Adding Children to a Property Title: What Families Should Know

AUTHOR: Paulina Pena

We recently met with a family of five; a couple, John and Jane, and their three children.

John and Jane sought out our help when they were considering adding their three children on title to their two properties. But before we dive deeper into their situation and the advice we shared with them, let’s take a quick look at how title to property is held and registered by exploring key terms to help guide you.  

What is a Parcel Register?

A Parcel Register is the official record of ownership and interests in a specific piece of land in Ontario’s Land Titles system. Each separately owned property is assigned a unique Property Identification Number (PIN). In the Land Titles system, the Parcel Register is the title, proof of ownership and the current state of registered interests.

What are the different types of ways ownership to property can be held?

There are different ways a property may be held jointly – either through a joint tenancy or as tenants in common.

Joint tenancy means that two or more people own the same property together in equal shares. This form of ownership is most common between spouses or partners. When one joint tenant dies, their share does not form part of their estate and does not pass under their will. Instead, their interest automatically transfers to the surviving joint tenant(s) through the right of survivorship. This means the last surviving joint tenant becomes the sole owner of the property.

Tenancy in common, on the other hand, occurs when two or more individuals own a property together but with separate and distinct shares. Each owner can hold an equal or unequal percentage of the property. When a tenant in common dies, their share does not pass automatically to the other owners. Instead, it becomes part of their estate and is distributed according to their will or, if there is no will, under Ontario’s intestacy laws. Because each co-owner holds an individual, transferable interest, any tenant in common may sell, mortgage, or otherwise transfer their share independently (subject to any agreement between the parties).

Adding my Children to my Property Title

Now that we’ve briefly explained some of the key terms, let’s go back to John and Jane.

They wanted to know how they could navigate the situation regarding their properties. They currently own two properties: a home in the GTA, and a cottage in Muskoka and were looking for a way to add their children to one of their property titles without having to face any financial implications.

Joint tenancy and tenancy in common were explained to them and they learned about the advantages and disadvantages of each.

In either case, John and Jane would have to adjust their property ownership. If they chose to go the joint tenancy route, they would rest assured knowing they wouldn’t be subjected to a potentially costly and time-consuming probate process (a legal process used to distribute a deceased person’s assets).

It’s also important to note that with both joint tenancy and tenancy in common, there are a few drawbacks. Once the parents add their children to title, they’ll lose some control over the property. Additionally, the children may not qualify for first-time home buyer benefits as their names are already tied to a property.

John and Jane having more than one property is another factor we should consider. If they are adding their children to their principal residence, their home in the GTA, then they are exempt from paying a capital gains tax for every year that they’ve ordinarily inhabited the home. However, if they choose to add their children as property owners of the cottage in Muskoka, they will be subjected to the capital gains tax as this gesture will be deemed a sale at fair market value.

Land transfer tax should also be taken into consideration. If the children intend to hold the property as owners and not as trustees for the estate, they will be subjected to land transfer tax. Which is why they wouldn’t be advised to use any of their own funds to pay for any of the house expenses over the course of their ownership.

Likewise, capital gains can be payable by the child if the parents later choose to sell the property.

Therefore, to avoid facing financial implications, it was advised to them that they should consider adding their children to their principal residence. This will help them avoid having the CRA (Canadian Revenue Agency) come back to re-assess them, especially if the second property may be viewed as an investment property.  

Regardless of whichever route they choose to take, should one of their children on the property pass away, it’s important to make note of the fact that there is a deemed disposition of their share of the property at the time of death. This means that the deceased owner’s share of the property is considered sold at fair market value for tax purposes and may be subject to income tax.

Many families question adding their children to their property titles or do so without having sought out professional advice as they do not know who to reach out to or believe a professional will steer them the wrong way. Reviewing titles, clarifying ownership structures, and getting proper advice can save significant costs and headaches down the road. Consulting with the best team of professionals which includes a real estate lawyer and financial advisor is imperative as they will help navigate you through these life-altering choices. Moral of the story. Find the right team to help you explore your options before making a decision. Your family (and your wallet) will thank you.