“Should I add a child to title?” is a question I get asked several times a month. Often someone has heard that adding their child to to title to their home is an easy way to save tax and legal fees, so they pick up the phone and call me. “I want to add a child to title. How much do you charge?” Unfortunately, it’s not always so simple.

Adding your child to the title of your home in Ontario can seem like a straightforward way to simplify inheritance, save estate tax and transfer ownership. However, this decision comes with significant legal and financial implications that should be carefully considered before moving forward.

Drawbacks to Consider

• Loss of Control: Once your child is on the title, they have legal ownership rights. You relinquish some control over the property, as you cannot sell it or refinance your mortgage without their consent.
• Disagreements and Disputes: Joint ownership can lead to disagreements between you and your child regarding property management, renovations, or even selling the home.
• Financial Repercussions: If your child encounters financial difficulties and accumulates debt, or faces a lawsuit, the home may now be exposed to their liabilities.
• Separation from a Partner: If your child suffers the breakdown of a relationship while on title, your child’s interest in the home may be exposed in a division of assets.
• Loss of First-Time Buyer Tax Rebates: If your child has never owned a home, after they are put on title they can lose eligibility for rebates that are available to first-time home buyers. For example, once you have owned property anywhere in the world, you are no longer eligible for the Ontario or Toronto Land Transfer Tax Rebate for First-Time Home Buyers. This is often an unexpected surprise to children buying their first home, after they have been put on title to their parents’ home to save estate tax.
• Capital Gains Tax: If your child does not live in the home, and already owns their own property, adding them to title to a second property can be viewed by CRA as an investment property, and this may expose your child to capital gains tax on the increase in value on their interest in the property accruing from the date they were added to title.
• Having Multiple Children: If you have more than one child, will you just add one of them to title? Will you add all of them to title? Both of these choices raise numerous issues that need to be carefully considered.

But I Hate Paying Tax!

Estate Tax is approximately 1.5%. This calculation is an important one to remember given the several potential drawbacks outlined above. It’s understandable that people tend to have a knee jerk reaction to minimize taxes and pay little to no tax whenever possible. But after considering the risks, often clients feel they prefer to pay the Estate Tax over adding a child to title. Every situation is different, so it is important that you consult with an expert before you make up your mind.

Estate Planning

People often fail to realize that the question of whether to add a child to title to the home is one piece of a larger puzzle. A great way to minimize taxes and legal fees and to make things easier for those closest to you is to have a broader estate plan that includes up-to-date Wills and Powers of Attorney customized to your individual situation by an experienced lawyer.

The Bottom Line

The decision of adding your child to your home’s title is a personal one. Weighing the potential benefits and drawbacks carefully, considering your family dynamics, financial situation, and long-term goals for the property is all part of the decision making process. Consulting with a lawyer specializing in estate planning can provide valuable guidance to ensure you make an informed decision that aligns with your overall wishes.