There are three types of personally owned real estate that can be entered; Principal Residence, Recreational Property and Investment Property. Any growth associated with your client’s Principal Residence will not create a tax liability. However, any growth associated with Recreational or Investment Properties will create a tax liability based on the Value and Cost Base each year. If the client owns more than 3 properties you must group the excess properties into one of the 3 categories or add it to the Other Assets area.
Value: Enter the value of any personally owned real estate.
Cost base: Enter the current cost base of the selected real estate properties. As the principal residence is not subject to taxation, cost base is not required. The software will utilize this amount when calculating the tax liability from an estate and net worth perspective.
Mortgage Balance: Enter the current outstanding mortgage value of the selected property. The software will automatically pay down the mortgage based on the Interest Rate and Monthly Payment entered.
Interest Rate: Enter current interest rate associated with the client’s mortgage. This is a static rate, compounded semi-annually, that will remain until the mortgage has been reduced to zero.
Monthly Payment: The software allows for a monthly mortgage payment only. For clients who are paying weekly or bi-weekly, you will need to adjust their payments to reflect an equivalent monthly payment.
Downsize/Liquidate Property: The software allows for the downsizing of the principal residence or the liquidation of the recreational and investment properties. To downsize or liquidate a property select ‘Yes’ from this drop down.
Downsize/Liquidate at Age: After indicating that a property is going to be downsized or liquidated set the age the property adjustment takes place at in this field.
Deposit Proceeds: When a property is liquidated at a future date the proceeds from the disposition can be deposited to either the clients’ investment account by selecting either Client Non-Registered, Spouse Non-Registered, or Joint Non-Registered from the drop down.
New Property Value: When downsizing or liquidating the Principal Residence the software allows for a new property value to be entered in this field. Enter a new property value to model the clients downsizing their principal residence in their retirement years.
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