Transferring Your House but Keeping a Life Estate in Ontario

Many older homeowners want to give the family home to a child while keeping the right to live there for the rest of their lives. The idea is often called a life estate. It sounds simple, but it changes who owns the property today, and that has consequences for control, taxes and family relationships.

This article explains in general terms how such an arrangement is documented and registered in Ontario, and what to weigh before you sign. Every family is different, so a lawyer, and often an accountant, should review the plan first.

What a life estate means in plain terms

A life estate gives a person the right to use and live in a property for their lifetime. When they die, the right ends and the person who owns the underlying interest has full ownership. In a family plan, the parent keeps the life interest and the child receives the ownership, often called the remainder.

The key point is that you are giving away ownership now. Even though you can keep living there, the child is the owner, and what you can do about selling, borrowing or changing plans depends on what the documents say.

How it is documented and registered

Only authorized Teraview account holders and their registered users can create and submit documents in Ontario's electronic land registration system. Authorized groups include lawyers. Who prepares and registers your particular transfer is worth confirming with a lawyer. After registration, ServiceOntario reviews and certifies the entry and updates the title information.

Transfers of any interest in freehold land, including life estates and easements, require an execution search against the registered owner or owners before registration.

A life interest in a deed that is not dealt with in later dealings is noted on the PIN. Removing it requires an application supported by evidence that the interest no longer exists, such as proof of the life tenant's death or consent. Your family should plan for that paperwork at the time of death.

Land transfer tax on a transfer to a child

A gift of land is not exempt from land transfer tax as such, but if no consideration passes in any form between the parties, no tax is payable. A nil-consideration transfer is reported as nil in paragraph 4 of the affidavit, with the relationship and reason in paragraph 5 and encumbrances in paragraph 6.

The mortgage matters. The amount remaining on any mortgage or debt the buyer assumes is added to the base amount. An outstanding encumbrance is taxed as consideration regardless of the relationship between the parties, except for certain spousal transfers. If your home has a mortgage, a transfer to your child could create tax even though no cash changes hands.

The tax is payable by the person who acquires the land, when the transfer is registered. Toronto has a separate municipal land transfer tax that is not covered here.

Risks to weigh before you do it

• Your child becomes the owner, so their creditors, divorce or death can affect the property.
• If the child has a spouse, family law rights could be involved, so ask a lawyer.
• If your home has a mortgage, check with your lender and a lawyer how a transfer would be treated. An assumed mortgage can also create tax.
• Capital gains and other income tax consequences depend on your facts and should be reviewed by an accountant.
• Title insurance may be affected by a family transfer. Confirm this with your insurer and a lawyer.
• If you later want to sell or downsize, the child's cooperation may be needed.

If the child has siblings, put your wishes in writing and talk to your family. How a lifetime transfer interacts with your will depends on your situation, so it is worth confirming with a lawyer.

Alternatives that some families consider

For an alter ego trust, the deemed disposition day is generally the settlor's death, when the trust is deemed to dispose of capital property at fair market value. Trust reporting rules are changing. CRA says T3 returns are due no later than 90 days after the trust's tax year-end, and that trusts other than bare trusts must file a T3 with Schedule 15 for 2025 year-ends unless specific conditions are met. Bare trust filing relief may not continue for years ending on or after December 31, 2026. A change in beneficial ownership that is not registered on title within 30 days may be taxable and need a return. A trust lawyer and accountant should review any such plan.

What to do next

• Get a current copy of the title and any mortgage statements.
• Write down what you want: staying for life, control over a future sale, and what happens if you need care.
• Talk with the child, and consider their siblings and spouse.
• Ask an accountant about income tax and capital gains.
• Ask a lawyer to compare a life estate with a will, joint ownership or a trust, and to handle registration.

Frequently asked questions