How To Transfer Real Estate Property During Your Lifetime

You've worked hard to own your home or investment property outright for years, maybe even decades. Now, you're at a point where you want to transfer that property to your kids or other beneficiaries while you're still around. But how do you do it without creating a big tax bill? 

The process is more complex than handing over a set of keys. This article will walk you through the ins and outs of transferring real estate in Canada while you're still alive. We’ll cover topics like capital gains taxes, land transfer taxes, and deeds so you can pass down your property smoothly and minimize costs. With some planning and strategic transfers, you can feel good knowing your real estate assets will end up where you want without the government taking a huge chunk.

Reasons to Transfer Real Estate Property During Your Lifetime

There are many reasons to transfer real estate property during your lifetime, from tax planning advantages to maintaining control and avoiding family disputes.

Tax Planning

Transferring real estate before you pass away allows you to avoid probate fees and capital gains taxes that your estate would otherwise owe. The property’s value is determined on the day of transfer, so you can gift it to family members at a lower tax cost now versus if they inherited it later.

Maintaining Control

Gifting or selling the property during your lifetime allows you to put certain restrictions or conditions on the transfer to ensure your wishes are fulfilled. You might require the new owner to allow you to live in the home for a certain period or limit their ability to sell or redevelop the property. These types of controls cannot be put in place with a will.

Avoiding Family Disputes

Transferring real estate before you die prevents arguments over who gets what after you’re gone. Dealing with these issues while you’re still alive and able to communicate your intentions helps avoid hurt feelings, resentment, and damaged relationships within the family.

Peace of Mind

Knowing your property has been dealt with and will provide for your loved ones even after you’re gone can give you peace of mind in your later years. You’ll feel reassured the asset you’ve worked hard to accumulate will continue benefiting your family for generations.

Transferring real estate property during one’s lifetime has many advantages. However, it’s important to consider how it may impact your financial security and well-being, especially in retirement—speaking with legal and financial professionals to develop an effective plan.

Options for Transferring Property Ownership in Canada

The following are the options for transferring property ownership in Canada:

Direct transfer

The simplest way to transfer real estate in Canada is through a direct transfer of ownership. This involves you signing over the title deed of your property directly to the new owner. The new owner can be a family member like your spouse, child or grandchild. Or it could be an unrelated party purchasing the property from you.

With a direct transfer, you give up all ownership and control of the property. The new owner gains full rights and responsibilities over the real estate. They can do as they wish with the property, including selling it immediately if they want to.

Transfer through a trust

Consider using a trust to transfer ownership but still retain some control. You set up a trust document naming yourself as a settlor, appointing trustees to manage the trust, and naming beneficiaries who will ultimately inherit the property. As a settlor, you transfer your real estate ownership to the trust. The trustees you appoint, which could include you, a lawyer, and a financial advisor, oversee the management of the trust.

The trust allows you to outline specific terms for how and when the beneficiaries gain control and ownership. For example, you can stipulate that your beneficiaries only gain complete control and ownership after a certain period or once they reach a certain age. Using a trust gives you more flexibility and control compared to direct transfer. However, it is a complex legal process, so you should seek guidance from an experienced real estate lawyer.

Joint tenancy

Consider joint tenancy if you want to add another owner to your property but retain ownership yourself. This method allows you to add one or more joint tenants who obtain an ownership interest in the property. All joint tenants have equal rights to use, occupy and sell the property. If one joint tenant dies, their interest automatically transfers to the surviving joint tenants.

Joint tenancy is a simple way to transfer partial interest in a property. However, there are risks, as any joint tenant can force a property sale. And if any disputes arise between joint tenants, it can lead to legal complications. So, choose your joint tenants wisely and consider a co-ownership agreement to outline each party's rights and responsibilities.

The Process of Transferring a Property Deed in Canada

Transferring the deed to your property during your lifetime in Canada requires several legal steps. The process typically takes 4 to 6 weeks to complete, so plan accordingly.

Hiring a Lawyer

First, you’ll want to hire a real estate lawyer to help you navigate the legal requirements. They can draft the necessary documents, coordinate the transfer, and confirm it's done appropriately according to your province's laws. 

Preparing Transfer Documents

Your lawyer will prepare a transfer deed, also called a deed of conveyance, which legally transfers ownership from you to the new owner. You'll need to provide your lawyer details about the property, like the parcel or lot number, plan number, and current ownership information. Other documents may include property title searches, property tax certificates, and property surveys if required in your province.

Signing and Witnessing Documents

Once the paperwork is ready, you and the person assuming ownership will review and sign all documents in the presence of witnesses, usually your lawyers and their staff. Some provinces require documents to be notarized by a notary public. Make sure you fully understand all documents before signing.

Registering the Transfer

Your lawyer then registers the transfer deed with the land registry office in your province to legally record the change in ownership. They pay any applicable registration fees and taxes on your behalf. Registration activates the transfer—congratulations, the property now belongs to the new owner!

Updating Property Records

Finally, update property records to reflect the ownership change. This includes notifying utility companies, your municipality, insurance providers, and mortgage lenders. Make sure property tax, insurance, and any outstanding bills are paid before completing the transfer.

Following these steps carefully with the help of your lawyer will ensure the smooth transfer of your property to its new owner. Let them guide you through this complex process—their legal expertise will give you peace of mind that it's done correctly.

Practical Tips for Property Transfer During Your Lifetime

Here are some tips for streamlining the property transfer process:

Plan Ahead

Transferring real estate typically takes several months, so start planning at least 6-12 months. Consult with legal professionals to understand the requirements and paperwork needed. Review your options for transferring the property, like adding someone to the title or transferring partial ownership. Planning will ensure a smooth transfer process.

Get an Appraisal

Getting an official appraisal of the current market value of your property is important for several reasons. It will determine any capital gains taxes owed when transferring ownership. Transferring the property to family members will also help establish a fair selling or gift price. An appraisal objectively estimates your property’s worth to help avoid disputes over value.

Review Tax Implications

There are several tax considerations when transferring real estate in Canada. Consult with an accountant to understand capital gains taxes, property transfer taxes, and any other taxes that may apply based on how you choose to transfer the property. You'll review ways to reduce your tax burden, like utilizing your principal residence exemption. Understanding the tax implications upfront will help avoid surprises later on.

Formalize the Transfer

Once you've planned the details, it's time to transfer the property formally. This typically involves signing official documents like a deed of transfer or gift letter and may require witnesses and notarization. Register the documents with your local land registry office to legally record the change in ownership. Be sure to update property insurance, utility accounts, property tax records and any other details to reflect the property's new owner(s) properly.

These practical tips will help simplify transferring your real estate property during your lifetime. With some planning and professional guidance, you can ensure your property is assigned according to your wishes.

Conclusion

This was a quick rundown of how you can transfer real estate property during your lifetime in Canada. Whether you want to add your spouse to the title, gift your home to your kids, or sell your cottage to a family member below market value, it's good to understand the process and potential tax implications. 

A strategic approach and seeking professional advice when necessary are the keys to success. With the right planning and paperwork, you can successfully transfer property to loved ones and avoid unnecessary taxes and headaches. The rewards of thoughtful estate planning and gifting are well worth the effort.