Adding an Adult Child to Property Title in Ontario

A property owner may consider adding an adult child to title for estate planning, shared ownership, financing, or family reasons.

Adding a child to title is not merely an administrative change. Depending on the intended arrangement, it may give the child a present legal or beneficial interest in the property and may affect control of the property, land transfer tax, income tax, existing financing, and the owner’s estate plan.

The potential benefits and risks should be considered before the transfer is completed.

A parent may consider adding an adult child to title to:

• make a present gift of an ownership interest; 
• share ownership and responsibility for the property; 
• arrange for the property to pass by right of survivorship; 
• simplify certain steps following the parent’s death; 
• recognize a child’s financial contribution to the property; or 
• complete another family or estate-planning arrangement. 

The appropriate ownership structure will depend on what the parent and child intend to accomplish.

Where the parent and child hold the property as joint tenants, the registered interest of a deceased joint tenant generally passes to the surviving joint tenant.

By contrast, tenancy in common does not include a right of survivorship. Each owner holds a separate interest that may pass through that owner’s estate.

If the surviving child is beneficially entitled to the property by right of survivorship, the deceased parent’s interest may pass outside the estate and may not be included in the value used to calculate Estate Administration Tax. A survivorship application and other legal steps may still be required to update title.

Registered title does not always determine who is beneficially entitled to the property after the parent’s death. Questions may arise about whether the parent intended to make a gift or added the child only for convenience or estate-planning purposes. The parent’s intentions should be clearly documented and coordinated with the Will and estate plan.

Adding a child to title may appropriately reflect an arrangement in which the child has contributed toward the purchase, mortgage, renovations, or other property expenses.

The parent and child should clearly document:

• their respective ownership interests; 
• who will pay property expenses; 
• whether the child is receiving a gift; 
• who may occupy the property; 
• what will happen if either owner wants to sell; and 
• what should happen following the death of either owner. 

Where a genuine gift is intended, the child may acquire an immediate interest in the property. The parent should not assume that the child can simply be removed from title later without the child’s agreement and another property transfer.

The child’s registered interest may also affect a future sale, refinance, mortgage, or transfer of the property.

An ownership interest may be affected by circumstances involving the child, including bankruptcy, creditor claims, incapacity, separation, or death.

For example, an interest in real property held by a bankrupt person may become relevant to the bankruptcy proceedings. 

The possible effect of the child’s personal circumstances should therefore be considered before ownership is changed.

Adding one child to title may create uncertainty or disagreement about whether:

• that child was intended to receive the property as a gift; 
• the child was added only to assist the parent; 
• the property should still be divided under the parent’s Will; 
• the child must account to the estate or other beneficiaries; or 
• the child’s interest was intended to take effect immediately or only after death. 

Clearly documenting the parent’s intentions and reviewing the parent’s Will and estate plan can reduce the risk of conflicting arrangements.

A transfer from a parent to a child is not automatically exempt from Ontario land transfer tax.

Where no money, mortgage liability, or other consideration passes, the amount of land transfer tax may be nil. However, where the property is subject to a mortgage and the child assumes responsibility for part of that debt, land transfer tax may be calculated using the applicable share of the outstanding mortgage and any other consideration provided.

The applicable land transfer tax treatment will depend on the structure and details of the transfer.

Adding a child as a beneficial owner may be treated as a disposition of the transferred interest for income-tax purposes.

Where capital property is gifted to a child, the parent is generally considered to have disposed of the transferred interest at its fair market value. This may result in a capital gain, although the principal residence exemption may eliminate or reduce the taxable gain where the applicable requirements are met. 

The transfer may also affect the future tax treatment of the property for the child. Tax and accounting advice should be obtained before completing the transfer.

Where a mortgage or secured line of credit is registered against the property, the proposed ownership change may be affected by the terms of the existing financing.

Clients are responsible for contacting their lender or mortgage professional and addressing any requirements relating to notice, consent, refinancing, or changes to the borrowers.

Adding a child to title changes the registered ownership of the property but does not, by itself, make the child a borrower under the existing mortgage.

Adding a child to title may not be the only way to accomplish the owner’s objectives. Depending on the circumstances, alternatives may include:

• preparing or updating a Will; 
• preparing a power of attorney for property; or 
• considering another appropriate estate-planning arrangement.

These alternatives have different legal and tax consequences and should be considered before transferring ownership.

Do not send original documents, identification, complete account numbers, passwords, or other sensitive information unless requested by Nobari Law Professional Corporation. If requested, please follow the document-sending instructions provided by the firm.

Depending on the circumstances and scope of the retainer, Nobari Law Professional Corporation may assist with:

• reviewing the proposed ownership change; 
• explaining the legal effect of the transfer and the proposed form of ownership;
• reviewing registered ownership and interests affecting the property as required; 
• identifying applicable Ontario land transfer tax requirements; 
• preparing the transfer and related legal documents; 
• obtaining the required signatures; 
• registering the ownership change; and 
• reporting to the client after registration. 

The legal services required will depend on the parties, the property, the proposed ownership arrangement, any existing financing, and the surrounding circumstances. Tax, accounting, family-law, or other professional advice should be obtained where applicable.

Adding an adult child to title may have consequences during the parent’s lifetime and after death. The intended ownership, financing, tax treatment, estate plan, and possible future risks should be considered before the transfer is registered.

Contact Nobari Law Professional Corporation to discuss adding an adult child to property title in Ontario.