Does an Adult Child on Title Affect a Parent's Home Exemption in Canada?

Many parents add an adult child to the title of their home to help with a mortgage, to simplify things later, or to plan for an estate. A common worry follows: does the child's name on title cost the parent part of the principal residence exemption?

The answer depends less on whose name is on title and more on who the beneficial owner is. This article walks through how CRA frames that question and what to confirm before you rely on any one outcome.

This article covers Canadian federal tax law, which applies in every province.

Title and ownership are not always the same thing

Legal title is the name registered on the property. Beneficial ownership is about who really owns the property and enjoys it. In a bare trust arrangement, the trustee only holds legal title, while the beneficiary is the beneficial owner.

This matters because, under CRA's principal residence folio, ownership for the exemption includes being a beneficial owner of the property, whether alone or jointly with another person. So the person who is the beneficial owner behind a bare trust can look to the exemption.

Two common situations

• Your child is a true joint owner, with a real share in the property. They are an owner in their own right, and the home is owned jointly.
• Your child is on title only as a convenience, for example to help with a mortgage or to avoid probate steps later, and you remain the one who owns and controls the home. The child may be holding legal title only, which is the bare trust pattern.

Which situation applies depends on the facts, including what was intended, who paid, and who makes the decisions. CRA says whether a bare trust exists is a question of fact and suggests consulting a legal advisor if you are unsure.

How the bare trust reporting rules treat a parent and child on title

Section 150(1.3) can treat a legal owner who holds property for others as a trustee, with the others treated as beneficiaries, where the legal owner can reasonably be considered their agent. But under s. 150(1.31)(b), that deemed-trust rule does not apply where the legal owners are related individuals and the property is real property that would be the principal residence of one or more of them. CRA says this covers a parent on title to allow a child to obtain a mortgage.

For this purpose, related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption. A parent and child connected by blood or adoption fit that description, but whether your particular arrangement is covered is worth confirming.

A related exception covers an individual who holds real property for a spouse or common-law partner where it would be the owner's principal residence, such as spouses jointly occupying a family home with only one on title.

What this means for the exemption and for reporting

Whether your child's name on title affects the exemption depends on the facts of your arrangement, so it is worth confirming with a lawyer or accountant. What matters is who the beneficial owner is, how the home is used, and whether the other conditions of the exemption are met. Those further conditions go beyond ownership, so a lawyer or accountant should confirm them for your home, particularly if the child also owns other property or does not live there.

If a bare trust is reportable and not excluded, income, capital gains and capital losses from the property should be reported on the beneficial owner's tax return. Bare trusts are not subject to the trust reporting rules for taxation years ending on or after December 31, 2024 and before December 31, 2026, and reportable bare trusts are caught after that.

If a true trust, rather than a person, is the owner, a further rule applies. For a trust itself to designate a property as its principal residence, no corporation (other than a registered charity) or partnership can have been beneficially interested in the trust.

What to do next

• Find the deed, mortgage documents and any written agreement about why the child was added.
• Write down who paid for the purchase, the mortgage, taxes and repairs.
• Note who lives in the home and who makes decisions about it.
• Check whether the child owns, or is on title to, other property.
• Keep records of any past sale or transfer of an interest in the home.
• Ask a lawyer or accountant to confirm who the beneficial owner is before a sale, a transfer or a tax filing.

Frequently asked questions