How to Transfer Property to Your Child in Alberta

Many parents want to pass a home or land to a child during their lifetime, whether to help with a first purchase, to simplify an estate or to keep land in the family. The transfer itself is a standard land title process, but the tax and family-law effects can be larger than the paperwork.

This article explains the Alberta steps, how a gift differs from a sale, the tax points the CRA sets out, the mortgage question, and the risks to weigh before you sign.

This article covers the law of Alberta.

Gift, sale or shared ownership

There are three common approaches: gift the property, sell it to your child (sometimes below market value), or add your child to title alongside you.

If you add your child as a joint tenant, the right of survivorship means that on your death your share goes to the other owners. If you add them as a tenant in common, your share goes to your estate instead. Joint tenancy must be specified on the transfer. Each choice affects your estate plan, so think about the other children and beneficiaries too.

The Alberta transfer process

You use the Transfer of Land form, which must be signed by all current registered owners. The form asks for:

• the full names of the current owners
• the full names and addresses of the new owners
• the full legal land description, not the civic address
• the consideration, meaning the amount paid, if any
• the name and address of the witness to the transferors' signatures

Forms are mailed or delivered to a Land Titles office in Edmonton or Calgary, and in-person service was noted as paused, so check current options.

If you are married and the land is your homestead, the Dower Act requires your spouse's written consent or a court order dispensing with it. With one current owner, Land Titles expects a dower option. The Dower Act does not apply to land you own with someone other than your spouse.

The transfer registration levy is $50 plus $5 for each $5000 or portion of the land's value, paid by the transferee. That means your child pays it. Fees are due at submission.

Tax: gift versus sale

Unlike a gift to a spouse, a gift of capital property to a child is treated as a sale at fair market value at the time of the gift, and any gain is reported in the year of the gift. If you sell to a child for less than fair market value, the CRA treats your selling price as fair market value for your proceeds, because related persons do not deal at arm's length.

Your principal residence may be sheltered. A family can designate only one home per year, and the exemption is allowed only if the disposition and designation are reported on your return using Schedule 3 and Form T2091(IND). A late designation may be accepted in some circumstances, but a penalty may apply. A loss on a home cannot be claimed because it is personal-use property.

For farm or fishing property transferred to a child, the CRA notes that postponement of a taxable capital gain or recapture of capital cost allowance may be possible. A rental or recreational property is different from your home, so ask an accountant before you act.

Mortgages and the risks to weigh

If the property has a mortgage, whether the lender must approve a transfer depends on your mortgage contract and its transfer or due-on-sale terms. Confirm with your lender first.

Consider these risks:

• Relationship breakdown: the Court may reach a transfer or gift to someone who is not a bona fide purchaser for value if made not more than one year before a Family Property Act application commenced, and may order the property paid or transferred back.
• Spousal rights: spouses and adult interdependent partners can have claims, and a spouse who starts proceedings may file a certificate of lis pendens that binds later instruments affecting the land.
• Losing control: once your child is the registered owner, the land is theirs. Shared ownership means a co-owner who disagrees may apply to the Court to end the co-ownership.
• Tax surprises: a gift may create a gain in the year of the gift.

What to do next

• Decide whether to gift, sell or share title.
• Get your mortgage terms and speak to your lender.
• Ask an accountant to estimate any capital gain and how the principal residence designation applies.
• Check whether the Dower Act applies to your spouse.
• Obtain the legal land description and prepare the Transfer of Land form.
• Update your will, since the transfer may change what your estate holds.
• Speak with a lawyer if there is any family dispute or separation risk.

Frequently asked questions