Did you know you could be leaving your children with a hefty capital gains tax bill?
If you have children from a previous relationship, and you are now in a new relationship, have you considered how to leave your estate when you die? Do you leave it to your new partner and hope, if you die first, they will do the right thing by your children? Do you leave it to your children and risk your partner making a claim on your estate?
Think about this common scenario. You own your home 50/50 as tenants in common with your partner and you want to ensure your children receive your share of your home but at the same time, you do not want to force your partner out of your home if you die first
You sign a Will that leaves your share of your home equally to your children. You die and you are survived by your partner who owns 50% of your home. Luckily your children are happy to allow your partner to continue to live in the home until they discover a potential capital gains tax problem.
The sting – if the home is not sold within two years of your death, when it is sold your children will more than likely end up with a capital gains tax liability! All that was required to overcome the potential tax burden on your children was to include a right for your partner to continue to occupy your home which would have preserved your main residence exemption from capital gains tax. Then, when the home is sold, there is no capital gains tax payable due to the continuance of the main residence exemption from capital gains tax.
Possible tax outcomes of decisions regarding the distribution of your estate need to be carefully considered to avoid leaving a tax burden to those you love. A simple Will may end up ‘leaving’ a tax burden to those you love.
Now is the time to Plan. Don’t leave it until it is too late! – contact JPM Legal to make an appointment with Eileen Meehan to discuss your unique circumstances.