Tax Treatment of Testamentary Trusts
As a busy conveyancing firm, we see transactions with all sorts of unique aspects. Often we wonder why a decision was made to do X, and wish that we did have the opportunity to speak to a client before the contract was finalized. As this is normally one of the largest purchases a client will make in their lives, it comes with a lot of uncertainty and stress, especially for first-time buyers. We do our best to ensure that the conveyancing and legal end of things goes smoothly, but there are times when we cannot control how a transaction will unfold. So, here are some tips based on our experiences which we hope will help reduce stress and potential issues for our clients and anyone looking to buy real estate:
- While you can set the completion date and possession date on the same day, if you do so you have to be willing to wait until the close of business for possession. If you as the buyer are moving into the property, and if the transaction closes late due to the late arrival of mortgage proceeds, you could be faced with delaying possession for a day as most sellers will not provide the keys to buyers until their lawyer has the net sale proceeds. So, it’s better to set the completion date one day before the possession date. If the deal completes on time, the seller may be willing to provide the keys that day. This will ensure that you are not sitting with movers and friends at the property unable to unload or setup due to any unavoidable delays.
- Don’t set your completion date for a Friday. Friday closings are the ones that cause the most problems on transactions where there may be an issue. If mortgage funds are late arriving and the transaction cannot be closed before the end of business, the seller has the option not to provide possession until the Monday. If you are buying and set on moving in on Saturday, you will be looking for a hotel room and having to rearrange your moving schedule. Set your closing for Thursday with possession on Friday. This provides an extra business day as a buffer in case there are any unavoidable issues that require attention before possession can be granted.
- Be reasonable in your expectations with respect to the time between subject removal and completion. As a buyer, you are the one most often in control of the timing of subject removal. Our firm can complete a deal in a few days provided we have all the documents we need. Still, we are beholden to the requirements of your lender if you are getting a mortgage. We normally need at least 3-4 days to receive the lender’s mortgage instructions, and from there we have to prepare documents. Lenders often require certain documents returned 1-3 days in advance of releasing funds to us. So, just to accommodate some lender requirements could take 5-6 business days. We recommend no less than 10 business days between subject removal and your completion date, and well more than that if possible.
- Attend to the necessary tasks well in advance and not on the completion day. You will need to set up home insurance, set up your move-in (if a strata property), provide any bank payouts if the Lender makes that a condition of your financing, arrange for payment of the balance required to complete the transaction, and provide our office with anything else that may be outstanding. If you wait to make these arrangements, the risk of having something occur which would delay closing goes way up.
- Before you remove your subjects, be sure to be reasonable when estimating your closing costs. Legal fees for a purchase with a mortgage of a property at $500,000 or less will be $1175. On top of this could be adjustments for property transfer tax, strata fees, property taxes, utilities, title insurance, costs to obtain strata forms, and various other items depending on your situation. It’s never a fun meeting when a client is surprised by their closing costs and needs to scramble to find extra funds to cover a shortfall they were not expecting.
- If you have to add someone to title such as a parent or relative, know that they must sign various legal documents to complete the transaction. If they are from out of town, we will need time to send them documents, get them to a lawyer to sign them and then return them. Know the schedule, especially holiday or travel schedule, of anyone who needs to sign documents, and advise us ASAP of this so that arrangements can be made to get their signatures.
- If you have any concerns about the sellers or the property, have your realtor push hard to have a holdback clause added into the agreement. As a buyer, you must transfer all cash to close to the seller before being granted possession. Once this is done, if you have an issue with the seller related to damage or an unfulfilled obligation, aside from negotiating payment, your only recourse is to sue in small claims court. This will cost you money and take many months of your time and energy. If you can insert a holdback clause, even if it is for $1000, this will provide you with some security against the seller for any damage found or issues that arise after you have completed the transaction.
We always welcome your comments or calls, and make a point of being an active participant with you to help you purchase a property. Call Dave, Deanna or Richard at 250-980-3360 with any questions.
Photo courtesy of griffithchris