How to Add a Child to Your Home Title in Ontario Safely

Many parents consider adding an adult child to the title of their home to simplify things later or to share ownership. It can look like a quick fix, but it is a transfer of an ownership interest with legal and tax consequences.

This article sets out the main risks in Ontario: tax, your child's personal circumstances, loss of control and what happens on death. Your own facts matter a great deal, so get advice before signing.

Land transfer tax on adding a child

The Land Transfer Tax Act has no general exemption for gifts of land. If no consideration of any kind passes, no tax is payable because the tax is calculated on a nil value. The Act defines the value of the consideration broadly, to include any benefit of whatever kind conferred as part of the arrangement.

If land is gifted subject to a mortgage that the recipient takes on, land transfer tax is payable on the amount owing at registration, whatever the relationship between the parties. The spousal exemptions do not extend to children. Some family farm transfers may qualify for specific exemptions.

Always report the arrangement accurately. Making false or deceptive statements, such as understating the price, is an offence. Ontario also has a general anti-avoidance rule that can deny a tax benefit from an avoidance transaction.

Capital gains and your principal residence

A person who gifts property, or transfers it to a non-arm's-length person for less than fair market value, is deemed to have received proceeds equal to fair market value. That can trigger a capital gain when a home is gifted to a child.

The child who receives property by gift is deemed to acquire it at fair market value. If you sell, or are considered to have sold, a home that was your principal residence, you must report the sale and designate the property on Schedule 3 to claim the principal residence exemption. A child's share of a home that is not their own residence may be treated differently, so ask an accountant before you act.

Risks to your control and your child's circumstances

• Your child's debts: how a co-owner's debts could affect the property depends on your situation, so it is worth confirming with a lawyer.
• Your child's marriage: if your child and their spouse ordinarily occupy the home as their family residence, it can be a matrimonial home, and on breakdown the full value of the family home must be shared even if it was a gift.
• Your own marriage: if you are married, you generally cannot sell or mortgage your interest in your matrimonial home unless your spouse joins in or consents, has released their rights in a separation agreement, or a court order authorizes it.
• Designated homes: consent is not needed for a property that both spouses have not designated as a matrimonial home, where a joint designation of another property is registered and not cancelled.

There is also the question of whether you can still afford to live in the home and manage it as you wish. A written agreement with your child, prepared by a lawyer, can address these points.

What happens on death and alternatives

If a spouse dies owning a matrimonial home as a joint tenant with someone other than their spouse, such as an adult child, the joint tenancy is deemed severed immediately before death, so the right of survivorship does not operate. Where survivorship does apply, the survivor updates title with a Survivorship Application.

Assets held jointly that automatically become the other owner's on death are excluded from the estate's value for Estate Administration Tax. Whether a particular joint holding really works that way is fact-specific, so do not assume adding a child avoids probate.

If your goal is help with managing your affairs, a continuing power of attorney for property may authorize the attorney to do anything with your property that you could do, except make a will. Gifts or loans by an attorney to friends or relatives are allowed only if there is reason to believe, from intentions you expressed before incapacity, that you would make them.

What to do next

• Write down why you want to add your child and what you want to happen if the relationship, marriage or finances change.
• Get a current parcel register and check for a mortgage.
• Ask an accountant about capital gains and your principal residence exemption.
• Ask a lawyer whether land transfer tax applies and how to structure the transfer.
• Consider a will, a power of attorney or a written agreement as alternatives or additions.
• Have the transfer registered electronically through Teraview, which only authorized account holders can use.

Frequently asked questions