Canadian residents, deaths and probating wills

[Randalor]

So, long story short, my family is Canadian, my parents had two time shares with DVC as their only US assets that are currently worth less than $30,000 USD, and they have both passed away. I am the executor of my father's estate and he passed away before he could wrap up dealing with my mother's estate before she passed away. The lawyer I hired to help me handle probating the will in Canada is concerned about the timeshares as he has had associates who have handled estates where the whole estate was taxed in the US and he wanted to know what, if anything, would be taxed when the will is ancillary probated in Florida to handle the timeshares.

I guess what I'm asking is: Has anyone been in a similar situation, what was your outcome/what was taxed by the Florida courts, and can someone recommend a good lawyer to handle ancillary probating the will in Florida once it has worked its way through the court in Canada?

 

[Best Aunt]

When you are talking to a Florida lawyer, watch your terms so that you get complete information. "Court filing fee" and "estate tax" are two different things.

 

[drusba]

With the death of both, the property will need to go through probate in Florida. If the property was held in joint tenancy or tenancy in the entirety, the last spouse to die will be deemed the sole owner and his estate will need to do the probate. Unless your parents had legal residence in Florida or had other property in Florida, the probate in Florida will be limited to the DVC timeshare and will not include assets (property, bank accounts, etc) that exist in Canada. In Florida, there is the regular probate proceeding and the summary probate proceeding, the latter of which is quicker and less costly than a regular. The summary proceeding can be used if the total value of the Florida assets is under $75,000.

The possible taxes are, initially, estate taxes. Florida has none, but the US government does and it would apply to any property owned in the US. However, there is, for foreign citizens, a $60,000 exemption, and thus if all property owned in the US has total value below that, there is no tax but there may still be a required filing.

The second potential tax arises if the timeshare gets sold during probate, or even after by those inheriting the property. The possible tax there is US capital gains tax (Florida has no separate capital gains tax). The tax will be on the gain (basically the sale price minus some of the costs of sale and minus the original purchase price, or, in case of death, the value at time of death if higher rather than original purchase price). Since the property is not owned by US residents, the process for any sale will follow a statute called FIRPTA. Under that statute, when the property is sold, 15% of the sale price is supposed to be withheld by the buyer (or broker or closing company) to assure estate taxes are paid. The seller then needs to file a federal tax form that shows the actual gain and then the 15% that was withheld minus the actual tax owed is paid to the seller. Invariably, particularly for a timeshare, the the seller needs to make that tax filing because the actual capital gains tax is either 0 or only a small fraction of that 15% withholding.

I do not know a recommended estates counsel in Florida but you may want to contact some organizations to find one, like the Orange County Bar Association https://orangecountybar.community.lawyer.

 

[CraigInPA]

Amplifying @drusba's comments on selling a timeshare during probate: DO NOT DO THAT. Once probate is finished, the value of the inherited timeshare is the then-current-value of the timeshare. For example, if your parents bought BWV for $60 per point years ago, and it sells for $100 per point now, during probate its value is $60 per point. After probate is done, it's worth $100 per point. If you immediately sell it after you obtain it through inheritance for $100 per point, you will have zero capital gains in the US and will owe no tax.