Parents who intend for a child to take over the family home when they pass away are often concerned about the probate costs of such a transition. Some Ontario families consider cutting estate administration and probate costs out of the equation by gifting the home to adult children or adding them to the house deed.
While this may seem like a simple solution to some, there are many complexities to consider before making such a significant move.
The first thing to consider is the tax burden involved in both scenarios. Capital gains taxes and land transfer taxes may be involved in transferring home ownership between parties. These costs could outweigh the probate that would be involved in the property changing hands.
Adding your child to the deed of your house can also expose you and your spouse to financial problems from others. For example, if your child has accrued substantial debt, putting your child’s name on your home’s deed means that their creditors could file liens on the home.
Additionally, if your adult child is married and later files for divorce, the house could be considered an asset that needs to be divided in the divorce proceedings. So, if you have a vested interest in keeping your house in the family throughout your lifetime, you may be able to keep it most secure by arranging to transfer ownership after you pass away.
Ultimately, the taxation situation and probate costs vary from province to province. It is understandable for people to want to do what they can to avoid unnecessary estate administration costs. However, making educated decisions in a legally sound way is also critical. Working with an Ontario estate planning and administration lawyer can help you to clarify the best options for you at each stage in the process.