Page 8 - Newcom

8 AE 01 2015
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Before gifting assets, clients need to understand the consequences
by JAMES DOLAN, a Vancouver-based nancial writer
GORDON WUSYK SAYS HIS CLIENT’S GIFT was made with the best intentions. The mother was in failing health. She had more
than enough to live on, and wanted to recognize the ongoing care given by her youngest daugh- ter. So, unbeknown to the rest of the family, she transferred the family cottage to her daughter.
Fast-forward 15 years and the mother’s gener- osity has caused unintended nancial and familial
consequences. While her estate has dwindled, Wusyk, president of Predict-
able Futures in Edmonton, estimates the cottage is now worth eight to 10 times what it was when the gift was made. Yet no tax has ever been paid. Wusyk estimates
penalties on those unpaid
taxes are in the thousands. Even more troubling is the resentment and bitterness the
gift created. The inequity has left other siblings feeling cheated and
overlooked. The youngest daughter feels guilty and is sure her mother
would want to make amends. But in the intervening years, the mother has
lost capacity to change her will or do any new estate planning. Wusyk expects a long period of family animosity, perhaps
culminating in a legal challenge of the mother’s will when she eventually passes.
Think before you give
Unfortunately, Wusyk sees this “gift rst, ask questions later” approach too often.
“There’s going to be disharmony.”
He adds, “There’s going to be huge tax—all kinds of problems, all kinds of unintended results, because no one sat down to actually review the overall goals and aspirations or what the original intentions were.”
Instead of clients giving away assets willy-nilly before they die, they should review both the tax and family implications of making a gift. Wusyk adds that planning could have saved the mother’s estate thousands in unpaid taxes and penalties.
Rather than gifting the cottage to a caregiver, Wusyk says the mother could have declared it her principal residence, thereby eliminating any taxes