Performing a title search on your property as part of your estate plan could save your heirs both money and hassle.
Title searches are more commonly performed as part of a real estate deal to ensure that there are no liens, easements or other encumbrances on the property before it is transferred to a new owner. However, a house sale is not the only time a property may require a title search.
In Investment Executive magazine, a financial advisor recently wrote about the experience of a colleague attempting to distribute a property from the estate of a wealthy client who had died suddenly, only to find that a long-forgotten lien remained on title.
The lien in this case may not carry much of a financial burden on its own, since the builder who registered it has since died and their company is no longer in business. However, the whole episode held up the administration of the estate while the estate trustee investigated the lien to validate it and determine whether the debt needed to be paid.
As the article notes, liens not uncommon in estate administration and a title search performed during estate planning could help ensure that any issues are dealt with long before the property becomes part of your estate.
For a lucky few longer-standing property owners, title searches could even offer a financial boost, thanks to a legal quirk known as the “first dealings” rule.
The rule allows homeowners who purchased the property before Ontario’s conversion from the old Land Registry System to the newer Land Titles System to avoid probate fees, and is one of the last great tax loopholes available in the province.
Since the 1980s, the province has switched the vast majority of properties from one system to the other as homes changed hands, but a dwindling number remain on the old Land Registry, because they were never sold or transferred since the conversion.
In today’s property market, the savings for those who qualify under the First Dealings rule can be significant: the probate tax on a $1-million home amounts to more than $14,000. In addition, skipping probate shortens the waiting period between the homeowner’s death and the property’s sale, since there’s no waiting around for a court to give its blessing to the executor’s appointment as trustee – a process that can last for months.
When it comes to actually applying the first dealings rule in practice, things can get a little technical because of the various steps required by local land registry offices, so estate trustees who have a potential case will want to make sure they consult an experienced lawyer to handle all the details.
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