Should I put my children on title?

children joint tenancy Apr 15, 2019

What are the perceived benefits of joint ownership?

The right of survivorship is a convincing attribute of joint ownership. The law states that when one of the joint owners passes away, the surviving joint owner(s) will automatically obtain the deceased person’s share. Accordingly, the asset would flow outside of the deceased person’s estate. If an asset flows outside of an estate, it will not be included in the overall value of the estate that is subsequently used to determine probate fees. While this may seem like a good idea at face value, the risks outweigh the benefits – especially in Alberta, which levies a flat probate fee that currently caps at a maximum of $525.

Let us explain:

Risks:

1. Deemed Disposition Tax: According to the CRA, “deemed disposition” is a term used when a person is considered to have disposed of a property even though a sale did not take place. Following that logic, when property is transferred to another person (other than one’s spouse), the transferor is considered to have disposed of a property even though they did not sell. Accordingly, if the property being transferred has incurred capital gain, the capital gains tax will apply.

2. Family Arguments: A person may choose to place one of their children on title to their home as a joint tenant to ensure that their home is not considered an estate asset. However, upon their passing, their remaining children may get upset at the fact that they did not inherit the home. While they considered the joint tenancy to be a means of alleviating probate fees, the intent may not be clear. Is the home to be deducted from the named child’s share of the residue? Will the named child be responsible for paying for all maintenance to the home? Was it their intention for the named child to retain the home, or to sell it for fair market value? 

3. Selling the Home: In order to sell the home, both joint tenants need to give their consent. Accordingly, in the event of a falling out between parent and child, difficulties may arise when making property decisions.

4. Creditor Claims: Pursuant to Gully v. Gully, a case dealt with by the British Columbia Supreme Court, it is important to note that third party creditors can become entitled to register judgements against the joint tenant (the child)’s interest in the home.

Does having my spouse on title pose the same risks?

In short, no; sharing title to your home with your spouse does not pose the same risks as having your child on title (with respect to Deemed Disposition Tax). Your spouse is protected by the Income Tax Act. This is an act that contains provisions that deter the tax you owe under deemed disposition rules. You take ownership at original cost.

Conclusion:

In general, we advise clients against putting their children on title. Given that Alberta has a flat probate fee that is lower than what is seen in other provinces, the risks almost always outweigh the benefits.

Stay connected with news and updates!

Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.

Subscribe
Close

Ready to protect
your loved ones?

Sign up and we'll help you make plans that protect the people you care about most.