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indicatorLifestyle

Navigating BC laws when buying a vacation home

By ATB Financial 18 December 2019 2 min read

Two chairs on a dock overlooking the water at a British Columbia vacation home. Photograph from iStock Photo.

Many Albertans choose to vacation beyond our provincial borders and it sometimes leads to purchasing a second property — especially travelers to British Columbia. While purchasing a vacation home can be an exciting time, there are notable differences in BC’s laws regarding real property that must be considered. These include its land transfer tax, probate taxes, and wills and estate legislation.

Broadly speaking, the land transfer tax is payable by the buyer on a residential property’s fair market value as follows: 1 per cent on the first $200,000, 2 per cent on the portion between $200,000 and $2,000,000, 3 per cent on the portion over $2,000,000, and a further 2 per cent on the portion of value above $3,000,000. This means $11,000 on a $650,000 vacation property in Fernie and $143,000 on a $4,500,000 luxury property in Peachland.

In Alberta, probate taxes max out at $525 for estates over $250,000. In contrast, probate taxes in BC are payable at a rate of 0.6 per cent on estates between $25,000 and $50,000, and 1.4 per cent on estates over $50,000. That’s an additional $8,550 on the $650,000 Fernie property and $61,750 on the $4,500,000 Peachland property. 

BC also has some unique aspects of its Wills, Estates & Succession Act. For example, there is a requirement for the testator to consider and provide for all their children in the disposition of their estate, including non-dependent adult children. Failing to provide equally to all children gives the “disadvantaged” child the right to contest the will. This means that you need to consider all your children in the disposition of your BC vacation property, even if only one child is interested in it.

Trust Exercise

If you’re considering buying a property, you may want to do so through an inter vivos trust at the outset. Owning a BC vacation property in an inter vivos trust means that the property does not form any part of your estate per se and the BC courts have consistently ruled that including the transfer of property into inter vivos trusts is proper and appropriate estate planning. The land transfer tax will still apply, but you eliminate the other two issues.

If you already own your property, you can still transfer it into an inter vivos trust, but the land transfer tax applies and any capital gains on that property have to be accounted for. If you are 65 or older, you can roll your property into an Alter Ego or Joint Partner Trust without triggering capital gains.

As you can see, there are many unique aspects of ownership that should be considered when you hold property in BC An estate planning lawyer with solid knowledge of the province’s applicable legislation can help you avoid potential uncertain- ties and their resultant costs – emotional and financial – should things go awry.

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