One of the most common questions I am asked at an estate planning session with a client, says Lawyer Salima Virani, is:
“Can I add my child(ren) on title to my house so that we can avoid taxes?”
There’s no quick answer to this question as the question itself is too simplistic. So, to answer this question, I need to first ask a few more questions, such as:
- Are you the sole owner on title to this property?
- Is this property your principal residence?
- Is the property mortgage free?
Salima explains: Assuming that the answer is yes to all the questions above, it would indeed be possible to add your child(ren) on title with you as joint tenants. This would mean that when you die, the ownership is transferred to the surviving joint owner(s) by right of survivorship (and without the need for probate). In Ontario, probate fees are about 1.5% of the estate’s value, so joint tenancy can allow the property to pass directly to the surviving owner, bypassing probate and saving on these costs.
Now, let’s consider scenarios where the answers to the initial questions are not all affirmative:
You own the property with someone else (perhaps your own spouse, sibling, parent). Your decision to add your child is subject to the rights of the other title holder and will require their consent. If you are married and the property is your matrimonial home, then ownership of this property is subject to the rights of your spouse even if they are not on title with you.
The property is not your principal residence. Adding your child on title will result in a deemed disposition (at fair market value) of your interest and will trigger capital gains tax which you will need to report in your tax return. This can potentially result in a significant tax liability in your lifetime.
The property is secured by a mortgage. You will need your lender’s consent to add a new owner on title with you. The lender will require this new owner to also be on the mortgage. This means you will need to refinance the property by paying off the existing mortgage with the proceeds of the new mortgage, following which you and the new owner will be on title as well as the mortgage.
Assuming you can overcome all these hurdles and are successful in adding your child(ren) on title with you, there are some significant risks discussed below that should be carefully weighed before you make this decision.
- Loss of Control: Once a family member is on title, you cannot sell, refinance, or make major decisions about the property without their consent. This loss of autonomy can become problematic if circumstances or relationships change.
- Exposure to Creditors & Divorce: If your child faces financial difficulties, divorce, or legal action, their share of the home could be at risk from creditors or ex-spouses, potentially forcing a sale of your home.
- Tax Implications: If your child already owns a home or does not live with you, their share of any appreciation in your home’s value may be subject to capital gains tax when the property is sold-often far exceeding the probate fees you hoped to avoid.
- Sibling Disputes: Adding one child to title can create family tension or legal disputes, especially if there are multiple children or if the estate is not divided equally. Adding multiple children on title (as joint tenants) will end up with the surviving child getting the property and the deceased child’s families could potentially be left with no share in the property.
- Loss of First-Time Buyer Rebates: If your child has never owned property, being added to your title can make them ineligible for first-time homebuyer rebates in Ontario or Toronto, which could impact their own future purchases.
- Irrevocability: Unlike a will, which can be changed unilaterally by you, once your child is on title, they have a legal right to the property and removing them will require their consent and legal processes (and costs)
Conclusion:
While adding a family member to your home’s title can achieve some limited estate planning goals, the risks-especially around taxes, loss of control, and exposure to your child’s financial issues-often outweigh the benefits for most downsizing homeowners. Don’t do this just because someone on a tik tok video said so! Always consult with a lawyer that understands the interplay between estate planning, real estate law, family law and taxation, before making this significant decision.
Blog Post provided by our partner and lawyer Salima Virani of Blue Letter Law.
Please note, the content provided above is for information purposes only and does not constitute legal advice. You should consult with a qualified attorney for advice on your specific situation.