How are you protecting your heirs?
Aug 2nd, 2023 | By FCT
Did you know only 55% of Canadians have a will? Or that more than half of people over 65 haven’t updated it in at least five years?1 Estate planning is an essential part of life, no matter what assets you have. But it’s even more important with a potentially shared asset like a cottage or other secondary property.
Is your vacation property part of your will? When it goes to your beneficiaries, more than just the property will pass down—your heirs will also inherit its risks.
Why protecting your title’s future matters
Title risks can take decades to show up after you buy a property. When they do, they’re sudden and expensive.
It’s impossible to know how financially stable your heir(s) will be and if they can handle an unexpected expense in the thousands or tens of thousands. But you can protect them now.
Did you know that title insurance coverage can continue, even after the property transfers to a new owner? The policy outlines the different circumstances that apply, and if the title is transferred according to the policy’s continuation of coverage each time, that policy can keep protecting successive generations.
Passing your property down directly
If you plan to pass the property down directly to your beneficiaries, then passing on your protection along with it is easy. There are two main ways to do this:
- Hand the property to your heir(s) through your estate when you’re gone.
- Transfer to your spouse or child for nominal consideration while you’re around.
In either of these cases, your title insurance policy can continue to protect the new owners, with the same protection it provided you.
What’s nominal consideration?
When someone gets something “for nominal consideration,” it means that they paid an insignificant amount of money for it, usually $1. For title insurance coverage to continue under the new owner, there needs to be a record of sale and some amount of money exchanged.
Putting your property in a trust
If you choose to put your property in a trust, passing on your title insurance protection is a little more complicated. Keep a couple things in mind to make sure the transfer goes smoothly:
You need to be the settlor of the trust
For coverage to continue under a trust, you need to be the one who created the trust. That person is called “the settlor,” or sometimes “the donor.”
Have a legal professional draft the trust agreement
For your title insurance to keep protecting your beneficiaries when the trustee eventually transfers the property to them, the title has to transfer in a way that’s clearly outlined in the terms of the trust. Vague wording or assumptions can cause the policy to lapse.
Having a clear, well-drafted trust agreement is essential, which is why you should always have your legal professional draw it up for you.
Don’t have title insurance?
If your secondary property isn’t title insured, it’s not too late, even if you’ve owned it for years. Talk to your legal professional about existing homeowner’s coverage for your property. You can also sign up here in minutes. Make sure your beneficiaries can enjoy your gift to them in peace—get protected today.
1 source: canada.ca
Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.
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