O.p.

What funner way to launch into a shiny new year than talk about the ancient snorts who walk among us? Old people. They’re so cute. All analoguey and quaint. But sometimes they need a pile of help. Fortunately, this infantile blog is happy to assist!

So here’s Yves, whose MIL is one of those rentiers the Mills and Zs hate. “This is the first time I´m reaching out to you with a question, but have been reading your blog for years with lots of interest. Thanks for all the sound advice,” he writes, wisely praising me.

My mother-in-law (retired on a defined benefit pension) has a second property in which she has long-term renters. She has access to money to pay off the entire debt on the house, but wants to keep a mortgage on this rental property as she wants to write-off the interest as well as upgrades/maintenance on the house. She renewed the mortgage on the property until 2025 at a fixed rate of 2.4%, and the rental money more than covers the mortgage costs.

Financially speaking, would you say it’s a) worth keeping a mortgage for the write-offs, or b) wiser to pay the outstanding balance on the mortgage next time it´s due for renewal in a couple of years? We´d appreciate your thoughts on this.

Simple answer. Do nothing. The 2.4% mortgage is a gift. It’s free money when inflation nears 7%. And all the interest paid is deductible from the rental (or other) income, as mentioned. Given that two years are left on the mortgage term, why is this even a discussion? Presumably mom has her liquid capital invested someplace, in some security, earning more than 2.4%.

In fact, when renewal rolls around in 2025, even if she renews at twice the current rate on the mortgage, it will still be a good choice, as it yields a substantially larger tax deduction. Hopefully she has other sources of income and a marginal rate that benefits from the write-off. So why pay the loan off? What is the advantage on an investment property? In fact, maybe borrow some tax-free equity from the property by increasing the deductible debt.

The larger question is whether or not it makes sense to hang on to the place. If MIL is only covering her expenses with a big wad of equity generating no income, what’s the point? Real estate’s peak is behind us now, so the days of fat appreciate are over. If she needs income, and is (ahem) old, there are better alternatives. If she balks at selling because there’ll be capital gains tax to pay, explain that this is the lowest tax in the land, applied to only half the gain and calculated at her marginal rate. She could well end up keeping 80% or 90% of the profit. Taxes scare seniors, Yves. Help her through it.

Now to Andre. “I had a question regarding estates,” he says. Apparently, he also has folks who are in financial stress.

My parents are elderly. Myself and my sister are currently in the process of making funeral arrangements for my father who is in the late stages of his battle with cancer. The cost of a funeral and plot is very expensive. My parents’ investment accounts do have enough funds to cover the costs. However, my mother would like for the family to split the costs 3 ways. Would it be a good idea to create a registered loan from me and my sister to my mother (that she could use the pay the funeral expenses). The logic being (in the future when my mother passes) funds distributed to repay the registered loans would not be subject to estate tax

There is no estate tax in Canada. Just probate on certain assets, and it’s not much to worry about. In the case of your parents – who don’t have enough saved to pay for a funeral – it will likely be non-existent.

Now, Andre, did your parents finance the childhoods of you and your sister? Pay for braces, hockey, toys, camp, piano lessons, bikes, pets or university? Maybe all the money they shelled out to provide you with a supportive and loving home is part of the reason they lack the resources to look after their own final journey?

Tell sis that you and she will be paying the damn bills. No loan.

Blog dog Brian in Mississauga comes with another MIL issue. “Her husband passed away,” he says. “The bank quickly collapsed her late husband’s RRIF (penguin bank Imperial Service, mutual funds) and sent her the lump sum.”

Now she expects a big tax hit.  How can she roll this into her RRIF if “the horse is already out of the barn”. The bank people don’t seem to have a solution, as it’s done.
What are your thoughts on how to handle this?

I checked with mine/my wife’s “beneficiary forms” for our self-directed RRSPs. We’re set up as [x] Lump Sum (it only allows us to check the [ ] “successor annuitant” box for RRIF accounts, not RRSPs.

The money or assets in a RRIF can be rolled over, free of tax, to a spouse or common-law partner. For that to happen, the spouse must be named a beneficiary on the account or in the will. “The RRIF continues and the spouse or common-law partner becomes the successor annuitant under the fund,” says the CRA. “All amounts paid out of the RRIF after the date the annuitant died become payable to that successor annuitant.”

The wealth is not subject to probate. Beneficiaries who aren’t eligible for the spousal rollover get the gross amount of the transfer, less tax – which the estate has to set aside, and pay, when the funds are moved.

Check the will. Review the beneficiary designation on his RRIF. Get the penguin bank advisor to assist in the process. After all, what were the fees paid for?

As for your own RRSPs, make each other beneficiaries, and successor holders on TFSAs. Write a will. Get POAs done for property and personal care. Enjoy not being old. I hear it sucks.

About the picture: “Here´s picture of our Winston when he was a dapper little puppy,” writes Yves (the one with the MIL problem). “He´s now 2.5 years old (still a head-turner) and the best dog we could have ever wished for.”