People often ask about adding one of their children to the title of their home as a joint tenant because someone told them that they can save on estate taxes. Joint tenancy means that the title passes directly to the surviving owner and does not pass through the will. However, it can cause an awful lot more problems than what it was meant to solve.
In BC we do not have any estate taxes, though we have a probate fee of 1.4% of the value of the assets held by a person at the time of their death. It does not take mortgages into account, so if a property is worth $500,000 and has a mortgage of $400,000, the 1.4% probate fee is applied to the full value of $500,000.
This can leave the child open to capital gains taxes on their share of this property. In Canada a principal residence is exempt from capital gains taxes. If they already own a home then they would be liable for capital gains taxes when selling this property. Quite often the capital gains taxes can be considerably more than the probate fees would have been.
If the children do not own a home, it would take away their ability to qualify under any first time home owners programs, such as for relief from the Property Transfer Tax in BC.
If the parent wishes to renew a mortgage or refinance and take out a larger mortgage, their chid will have to be available to sign as well and needs to go to all the meetings, or pay additional fees to sign separately. If they live in differing municipalities or have different work schedules, it can be a real nuisance to be available together at the signing appointments. There could be issues if the child does not agree to sign the paperwork.
If the child divorces, their interest in the parent’s home can be looked to as a family asset by their spouse, who may seek to own a share of it. If the child runs into money problems, their creditors can force the parent’s home to be sold in order to satisfy their debts.
It just doesn’t seem to me like it’s worth all of these hassles and risk in order to save the probate fees.
Disclaimer: This is not meant to constitute legal advice. I highly recommend speaking to a legal professional about your specific circumstances.
