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This article was originally published on Advisor.ca
Estate planning implications
Given the rising value of burial plots, advisors must discuss plans for them with clients as they would any other asset, says Camron Foulds, a Vancouver CPCA and associate with ZLC Financial Group. "We sit down and discuss who is getting the asset, and how we can make it fair and equitable for all parties involved."
Foulds dealt with a situation where the grandparents in a family had purchased eight burial plots; they took two themselves and passed the remainder to their two children, who planned to use them.
There were four plots left, each worth about $10,000, to share among 10 grandchildren.
So Foulds called a meeting, asking "Who wants the plots and who wants cash value instead?" In this case, it worked out, because two of the grandchildren and their spouses wanted to be buried there.
The other eight grandchildren opted for a cash payout. Foulds suggested the family place the plots in a trust and use an $80,000 life insurance policy to cover the cash payout of $10,000 per remaining grandchild.
With the insurance work completed, he brought in the family's estate lawyer to create the trust and will. Having the details of the plan ironed out before they had to pay the lawyer's expensive hourly rate resulted in a "great cost savings" for the family.
Clients can sometimes avoid hassles, affirms Peikes, by gifting items like funeral plots and other unusual assets to their heirs while they're still alive.
"The problem arises when these items are recited in a will," he says. "If the will is to be probated, these items need to be valued and this valuation may attract estate tax."
Even when gifting, he cautions, it's wise to get an accountant's opinion about whether a tax event has been triggered.
Death and taxes
When you buy a cemetery plot, says Stella Gasparro, CPA, CA, and partner, tax and accounting with MNP LLP, you're not actually purchasing the underlying land, but rather the right to be buried in that spot. That right would fall under "personal use property" in the Income Tax Act.
This is defined as "property owned by the taxpayer that is used primarily for the personal use or enjoyment of the taxpayer or for the personal use or enjoyment of the taxpayer and related individuals or trust beneficiaries."
Whether people actually "enjoy" the use of a cemetery plot is debatable, she says, but a cemetery plot is normally for the personal use of a client or his relative.
For tax purposes, capital losses can't be claimed on personal property.
But clients may have to pay capital gains tax if the price of the plot has risen by more than $1,000, according to Gasparro. If a burial plot is being used to bury a dead person, however, it wouldn't accrue tax.
For unused plots held at death, she says, "it may depend on what will be done with those plots." Since there is a deemed disposition of assets on a person's death, if a plot is being willed to a family member other than the spouse, there may be a capital gain in the final return of the deceased.
And, tax authorities will pay attention if there's big money involved. In fact, this is exactly what happened to a California woman who, in 2009, received a final bid of $4.6 million on eBay for the crypt above where Marilyn Monroe is entombed. But the bid was later rescinded.
Related Topics:Estate Planning
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