Power of Attorney Selling a House Before Death in Ontario

Families often turn to an attorney for property when a parent can no longer manage, and selling the home is a common question. Another worry follows quickly: what happens if the person dies before the sale closes?

This article explains the practical points on both sides of death. It does not replace advice on the specific document, because what an attorney may do depends on its wording.

What an attorney may do with the home

An attorney for property acts for the person who gave the power, called the donor. Whether the attorney may sell the home depends on the wording of the power of attorney, on when it takes effect, and on the person's circumstances. Read the document closely and have a lawyer confirm what it allows before any listing.

Both spouses have an equal right to possession of a matrimonial home. A matrimonial home is every property in which a person has an interest and that is ordinarily occupied by the person and their spouse as their family residence. A sale of such a home can raise spousal rights questions, so take advice.

What changes when the donor dies

A power of attorney is a tool for the person's lifetime. After death, only an estate trustee has legal authority to manage or distribute an estate, which includes selling the home or clearing it out. The deceased person's property, including the home and its contents, vests in the personal representative, who holds it as trustee.

So the attorney should stop acting on the home at death and tell the person named as executor, or the family if there is none. What happens to a pending sale depends on how far it had gone, the terms of the agreement and when title actually moved. A lawyer can sort that out quickly.

Finishing a sale after death

• When the home is in the deceased's name alone, the estate trustee registers a transmission application under s. 124 of the Land Titles Act.
• On a transfer, the estate trustee must state that they are entitled to transfer under the will, the Estates Administration Act and the Succession Law Reform Act, or that a court authorized it.
• The transfer must also say whether title is subject to spousal rights, and that required consents were obtained or none are required.
• Where a minor has an interest, no sale or conveyance under the Estates Administration Act is valid without the written approval of the Children's Lawyer or, failing that, a judge's order.

If the home was sold only for the purpose of distribution, the sale is not valid without the required concurrence, which generally means a majority of the beneficiaries holding at least half the interests.

Tax, insurance and the proceeds

At death, a person is treated for income tax purposes as having sold all their property just before death, which can create a capital gain or loss on the home. Where the home goes to someone other than a spouse or common-law partner, the deemed disposition must be reported on Schedule 3 of the final return, and all or part of the gain may be exempt as a principal residence, designated on Form T1255. If the home passes to a spouse or common-law partner, no principal residence designation for the period before death is required on the final return.

Before distributing sale proceeds, consider a CRA clearance certificate, requested on Form TX19. A legal representative who distributes assets without one can be personally liable for unpaid tax, up to the value of the assets distributed.

If the house sits empty, a change material to the risk that is not promptly notified in writing to the insurer can void the contract as to the part affected. Read your own policy wording for any vacancy limits.

What to do next

• Get a copy of the power of attorney and have a lawyer confirm what it permits.
• Keep the sale agreement, listing documents and all records of the attorney's decisions.
• If the donor dies, tell the executor or family, and stop acting under the power.
• Identify who will apply to be the estate trustee.
• Notify the home insurer in writing and confirm coverage.
• Ask an accountant about the final return and the principal residence designation.

Frequently asked questions