How to Transfer the Title of Home from a Parent to a Child

It can be challenging to transfer your parent's home title into your name when your parent decides to give you his or her home as a gift. Yet with some preparation and understanding of the required legal steps, you can allow the transfer to go smoothly. 

This article will walk you through the key considerations, from holding family discussions to finalize the decision, to working with a lawyer to file the right paperwork. You’ll learn the documents needed to record the new deed, as well as potential tax implications. With the right guidance, you can make this significant transaction efficient for both you and your parent. Equipped with the information here, you'll be ready to accept the title transfer gift confidently.

Reasons to Transfer a Home Title From Parent to Child 

Transferring a home title from parent to child can offer financial security and facilitate estate planning for future generations.

Tax Benefits

Transferring a home title to your child during your lifetime can help minimize or avoid taxes like capital gains taxes when the home is eventually sold. As a principal residence, a home is tax-exempt, but if you pass away while still holding the title, your estate may have to pay capital gains taxes on the increase in value since the time you acquired the home. By transferring the title to your child during your lifetime, the tax liability can be avoided.

Avoid Probate

Transferring a home title to your child allows you to avoid the home going through probate after your passing. Probate is the legal process of distributing a deceased person's assets and can be time-consuming and expensive. Transferring the home title during your lifetime guarantees your child receives the home directly without delays and additional costs from the probate process.

Protect Assets

Some seniors transfer home titles to protect assets from the costs of long-term care or medical expenses. Once a title has been transferred, the home is no longer considered an asset that can be claimed to pay for care costs. However, there are rules around the timing of transfers to avoid appearing as if assets were transferred solely to qualify for government benefits. It is best to speak to an estate planning lawyer regarding the specifics in your province.

Provide Security

For some parents, transferring the home title provides peace of mind that their child will have secure housing after they are gone. However, it is important to consider your child's responsibility level before transferring a valuable asset. You want to ensure the home and any associated costs like property taxes, insurance and maintenance will be properly managed. 

How to Transfer a House from a Parent to a Child?

Certain legal steps must be followed when transferring a house from parent to children:

Specify the Value of the Property

To transfer the title of a home as a gift, you must first determine the property's fair market value. This is the amount a willing buyer would pay a willing seller for the home. You can hire an appraiser to provide an official appraisal for the home. The appraised value will determine if any gift taxes apply to the transfer.

Complete the Paperwork

The next step is to complete the required paperwork to transfer the title legally. The specific forms will depend on how you want to transfer the home (as a gift, sale, or bequest). Generally, you will need to complete transfer documents like a deed or title, as well as file documents with your local land records office. It is best to work with an estate planning attorney so all the paperwork is accurate and legally compliant.

Record the New Deed

Once the paperwork is complete, the new deed must be recorded with the local land records office to officially transfer ownership to your child. Your child's name will then appear on the property title and all responsibilities for the home, like paying property taxes, will shift to them.

Tax Implications

When transferring a home as a gift, you must consider potential gift tax implications. In Canada, gift tax exemptions and rates vary by province. It is best to consult with an accountant or tax professional to determine if any taxes will be owed on the transfer and ensure all necessary returns are filed properly. By following the necessary steps to legally transfer your home, you can pass your property on to your child. However, it is best done with the guidance of legal and tax professionals to avoid complications.

Attribution Rules

As a parent transferring property to a child, it is important to be aware of attribution rules to avoid unintended tax consequences. 

Gift Tax

When transferring a home as a gift, the property’s fair market value may be subject to gift tax for the donor. However, there are exemptions available. As of 2021, individuals have a lifetime gift tax exemption of up to $11.7 million. As long as the fair market value of the home does not exceed this threshold, no gift tax will be owed.

Capital Gains Tax

If the home has appreciated since the donor purchased it, capital gains tax may be due when the title is transferred. However, a principal residence exemption allows individuals to avoid capital gains tax on the sale of a home. To qualify, the donor must have lived in the home as their principal residence for a certain period. As long as the child continues using the home as their principal residence after the transfer, capital gains tax can be deferred indefinitely.

Probate Fees

Transferring a home during one’s lifetime allows the new owner to avoid probate fees that may apply if the home is inherited after the donor passes away. The fees charged can vary significantly between provinces but often amount to a percentage of the estate’s total value. By gifting the home, the donor can pass the full value of the asset to their child without these additional costs.

With proper planning, transferring the title of a home to a child in Canada can be done in a tax-efficient manner by taking advantage of exemptions and deferrals available under current rules. Consulting legal and tax professionals is advisable to ensure all obligations are met.

Things to Consider Before Transfering a House from a Parent to a Child

Before transferring a house from a parent to a child consider the following factors:

Legal Requirements

Before transferring the title of a home, it is important to understand the legal requirements involved. In Canada, the transfer process varies by province, so you will need to check with your local land registry office. Typically, you will need to provide identification for both parties, as well as proof of ownership and the legal description of the property. There may also be additional paperwork required to formally change and register the new owner’s name on the property title.

Tax Implications

There are potential tax implications to consider when transferring property between family members. While there are tax exemptions for primary residences in Canada, capital gains taxes may still apply if the home has increased in value. It is best to consult with a tax professional to determine if capital gains taxes will be owed and ensure the transfer is handled properly according to the tax laws.

Financial and Estate Planning

Transferring ownership of a valuable asset like a home is a big decision that should be made carefully as part of a comprehensive financial and estate plan. You will want to consider how the transfer may impact other estate planning tools like wills as well as weigh the pros and cons of alternative options. Speaking with financial and legal professionals can help ensure the best path forward for your unique situation.

Transferring the title of a home from a parent to a child is an important process that requires foresight and the guidance of professionals. With careful consideration of the legal, tax and financial factors involved, the transfer can be handled properly according to the laws and in line with the long-term goals of both parties.

Conclusion

By following the proper legal steps, being aware of tax implications, and working with the right professionals, you can guarantee a smooth transfer of home title from parent to child in Canada. While complex, this process allows families to thoughtfully plan for their collective futures. With open communication, trusted advice, and care taken at each stage, a property title transfer allows generations to support one another.

Though not without challenges, the act represents trust and generosity between loved ones. When done properly, all parties can feel confident in the transfer. As you move forward, remember that patience, diligence and care for your family should guide each choice.