David A. Altro is a regular contributor to Paul Delean’s business column in the Montreal Gazette, please scroll down to read David’s answer to a reader’s question.
Tax strategy: Inheritance can affect level of social assistance
Tuesday, October 8, 2013
Questions about inheritances and their effect on taxes and social assistance were among the latest queries from readers. Here’s what they wanted to know.
Q: One of my children is on social assistance. She is one of the beneficiaries in my will. Would an inheritance, such as half a house, affect the amount she receives?
A: It will. Inheritances are not taxable, but they can change the amounts paid by the provincial government for social assistance, since home ownership and cash reserves do figure in the calculations for each beneficiary. Cheques are reduced, for instance, for individuals who have more than $1,500 in cash. With homes, there’s a downward adjustment if the net value of their real estate (market value less mortgage) exceeds $90,000. If the home you’re leaving in the will is worth more than $200,000 and mortgage-free, her half would exceed the guideline, although the government is making some concessions on that front to lessen the effect of recent spikes in municipal housing values.
Q: I’m a dual citizen who owns a condo in Florida. Should that be included in my Canadian will or should I give it to an American cousin of mine? I could still live in it until I die.
A: Giving it to a U.S. cousin is not advisable, cross-border tax expert David Altro said, because it qualifies as a disposition under the Canadian tax act and may trigger gift tax in the U.S. Leaving it in your will may not be the ideal solution either, because upon death, it will be subject to Florida probate, “which is expensive, time-consuming and freezes the Florida estate during the probate procedure,” Altro noted. In his view, creating a cross-border trust might be a preferable option.
Q: If you work your whole career in Quebec but move to another province before applying for your pension, do you receive the Quebec Pension Plan (QPP) or Canada Pension Plan (CPP)?
A: If you contributed only to the QPP during your working life, that’s where your benefits will come from, wherever you live. But if you contributed to the CPP at any point, that’s who will send you a cheque if you apply after relocating to another province. If you leave the country, your last province of residence determines whether it’s QPP or CPP.
Q: We owned a mobile home in Florida that we couldn’t sell, so we donated it to a local charity, a food bank operated by a church. We were hoping this donation could apply for our 2013 income taxes, but our tax preparer says no. Is this correct?
A: Canadian tax rules are quite specific about the types of foreign charities eligible for tax credits here. They include the United Nations and its agencies, universities outside Canada that ordinarily accept students from Canada, and foreign charities to which the Canadian government has made a gift. If you’d like to know if the foreign charity to which you’re donating is eligible for a Canadian tax deduction, check the Charities Directorate at Canada Revenue Agency. If you have U.S. income, you may still be able to claim gifts to charities that would be allowed on a U.S. tax return, but the amount is limited to 75 per cent of the net U.S. income you report on your Canadian return.
The Gazette invites reader questions on tax, investment and personal finance. If you have a query you’d like addressed, send it to Paul Delean, Gazette Business Section, Suite 200, 1010 Ste. Catherine St. W., Montreal, Que., H3B 5L1 or to by email to email@example.com