1. What Does Estate Planning Mean When You Own Real Estate?

2. What Does Alberta Law Say?

3. The Three Most Common Ways Real Estate Is Dealt With After Death

4. Capital Gains and Tax Considerations

5. Rental and Investment Properties

6. Protecting Vacant Property

7. Should You Leave Real Estate to One Child?

8. Common Mistakes to Avoid

9. Costs and Considerations

10. When Should You Speak With an Estate Planning Lawyer?

11. How Bridgestone Law Can Help

Introduction

For many Albertans, their home represents far more than a financial investment. It is where children were raised, holidays were celebrated, and memories were made over many years.

Others may own rental properties, recreational cabins, farmland, commercial buildings, or investment real estate that forms a significant part of their overall wealth.

While purchasing real estate often involves careful financial planning, many property owners spend far less time considering what will happen to those properties after they pass away.

Owning real estate should be an important consideration when preparing your estate plan.

Depending on your circumstances, your estate plan may need to address:

• whether probate will be required;

• how ownership is registered on title;

• whether property passes by right of survivorship;

• whether a specific beneficiary should inherit the property;

• whether the property should be sold;

• mortgages and other debts secured against the property;

• potential tax consequences, including capital gains; and

• your executor's authority to manage, maintain, transfer, or sell the property.

  
  

Every property is different, and the best approach depends on your family, your estate, and your long-term objectives.

What Does Estate Planning Mean When You Own Real Estate?

Estate planning is more than deciding who inherits your property.

For real estate owners, it also involves planning for what happens between the date of death and the eventual transfer or sale of the property.

During that period, someone may need to:

• secure the property;

• maintain insurance coverage;

• arrange utilities and maintenance;

• continue mortgage payments where appropriate;

• pay property taxes;

• protect vacant property;

• obtain appraisals;

• transfer title; or

• prepare the property for sale.

These practical responsibilities often arise long before an estate has been fully administered.

A comprehensive estate plan provides your executor with the authority and guidance needed to deal with these issues efficiently.

What Does Alberta Law Say?

Real estate forms part of an estate unless it passes outside the estate through another legal mechanism, such as a valid right of survivorship.

The administration and transfer of real property in Alberta may involve several pieces of legislation, including the:

• Wills and Succession Act;

• Estate Administration Act;

• Land Titles Act;

• Surrogate Rules; and

• Income Tax Act (Canada), where tax consequences arise.

How a property is dealt with depends on several factors, including:

• how title is registered;

• whether the deceased left a valid will;

• whether probate is required;

• the terms of the will;

• any mortgages or other registered interests; and

• the circumstances of the beneficiaries.

Because these issues often overlap, real estate planning is most effective when considered as part of a comprehensive estate plan rather than in isolation.

The Three Most Common Ways Real Estate Is Dealt With After Death

Although every estate is different, there are generally three common ways that real estate is dealt with after someone passes away.

Understanding these possibilities can help property owners make informed estate planning decisions and provide clearer instructions for their executor.

1. Property Passes by Right of Survivorship

Many married couples and some other co-owners hold title to real estate as joint tenants.

When one joint tenant dies, their interest in the property generally passes automatically to the surviving joint owner through the right of survivorship.

This transfer occurs outside of the deceased's estate and, in many cases, the property does not pass under the terms of the will.

The surviving owner will typically need to work with a real estate lawyer to update the Land Titles records by providing the required documentation, such as:

• the death certificate;

• proof of identity; and

• the documents required by Alberta Land Titles.

Although this process is often simpler than transferring property through an estate, it is still important to obtain legal advice to ensure the transfer is completed correctly.

It is equally important to understand that not all jointly owned property automatically passes by right of survivorship. The legal effect depends on how title is actually registered and the surrounding circumstances.

2. Property Is Left to a Named Beneficiary

Some wills specifically leave a particular property to a named beneficiary.

For example:

• "I leave my home to my daughter Emily."

• "I leave my cabin at Sylvan Lake to my son Michael."

When this occurs, the executor's role is generally to transfer the property to the beneficiary, provided the estate has sufficient assets to satisfy debts, taxes, and any other legal obligations.

The beneficiary will often need to provide:

• government-issued identification;

• the grant of probate, if required;

• the death certificate; and

• any other documents required by Alberta Land Titles.

Depending on the circumstances, legal and tax advice may also be appropriate before the transfer is completed.

3. The Executor Sells the Property

Many wills direct that real estate be sold.

In other cases, the will gives the executor discretion to decide whether selling the property is in the best interests of the estate.

There are several reasons an executor may choose to sell real estate, including:

• paying estate debts;

• funding gifts to beneficiaries;

• dividing the estate equally among several beneficiaries;

• avoiding disputes over ownership; or

• preserving the overall value of the estate.

Sometimes an immediate sale is appropriate.

In other situations, the executor may decide that waiting a reasonable period is in the estate's best interests, for example, to complete necessary repairs, improve marketability, or sell during a more favorable real estate market.

The executor must always act in the best interests of the estate and the beneficiaries while exercising any discretion granted under the will.

Capital Gains and Tax Considerations

Many property owners assume that if real estate is left to a beneficiary, there are no tax consequences.

Unfortunately, that is not always the case.

Depending on the type of property and the circumstances, capital gains tax may arise.

For many estates, a principal residence may qualify for the principal residence exemption, subject to the applicable tax rules.

However, investment properties, rental properties, recreational properties, commercial real estate, and certain other real estate holdings may give rise to capital gains when the owner dies.

It is also important to understand that if a property remains in the estate after death, any increase in value occurring after the date of death may create additional tax considerations when the property is eventually sold or transferred.

For this reason, executors often obtain legal and accounting advice before deciding whether to retain or dispose of estate real estate.

Every estate is different, and tax consequences depend on the particular facts and applicable tax legislation.

Rental and Investment Properties

Rental properties often require immediate attention following the owner's death.

Unlike a vacant residence, an income-producing property usually continues to have ongoing obligations.

The executor may need to address issues such as:

• collecting rental income;

• paying mortgages;

• maintaining insurance;

• arranging repairs and maintenance;

• responding to tenant concerns;

• complying with lease obligations;

• paying utilities and property taxes; and

• maintaining accurate financial records.

If these responsibilities are neglected, both the value of the property and the income generated by it may be affected.

For this reason, executors frequently engage property managers, accountants, or legal advisors to assist with administering investment properties.

Protecting Vacant Property

A home that becomes vacant after death presents its own challenges.

Executors should consider:

• ensuring the property is properly secured;

• confirming that insurance remains in force;

• notifying the insurer if the property will be vacant;

• arranging regular inspections;

• maintaining heating, utilities, and essential services where appropriate;

• caring for lawns and snow removal;

• protecting the property from vandalism or theft; and

• documenting the condition of the property.

Many insurance policies contain vacancy provisions that may affect coverage if the insurer is not notified.

For this reason, one of the executor's first priorities is often contacting the insurance company to determine what steps are required to maintain appropriate coverage until the property is transferred or sold.

Should You Leave Real Estate to One Child?

Parents often wish to leave the family home, cabin, or farm to one child while dividing the remainder of the estate equally among others.

This can certainly be appropriate in some circumstances, but it deserves careful planning.

Questions that should be considered include:

• Will the other beneficiaries receive assets of comparable value?

• How will the property be valued?

• Who will pay any mortgage remaining on the property?

• Will there be capital gains tax?

• Can the beneficiary afford the ongoing costs of ownership?

• What happens if the beneficiary wishes to sell the property shortly after inheriting it?

Discussing these issues while preparing your estate plan can help reduce misunderstandings and family conflict after your death.

Practical Examples

Example One: The Family Home

Robert owns a home in Calgary in his sole name. His will leaves the home to his wife.

After Robert's death, his executor determines that probate is required before the property can be transferred. During the administration of the estate, the executor continues making mortgage payments, maintains insurance, pays property taxes, and ensures the property is properly maintained until the transfer is complete.

Because Robert had clearly stated his wishes in his will, the transfer proceeds with much less uncertainty.

Example Two: A Recreational Property

Susan owns a family cabin that has been enjoyed by three generations.

Rather than assuming her children will "work it out," Susan discusses the future of the property with her family while preparing her estate plan.

After considering the ongoing costs of maintenance, taxes, insurance, and differing levels of interest among her children, she decides that selling the property and dividing the proceeds equally best reflects her wishes.

Having those discussions in advance helps avoid disagreements after her death.

Example Three: An Income Property

Michael owns several rental properties.

His will gives his executor broad authority to continue managing the properties while the estate is being administered. His estate plan also identifies the property manager, accountant, insurance broker, and mortgage lender.

Because this information is readily available, the executor is able to continue collecting rent, paying expenses, and protecting the value of the properties while longer-term decisions are being made.

Common Mistakes to Avoid

Real estate often represents one of the largest assets within an estate. Careful planning can help avoid many common problems.

Assuming Joint Ownership Always Avoids Probate

Many people believe that adding another person to title automatically avoids probate.

In reality, the legal effect depends on how ownership is structured, the surrounding circumstances, and whether the joint ownership accurately reflects the parties' intentions.

Changing ownership solely for estate planning purposes should never be done without obtaining legal and tax advice.

Forgetting About Ongoing Property Expenses

Real estate continues to generate expenses after death.

Mortgage payments, property taxes, insurance premiums, utilities, condominium fees, maintenance, and repairs often continue while the estate is being administered.

Your executor should have sufficient authority, and sufficient estate funds, to deal with these ongoing obligations.

Ignoring Capital Gains

Many people assume taxes are only an issue when property is sold.

Depending on the type of property, tax consequences may arise upon death or when the property is later disposed of by the estate or beneficiary.

Obtaining accounting advice before making significant decisions involving estate real estate can help avoid unexpected tax consequences.

Leaving One Property to Multiple Beneficiaries Without a Plan

Leaving a cottage, farm, or family home equally to several beneficiaries may seem fair.

However, disagreements can quickly arise regarding:

• who pays for maintenance;

• who may use the property;

• whether improvements should be made;

• how expenses are shared; or

• whether the property should eventually be sold.

If you wish multiple beneficiaries to inherit the same property, your estate plan should clearly address how future decisions are to be made.

Failing to Review Ownership

People often purchase additional real estate over the course of their lives.

Vacation properties, rental homes, farmland, commercial buildings, or properties in other provinces may require different planning considerations.

Reviewing your estate plan whenever you acquire or dispose of real estate helps ensure your will continues to reflect your overall objectives.

Costs and Considerations

Owning real estate can increase both the complexity and the cost of administering an estate.

Depending on the circumstances, costs may include:

• probate filing fees, where probate is required;

• legal fees;

• Land Titles registration fees;

• real estate lawyer fees for transfers;

• property appraisals;

• accounting fees;

• ongoing mortgage payments;

• insurance premiums;

• property taxes;

• maintenance and repair expenses;

• utility costs;

• condominium fees; and

• real estate commissions if the property is sold.

Every estate is different. The total cost depends on the number of properties, their value, whether they are sold or transferred, whether probate is required, and whether tax issues arise.

Planning ahead often helps reduce delays, preserve the value of the property, and simplify the administration process.

When Should You Speak With an Estate Planning Lawyer?

You should consider obtaining legal advice if:

• you own your home in your sole name;

• you own multiple properties;

• you own rental or investment real estate;

• you own farmland or recreational property;

• you own commercial real estate;

• you wish to leave specific property to particular beneficiaries;

• you have a blended family;

• you own property outside Alberta;

• you are considering changing ownership of property for estate planning purposes; or

• you are unsure whether your current estate plan adequately addresses your real estate.

Even relatively straightforward estates can benefit from legal advice where real estate forms a significant part of the estate.

How Bridgestone Law Can Help

Real estate is often one of the most valuable assets a person owns, and thoughtful planning can make a significant difference in how smoothly it is transferred after death.

Bridgestone Law assists individuals and families throughout Calgary and Alberta with wills, estate planning, probate, and estate administration involving residential, recreational, rental, commercial, and investment properties.

We help clients prepare estate plans that coordinate their wills with property ownership, address succession goals, and provide executors with clear authority to manage, transfer, or sell real estate where appropriate.

Whether you own a single home or an extensive real estate portfolio, careful planning today can help protect both your property and the people you leave behind.