I’m not sure where your wife lives, but that particular country’s tax rules will likely come into play if your wife sells the apartment. In addition, there will likely be tax ramifications in Canada as well.
There are three factors that can affect whether and how much tax your wife could pay on the home if she sells it or otherwise has it:
- Keep the apartment or not: The first is whether your wife will continue to own the apartment after her mother dies or whether she will sell it. Remember that if your wife was not a primary residence in the home, she may owe capital gains tax on her portion of the home from the time of the first purchase and then on the entire home after her mother dies.
- Rent the apartment or not: If your wife keeps the apartment, the second factor is whether it is used as a rental property.
- Living in Canada or abroad: The third factor is where your wife will live if the apartment is sold, whether then your mother-in-law dies or sometime afterwards.
For example, let’s say that after your mother-in-law dies, your wife keeps the apartment that she now owns 100% and sells it some time later. In this case, the following tax consequences can arise when selling the apartment:
- Canada Non-Resident Tax; or
- Capital Gains Tax in Canada, and
- Tax consequences in your country of residence when selling.
If she does not keep the apartment after her mother’s death or if she keeps it and rents it, the tax picture could look different again.
As you can see, the decisions your wife makes about the home following the death of your mother-in-law can have complex tax consequences. Therefore, it is important to seek the correct advice from a qualified tax advisor at the time of sale – or even – so you can be prepared for the likely outcomes in your case.
This answer was provided by FPAC member Andrea Thompson, CFP®, CRPC (USA), CLU, CHS, CDFA, a senior financial planner, Coleman Wealth at Raymond James Ltd. in Toronto. The information provided is not solicitation and is not guaranteed, although it comes from sources believed to be reliable. The views and opinions contained in the article are those of the author, not those of Raymond James Ltd., Raymond James Ltd., a member of the Canadian Investor Protection Fund.
Andrea focuses on working with clients to develop long-term, holistic planning solutions that integrate all aspects of their financial life, including cross-border (US / CAN) and domestic age, education and estate planning, risk management, philanthropic strategies, taxes, cash flow and debt management strategies.
Qualified advice is written by members of FPAC (Financial Planning Association of Canada), op MoneySense content partners. The aim of the association is to set standards and principles that enable financial planning to develop into a knowledge-based profession that ultimately has the credibility, public awareness and respect of other respected consulting professions in close cooperation with governments, regulators, financial planners and universities promotes. Vendors and the general public.