Dr Garth

Here’s a question the Doctor often ponders. Do parents ever stop being parents? Do they morph into, like, close friends and advisors? Or do the offspring always expect their messes to be mopped up and their failures papered over – a role parents embrace, even as they face their own crud?

Debbie says yes. This is her story.

“I was hoping you could offer some advice as I transition out of a very difficult longterm relationship,” she says. “I am a retired woman with a pension living in a paid off home with my common-law husband who is a retired firefighter with a drinking problem.  My husband and I are both on title as joint owners.  We are working with a very experienced counsellor to help keep perspective during this emotional change.  He already knows I want to leave and I pray the counsellor will help keep things amicable.  The counsellor has also suggested using a mediator to help sort things out.”

Deb collects fifty grand on her DP pension and has $267,000 in an RRSP and a TFSA. The house is worth just over a million. She wants out. But there’s another complication. The kid.

“My 42 year old single daughter is in a tiny apartment with 2 small windows and no space for a sofa.  She would like to move into a proper sized apartment but cannot afford market rent on her single income of $60,000/yr.  Her landlord has been pretty good in that her rent has just been raised to $1200 a month which will only buy her a room and a shared bathroom in the current rental market.  She works full time at a decorating store, and doesn’t have much. My daughter and I are seriously considering sharing a residence.

“Would my daughter and I be better to buy a small bungalow (either detached or townhome) together outside the city? I am not sure if she should be a co-owner or a tenant but at least this would ensure that we have place we can live indefinitely not beholden to a landlord who could kick us out for whatever reason in the future.  Also, my daughter would inherit the home after I pass.  I never thought that I would be in this situation at this point in my life or have to deal with my daughter struggling to get by on her own.  Please advise.”

Messy, messy. The first thing Deb needs to worry about is Deb. Her soused spouse may not agree to relinquish title to the house, dashing hopes of a sale. Yes, he’d have to buy her out as part of an eventual split (or vice versa), but that takes time. And just because a partner boozes does not mean lifelong support payments and a neat separation. Moreover, she talks about ‘her’ daughter, not ‘ours’. Seems they’ve both been here before. Deb should understand the significant costs involved.

As for the kid, well, at 42 she’s no dependent. Stop treating her that way. Do not buy real estate with her (she has no money). Do not put her on title. What if she marries, the new hubs moves in, and Deb finds herself living in the basement? Or is forced into a sale? Or her daughter’s marriage fails after a few years and the real estate becomes part of an ugly dispute?

Advice? Get out of the relationship first. Then sell the house and see what remains. Rent somewhere, anywhere, at any cost, for a year until priorities become clearer. Do not spend all the precious liquid assets on another house since the pension will never cover costs. And stop being a mother. It’s not working.

Ah, now here’s Leo. He sounds like a better offspring.

“My dad passed away last year and my mom who is getting up there in years suggested that I get my name on her account. This would greatly simplify things with getting access to her funds if needed and performing my role as executor, when that day comes.

“But it sounds the feds passed some law so that they feel that I should report to the CRA these accounts?   Frankly, I don’t see how my banking information is any business of the governments outside paying taxes on interest.   But I will be honest, I don’t know much about it, and so I am not enthusiastic about paying an account to help setup something that is overreaching on their part. I hope with the next election, this trust thing will change with the change of government.”

It already did, Leo.

The feds and the CRA screwed up this time. Bigly. New rules intended primarily to spank people for holding development real estate ensnared millions of people like you as Ottawa declared war on ‘bare trusts.’ The tax cops said: “A bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.” Such a broad definition – covering many family circumstances. My colleague Sinan did a great job of explaining it all here.

But, it’s not kaput. Last week the CRA backed off on a requirement for bare trusts to file a T3 return and Schedule 15 document for the 2023 tax year. “Over the coming months, the CRA will work with the Department of Finance to further clarify its guidance on this filing requirement. The CRA will communicate with Canadians as further information becomes available,” it said.

By the way the federal Income Tax Act does not cover bare trusts. No legislation was passed in Ottawa to create these new rules. They are punitive, intrusive, blunt and tell us two things. The bureaucracy is out of touch with, and dismissive of, the people. And, there’s an election coming.

About the picture: Cody the Chow turned two a few days ago, and invites anyone who has a few fingers they don’t need to touch his favourite ball. (Actually he’s gentle and sociable, but is also massively conceited walks like a four-wheel-drive truck.) He’s currently reigning in Lunenburg. 

To be in touch or send a picture of your beast, email to ‘[email protected]’.