Personal Finance

Transferring home from a parent to a child - estate planning?

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  • Mar 4th, 2019 1:47 pm
[OP]
Member
Apr 14, 2004
308 posts
6 upvotes
Toronto

Transferring home from a parent to a child - estate planning?

Sorry if this is not the right forum, but I am not sure which it belongs under. I'm hoping someone can shed light on this situation, if its even possible.

I have an elderly parent with dementia who does not require any care yet, and is still able to live independently (for now). The income is bare minimum, OAS, CPP. No pensions. The house is fully paid off.

My question/understanding is, when the parent requires more care and has to sell the house, those proceeds from the sale of the house are then used to pay for the care in a retirement community. After the money is depleted, the government kicks in and covers the rest? This would be a public home, not a private one.

My question is, can the parent transfer ownership of the house, to the child beforehand, thus keeping the house in the family and its value, instead of having to sell it and using the proceeds/handing over to the government? Is this possible? Are there tax implications?

The main priority is for the care of the parent of course, and hope this post does not come off as cold-hearted, however I am trying to make informed decisions.
3 replies
Deal Addict
Jul 3, 2017
3860 posts
2774 upvotes
Same in BC. Provincial support for long-term care is means-tested by income, not by assets.

You may want to consult with a lawyer over how to handle any eventual transfer of property. Some of the things to consider:

- If the principle owner and resident sells the house, there is no capital gains tax. They can subsequently gift any money received to someone else tax-free if they want.

- If you inherit the house, it is deemed disposed of by the owner on their death. Any gain in value up to the day of their death is a tax-free capital gain as long as they were the principle owner and resident, but if it takes a while to sell, gains after the date of death are taxable. The house will be tied up in probate for a while, and the estate will be subject to the provincial probate fee (not-an-inheritance-tax).

- If you take on joint ownership of the house in order to make it easier to sell, you may become liable for some capital gains tax (since you are not the principle owner and resident), and any homeowner grant on property taxes may also be reduced.

- Some lawyers will draw up a signed and undated sales agreement that gets filled in automatically on the date of death, so that you inherit the house just before it becomes part of the estate. But other lawyers will tell you that's illegal. Take your pick.
Sr. Member
Jan 15, 2015
599 posts
332 upvotes
sandman804 wrote: Sorry if this is not the right forum, but I am not sure which it belongs under. I'm hoping someone can shed light on this situation, if its even possible.

I have an elderly parent with dementia who does not require any care yet, and is still able to live independently (for now). The income is bare minimum, OAS, CPP. No pensions. The house is fully paid off.

My question/understanding is, when the parent requires more care and has to sell the house, those proceeds from the sale of the house are then used to pay for the care in a retirement community. After the money is depleted, the government kicks in and covers the rest? This would be a public home, not a private one.

My question is, can the parent transfer ownership of the house, to the child beforehand, thus keeping the house in the family and its value, instead of having to sell it and using the proceeds/handing over to the government? Is this possible? Are there tax implications?

The main priority is for the care of the parent of course, and hope this post does not come off as cold-hearted, however I am trying to make informed decisions.
I'm not familiar with the laws in Ontario, but in B.C. you can have adult children added to title as joint tenants. This serves two purposes: (1) an elderly person with dementia could not be swindled out of a property by unscrupulous financial advisors (2) no creditors can place a lien against the property or force a sale without the other joint tenant(s) knowing. So, in my mind, the government could not easily force a sale of assets since an equal share legally belongs to the remaining joint tenant(s).

The problem is that the law courts may ultimately void a transfer or change of title if challenged by potential heirs to the property. If you or a sibling already has power of attorney, this would allow you to transfer/change title legally, quickly and without interference. So that should be a priority - to assume power of attorney if you have not already done so, perhaps getting one or more medical support documents.

Keeping the property in joint tenancy means that it is not added to the assets of the estate when the elderly joint tenant passes away; the house can be transferred completely to the surviving joint tenants with no tax implications and no fees attributable to the value of the property (and payable to the province) when probating a will.

The questions remains whether or not Canada Revenue will tax the transfer. If you pay a parent the fair market value (or your share) of the property prior to change of title, there should be no adverse tax consequences. I believe with the new disclosure rules you have to disclose the value of principal property to CRA even before you have sold, but I'm not clear on specifics as it doesn't affect my personal situation.

Lastly, I want to make clear I'm not a lawyer, but I have probated wills myself and have transferred or changed title on a few properties, both with and without a lawyer. Good luck to you.

Edit: If you don't own another principal residence, the eventual disposition sale of your parent's home would definitely not be taxed for capital gains. There are ways to avoid paying capital gains on your share even if you can't declare it as your principal residence. Different lawyers/accountants will tell you different things.

If a property is under one owner (deceased), you can list for sale with realtors but can't complete the sale and property transfer until probate is completed. But if the property has joint tenants, the transfer to surviving joint tenants - and subsequent sale - can be done outside probate.

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