Children don’t inherit parent’s debt: experts

MONTREAL – The death of a parent can sometimes mean financial turmoil for surviving relatives, but advisors say that lingering debts aren’t the responsibility of the adult children in the family.

“There is no liability for a child to take on the debts of the parents,” said lawyer Murray Morrison, who specializes in insolvency and practices in the Vancouver area.

If the parents die in debt, the first place to turn is their estate which can go bankrupt, he said.

But a bankrupt estate also means there won’t be an inheritance for the family.

“Kids do not come first,” he said. “Under the law, the debts have to be paid before anybody gets a nickel.”

So the surviving children can choose to ignore their parents’ debt and let creditors sue and garnishee the deceased mom or dad’s bank account, or they can spend what money is in the estate to bankrupt it, Morrison said.

He said surviving children should not “try to pay the bills without thinking about it” and also recommended they seek legal advice.

Debts aren’t transferred by virtue of marriage or death — not without your signature — even though spouses and children may feel they should clear up any outstanding money owed, said Margaret Johnson, president of Solutions Credit Counselling Service.

“A lot of people want to do the right thing,” Johnson said. “The right thing is to pay debts that are yours. If they’re not yours, don’t pay them.”

For example, if dad passes away but has a credit card bill and an unpaid

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Condo market vulnerable to correction: BoC

Condo market vulnerable to correction: BoC

A condominium under construction is shown in Toronto on Saturday, February 4, 2012. The Bank of Canada is issuing among its starkest warnings to date about the country’s housing market, again taking special aim at Toronto’s condominium sector. THE CANADIAN PRESS/Pawel Dwulit

OTTAWA – An overbuilt and overpriced condominium market is posing a risk to Canadian households, banks and the economy in general, the Bank of Canada warned Thursday in its latest review of the health of the country’s financial system.

The central bank particularly singles out the Toronto condo market, which it notes continues to carry a high level of unsold high-rise units in both pre-construction and under-construction phases.

It urges policy-makers to continue monitoring developments in the sector, saying it is “working closely” with federal authorities to maintain an ongoing assessment of risks.

Overall, the bank says it believes both global and Canada financial conditions have improved somewhat despite the subdued pace of the economic recovery.

In Canada, the growth in household credit has continued to slow and has fallen broadly in line with growth in disposable income. As well, overall activity in the housing market has moderated.

But the central bank is still worried about the housing market, and particularly condos in Toronto.

“If the upcoming supply of units is not absorbed by demand as they are completed over the next 12 to 30 months, the supply-demand discrepancy would become more apparent, increasing the risk of

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New forms to track potential tax cheats

OTTAWA – The federal government is bringing in new rules to monitor people who may be hiding property offshore.

Revenue Minister Gail Shea says a tougher foreign income verification statement will help fight tax cheating.

Starting with the 2013 taxation year, Canadians who hold foreign property worth $100,000 or more will be required to provide additional, detailed information to the Canada Revenue Agency.

Holders of foreign properties will have to provide the name of the institution that controls the overseas funds, the country to which the property relates and the income generated from the property.

The revenue agency will use the new information to ensure compliance with tax laws.

Shea says the information will help the taxman track cheaters.

“Our government is committed to combating tax evasion and getting tough on tax cheats,” she said.

The Certified General Accountants Association of Canada welcomed Shea’s announcement.

“We are pleased to see the government taking action on this important issue,” said Carole Presseault, the association’s vice-president of government and regulatory affairs.

“Increased reporting requirements of large offshore assets will help to ensure that all Canadians are operating on a level playing field when it comes to their taxes.”

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Some Canadians slow to learn TFSA rules

Some Canadians slow to learn TFSA rules

The Canada Revenue Agency headquarters in Ottawa is shown on Friday, November 4, 2011. Thousands of Canadians received mailed warnings from the taxman this spring about overcontributions to their tax-free savings accounts, suggesting the rules remain unclear four years after the savings vehicles were first introduced. THE CANADIAN PRESS/Sean Kilpatrick

OTTAWA – Thousands of Canadians received mailed warnings from the taxman this spring about overcontributions to their tax-free savings accounts, suggesting the rules remain unclear four years after the savings vehicles were first introduced.

The Canada Revenue Agency recently sent 65,978 mailouts to taxpayers who apparently put too much money into their TFSAs in 2012.

The number is down from the 76,000 who got mailouts last year, but remains stubbornly high despite efforts by the agency and financial institutions to alert Canadians to a wrinkle in the rules.

Tax regulations say that account holders can put back the amounts they withdraw from a TFSA only in a later calendar year. Doing so in the same calendar year exposes them to a tax hit for overcontributions, even though they’re only replacing the withdrawn funds.

The agency has been sending out warnings for four years now, with a peak of 103,000 in 2010. The CRA, banks and other financial institutions have stepped up education campaigns about the wrinkle, with uneven results.

Some 13,000 individuals who received TFSA overcontribution warnings this spring got the same mailout in the spring

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Canadian home sales stronger than expected

Canada’s housing market continues to show signs of stability as the number of homes sold so far this year has come in slightly higher than projected, a possible signal that the market is set for a rebound in 2014, according to the Canadian Real Estate Association.

The industry group representing Canadian realtors reported Monday that although it still expects fewer sales to be logged this year than in 2012, the decline will be smaller than what was predicted in March.

Overall, it forecasts that there will be more sales next year than in 2013 and 2012.

Douglas Porter, chief economist with BMO Capital Markets, said the figures show that the doom and gloom that has been anticipated for the Canadian housing sector looks like it’s been delayed — at least for the near future.

“Overall, this is relatively encouraging news,” he said. “If anything, the surprise has been how healthy the housing market has been.”

CREA is now estimating that 443,400 units will be sold in 2013 , a decline of 2.5 per cent from 454,573 in 2012. It had previously projected a decline of 2.9 per cent from 2012.

The group reported that sales activity began to pick up at the end of the first quarter and accelerated in the second quarter. It projects that 2014 will see a strong rebound, with 464,300 housing units sold — about 9,700 more than last year.

It said the drop in transactions in the second half of 2012 can be attributed to stricter mortgage rules for lenders and

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Parents unsure how to teach children about money

(Special) – Parents generally seem to be in a quandary about how to teach their children about money and investing, which is unfortunate because the sooner children can grasp the basic concepts the more likely they will be to establish good financial management practices as they mature and grow into adulthood.

“As busy parents we might not be well prepared to how best to talk to our young kids about the important of money, spending and saving as well as investing,” says Serge Pepin, vice president of investment strategy with BMO Asset Management.

“The younger you are in understanding the basic concepts of money and investing, the better you’ll be in securing sound financial well-being,” Pepin says. “It’s never too early or too late to teach children about money and take time as educators and as parents and/or guardians to explain key money concepts to them. It will help them succeed early on in the management of their first credit experience and help them establish good financial management as young adults.”

Many parents are still unsure about some of the basic money-learning concepts and activities such as when to start giving their children an allowance, how much to give them and should an allowance be tied to doing chores around the house.

“Some of the basic fundamentals are still a quandary to parents,” Alyson Shaefer, a psychotherapist and parenting expert, says. “They don’t really know where to start.”

To help with the challenge of educating children about money, BMO has partnered with the Canadian Foundation

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Finding vacations deals harder this year

Finding vacations deals harder this year

An airliner prepares to land at Pearson International Airport in Toronto, September 30, 2004. If you’ve been procrastinating on plans for the family’s summer vacation, you’re going to need to move fast as rising airfares and packed flights have made it tough to find deals, but there are still a few tricks that could help, experts say.THE CANADIAN PRESS/Adrian Wyld

MONTREAL – If you’ve been procrastinating on plans for the family’s summer vacation, you’re going to need to move fast as rising airfares and packed flights have made it tough to find deals, but there are still a few tricks that could help, experts say.

Ticket prices are up one per cent for travel this summer — and that’s on top of last year when they were the highest in eight years, said Rick Seaney, CEO of U.S.-based travel website

There are several other factors working against late planners, including a number of mega airline mergers in the United States that have put a damper on price competition.

Airlines have also been cutting seat capacity over the last few years in the face of high fuel prices and a weak economy, leaving the industry with fuller planes and less incentive to offer great deals to customers.

“This summer people are going to be shopping for airfares and getting some sticker shock in certain cases,” Seaney said in an interview from Dallas.

But he remained optimistic that strategic

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Responsible ways to use credit

(Special) – Canadian households are continuing to pile up debt. A recent Statistics Canada report calculated that the average household in Canada owed a record $164.97 in debt for every $100 of disposable, after-tax income earned in the fourth quarter of 2012, up slightly from the previous high of $164.70 in the prior three months.

While most people would agree that debt can be very dangerous if it gets out of control, it is a fact of life which, if approached prudently, does not necessarily have to be bad.

Canadians need to access credit and borrow money to pay for things they need. One of the main principles of money management is to borrow for things like a house which, over time, are likely to increase in value.

In other words, there is good debt and bad debt.

Good debt includes anything that is too expensive to pay cash for but is something that you need or might be considered a good investment, such as a house. Bad debt is any form of debt with a high interest rate for things you don’t really need or can’t afford, such as charging an expensive vacation on a credit card.

The worst form of bad debt is credit card debt because it carries the highest interest rate. It becomes particularly bad when consumers are unable to cover the monthly card payments and continue to add to the balance.

A recent survey by TD Canada Trust found that the top three credit products used by most Canadians within the

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