Not too long ago, I met with Gail (not her real name) at my law office in Ottawa. Gail had signed a Will about five years ago. Since then, she had some new assets and wanted to review her estate planning and make sure her Will was up-to-date.
During our meeting, Gail mentioned that she had recently invested in a small family company which owns a large island in Ontario cottage country. There are several cottages on the island which are used by various family members all of whom, along with Gail, own some of the shares of the corporation. Gail’s two children also own shares in the company. For this reason, Gail thought she might want her shares to go to her grandchildren. However, she wasn’t sure if she should gift the shares during her lifetime or wait until her death. All of her grandchildren love the spending time at the island as much as Gail does. They spend as many much time there as possible even though they have busy lives with careers and young families of their own.
I advised Gail that if she transferred the shares to her grandchildren during her lifetime, she might have capital gains tax to pay (assuming that the shares had gone up in value). If she gifts the shares to her grandchildren during her lifetime, there is a potential for double taxation. I urged her to review her options with a tax specialist so that she could understand any tax implications before she makes a decision.
I also told Gail that if the shares were transferred after her death, she should have two wills — a primary will to deal with assets that must pass through probate and a secondary will to deal with assets that don’t require probate such as the shares in the family company (also known as Canadian-controlled private corporation or CCPC). The probate fee savings could be considerable depending upon the value of the shares at her death.
I had given Gail a lot to think about. She was pleased that we had reviewed the options and that she knew there could be very different tax consequences depending on what she decided to do. Before making a final decision, she would meet with a tax professional and discuss things with her children and grandchildren.
At Neff Law Office P.C., we review all of your assets while considering what it is that you are trying to accomplish. There may be tax implications which you were not aware of that can drastically affect how you structure your estate plan. Our estate planning lawyers will review your specific situation and estate planning goals and advise you of your options for achieving those goals. Call or email us today for an appointment.
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Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.
