lifestyle |  One fall, then it all comes crashing down

lifestyle | One fall, then it all comes crashing down

Fall victim, disabled, elderly woman just admitted to CHSLD. Can her daughter, should she, sell her condo?

Posted at 6:00 am

marc tison

marc tison
Press

The situation

Monica’s mother* fell last July. Then everything fell apart. With a hip fracture, the 88-year-old woman, who also has dementia, was hospitalized for six weeks.

“From there, they applied for permanent housing because they couldn’t go home,” says Monica. She was admitted to a CHSLD.

The old lady, let’s call her Luisa, had previously lived in a condominium she owned.

“We are just two children, now we were wondering what to do, continues Monica. Should you rent or sell your condo? »

“If we sell the condominium, which is not in our name, we would have to do all the paperwork to have a disability mandate that she made in October 2021 approved.”

The mandate, signed before a notary, is not approved.

“I believe that if the mandate is not approved by a judge, we cannot proceed with the sale. Therefore, it must be approved. To get it approved, I think we need to go to a social worker and a doctor who establishes that my mother can no longer make her decisions. It can be long! »

If it is preferable to rent, it is Monica and her brother who will have to find a tenant and get him to sign a lease.

“Do we have the right to make a lease? The condo is in your name. »

While cleaning out her mother’s papers, Monica found an old power of attorney in her name dated 1999, which she had forgotten existed.

“I don’t know if it’s still valid,” he adds. I could rent with that. »

In any case, it will be necessary to sell the flat after the death of his mother.

The condo, which paid about $250,000 in 2010, does not have a mortgage. Monica estimates its current value at about $400,000.

“Since the condo would no longer be your primary residence, would we or the estate be subject to tax? There is quite a question mark on this level. »

But whether the condo is sold or rented, it will take many months to clean the apartment and then find a buyer or tenant.

Meanwhile, Luisa still has to pay the condominium expenses (insurance, electricity, condominium fees, property tax), which amount to $536 per month. She also pays a monthly payment of $277 for a prearranged funeral contract that binds her for three years. Total: $813 per month.

Luisa receives only the QPP pension and the Old Age Insurance (PSV) benefit increased by the Guaranteed Income Supplement (GIS). With the GST refund, her income totals $2,101.

“CHSLD charges you $2,019 a month, the maximum,” Monica says. Do I need to apply for an exemption until the condo is rented if this is the case? »

Several questions, several uncertainties. “We do not know who to contact. »

The numbers

Louisa, 88 years old

Income

QPP: $1021/month
PSV and GIS: $994/month
GST refund: $88/month

Without savings

Department

no mortgage
Acquired in 2010 for approximately $250,000
Approximate current value: $400,000

condominium expenses

Condo Fees: $200/month
Insurance: $27/month
Electricity: $100/month
Property tax: $2515/year

Other expenses

Pre-funeral arrangements: $277/month
Payment to CHSLD: $2019/month

The answer

“Whether the mandate is witnessed or notarized, you can’t escape the approval process,” says notary and tax specialist Patricia Besner, director of financial, tax and estate planning for Desjardins Wealth Management.

The financial planner confirms Monica’s suspicions: “The delays, currently, can be from 9 to 12 months. »

Six months are needed to prepare the application, gather all the documents and obtain the medical and psychosocial evaluations that will confirm Luisa’s disability. The Court’s decision will be issued three to six months after the application is submitted.

Attorney

While waiting for this decision, could Monica use the power of attorney signed in 1999? With a power of attorney, a suitable person, therefore in possession of his intellectual faculties, authorizes a trusted person to represent him in certain administrative acts.


PHOTO MARTIN CHAMBERLAND, LA PRESSE ARCHIVES

Patricia Besner, Director of Financial, Tax and Wealth Planning at Desjardins Wealth Management

Originally, Monica couldn’t use it to sell or rent her mother’s condominium. But “it’s not because it’s from 1999”, specifies Mme besner. “Since Luisa is incapacitated and Monica knows it, she can no longer act by power of attorney. The validity of the power of attorney ceases at the time of incapacity, since the principal is no longer in a position to revoke it. »

However, there is a small opening. An article of the Civil Code indicates that between the presentation of the application for approval of the protection mandate and the court’s decision, a representative authorized by a power of attorney could carry out certain procedures on behalf of the principal.

This is probably the case for Monica.

Therefore, you have the advantage of quickly starting the approval process and filing the documents with the court, “because then you can make the decision to rent or sell the condo.”

The notary points out in passing that the A Law to better protect people in situations of vulnerabilitywhich will come into force on 1Ahem November 2022, will allow temporary representation. A family member of the vulnerable person may become their temporary representative, while the specific act for which they have been designated is carried out.

Rent or sell?

Rent or sell Luisa’s condo? Patricia Besner raises some points for reflection.

The rent, to the extent that the rent is higher than the costs, would bring additional income to Luisa. Over time, there is a good chance that the value of the property will increase even more.

“On the other hand, we must not forget that the current condominium rates could be called to increase, argues the tax specialist notary. There may be special contributions. »

In addition, it will be necessary to check if the declaration of co-ownership restricts or prohibits the lease.

In addition, when the time comes to sell the condominium, the future owner must respect the rights of the tenant in the place, in particular the regulations for the recovery of the house. “It can be a challenge to find a buyer,” says M.me besner.

rent and taxes

Another subtlety: When a primary residence changes use to become a rental property, the taxing authorities therefore consider there to be a provision estimated at fair market value.

“It is considered that Luisa sells her condominium the year we start renting it,” explains the notary. Whoever says estimated sale theoretically says capital gain. »

Fortunately, for every year the property has been used as a primary residence, the capital gain made on the property is tax-free. This would be the case for Luisa’s condominium between the acquisition in 2010 and its transfer to a CHSLD in 2022.

Capital gain realized in subsequent years is taxable.

However, in the case of a change of use to a rental property, a tax provision, another one! — allows you to apply for an extension of the homestead exemption for up to four years.

This request is made in a letter attached to the tax return for the year in which the change of use occurred.

And since the tax authorities always grant an additional year in the calculation of the exemption for main residence, Luisa could thus add five years to her exemption period.

Assuming that the condo is sold in 2029 with a capital gain of $200,000 since the acquisition in 2010, the capital gain could not be exempt for 2 years out of 20, that is, for 10% of this $200,000.

sale and death

Anyway, the property will be sold, sooner or later.

If Luisa still owns her condo at the time of her death, whether rented or not, it will be considered a disposition for tax purposes. Any taxable capital gain will be taken into account in your final Income Tax return.

“At death, we will do Luisa’s taxes, and if there is a taxable capital gain, it is the inheritance that will pay,” explains Patricia Besner. The children will receive the inheritance net of taxes. »

the difficult period

Currently, Luisa’s income is enough to cover her $2019 contribution to CHSLD.

A reduction seems unlikely, since the value of the property exceeds the maximum authorized limit.

To get around this hurdle, could Luisa donate her property to her children during her lifetime? “It would not be a solution for Mónica and her brother, because her mother is not fit,” says our advisor. As proxies, they cannot make such a donation on behalf of the person they represent. »

Until the condo issue is resolved through sale or lease, Luisa will still have to pay the costs of ownership and maintenance. Adding her pre-funeral arrangements, her budget shortfall is currently around $800 a month.

“If Monica and her brother have to advance the sums to pay the condominium fees and the additional expenses that Luisa cannot afford because she does not have additional savings, they can be reimbursed once the mandate is approved, or at least after filing. the approval request. »

However, the funds will need to be available, either because the rental will have started to provide sufficient income or because the property will have been sold. In this sense, the sale can offer more guarantees and fewer management concerns for the agents.

While waiting for this outcome, Patricia Besner delicately opens another door.

“If you take a shared room in a CHSLD, the monthly payment is lower. For a room with two beds, the monthly payment is $1,686 and for a room with three or more beds, $1,256. It is approximately the $800 that Luisa is missing. It could be a temporary solution. »

* Although the case highlighted in this section is real, the names used are fictitious.

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