Optimism #39
Dear clients and friends,The rental situation caused all kinds of interesting feedback and more questions.
I appreciate your collective wisdom. Wasn’t there a game show where you could call a friend if you didn’t know the answer?
Okay I was a bit of a drama queen. There is more to it. It’s 2.1 million of property, $790,000 of mortgages, $64,000 of net income, but the catch is that only $263 per month, $3,156 per annum is left over because of the more than $60,000 principal required on the mortgages each month.
‘Required’ is the wrong word, but that is how the payments are set up, so the advice is actually to stop paying the debt off so fast. My Scottish roots are trembling. The debt is 38% of the property value, so safe, I think. But that said, the spending money, however you count it, from these rental properties with mortgages is extremely low.
I bought an hour of time from a divorce lawyer here in Kelowna. I liked the guy. He only takes people who agree to work to a rational solution and avoid messy fights.
I wanted to know more about how to protect inheritances, cash gifts from parents, and the current state of the division of assets when a marriage breaks down. Please don’t take this as legal advice. Further, laws differ by province, so get legal advice if contemplating such a decision.
When you gift your child a lump sum of money and he or she for example, buys a house for he and his wife, there is what is referred to as a
‘presumption of advancement’. Unless the intent is clearly documented otherwise, it’s presumed your kid intended to gift half of the money to the spouse.
The classic recent case law is Venables vs Venables. You can read about it here.
https://canliiconnects.org/en/summaries/67830#:~:text=In%20Venables%20v.%20Venables%202019%20BCCA%20281%20the,therefore%2C%20could%20not%20be%20characterized%20as%20excluded%20property.
If the decision is unfair, one spouse can apply for what is termed ‘reapportionment’, which might have the assets or support figures adjusted.
Inheritances are not family assets, meaning not subject to division upon separation / divorce. It’s putting it into a joint account or jointly owned property etc that creates the problem.
Also interesting. Some worry their ex-spouse can come back for more money later, after the legal agreement has been made. I hear that this happens. The way to protect oneself is apparently by putting in the contract that it can not happen under any circumstances.
I have heard of using trusts or loan agreements to protect an inheritance or gift but maybe the answer is a simple letter of intent, signed and witnessed.
Again, not legal advice, but if you are gifting your kid money for a house down payment, consider buying an hour of advice from a divorce lawyer in your province.
Metro, a grocery store in Ontario that includes chains called Food Basics and Super C, raised its dividend by 10% this week.
CN rail gave you a pay raise this morning of 19%. Gotta love it.
Have a great week.
