Rob have decided to split the monthly deposit equally of $142.50 per month.
Should Muriel pass away 5 years from now and Jack dies in the 10th year, Les, Rob and Jill would have required to invest the $142.50 per month and realize a 55% annual return on their money over the 10 years to have saved $100,000 tax free. calculate yourself
Should Jack pass away 10 years from now and Muriel dies in the 20th year, Les, Rob and Jill would have required to invest the $142.50 per month and realized a 18% annual return on their money over the 20 years. to have saved $100,000, tax free. calculate yourself
Let us assume that
Jack dies and Muriel lives until she is 95 years of age. and
Les, Rob and Jill would have required to invest the $142.50 per month
they would realize a 8% annual return on their money over the 30
years to have saved $100,000 tax free. calculate