Estate planning is no easy feat. You’ve worked hard all of your life to guide and protect your child. As they grow and become independent, it’s your turn to live life to the fullest and make the most of every moment.
It’s hard to think about a future where you may not be here to offer your sage advice anymore. All you can do is set your loved ones up the best you can with the resources you have available. If part of your estate includes a house, you truly have an incredible legacy to provide your children with the best possible head start in life.
Perhaps you’ve reached retirement age and plan to sell your home in favour of something smaller. Everyone is different, and there are multiple options before you.
Some homeowners choose to stay right where they are, in the home they have loved. This choice raises a series of other questions, beginning with whether you can gift a house to your child or if you should leave the house to your child in your Will. Today, let’s explore the implications in more detail.
If you plan to sell your home instead of bequeathing it, our Seller’s Guide can help you maximize your results. Download your copy right here.
Early Communication Avoids Future Conflicts
As we mentioned, estate planning is complicated and there can be legal implications. Since we are not lawyers, nothing in this post should be taken as legal advice. Obtaining professional legal counsel early helps to ensure you’re fully protecting your interests and that of your family.
Before making any decisions, it’s a good idea to have a conversation with your loved ones. If you have only one child, deciding to leave your house in your Will might be easier since there’s no chance of in-fighting or resentment from the others left behind. If you have more than one child, it may get more complicated.
You could decide to leave an equal portion of the property to everyone, or divvy up your estate another way. Keep in mind that conflict could arise if one child wants to sell the home but another wants to live there. A conversation now may be uncomfortable, but it lets you make your wishes known. Every family dynamic is unique, and crystal clear communication is the key to easing everyone’s burden.
Are you looking for more guidance during estate planning? The posts below will provide some answers:
- Joint Tenants Vs Tenants In Common
- Can Your Adult Children Sell Your House When You’re Gone?
- What If Family Members Fight During an Estate Sale?
Understanding Capital Gains
Fortunately, there is no inheritance tax on property in Canada. Capital Gains are a different consideration. “How do I transfer property to a family member tax-free (Canada)” is a question we get asked a lot. The government always wants its share, but it’s normal to search for some workarounds.
Primary residences are fortunately exempt. Second homes are different. Capital gains will need to be cleared from an investment property or vacation home before the transfer of ownership takes place. From there, Capital Gains could become a factor years later for your child.
If your child does not yet own a house and takes possession as their primary residence, they would benefit from the exemption. If the inherited home becomes your child’s secondary property, capital gains would apply to a portion of the gain in value at the time they decide to sell. Tax implications can be confusing, but an experienced financial advisor can walk you and your loved ones through the implications of an inherited home.
Exploring All Options
Can you gift a house to your child? It’s one option, but like nearly everything to do with real estate, gifting property to children is complicated. Working with an experienced estate lawyer can enable you to find innovative solutions avoid complications and any unnecessary expenses of an inherited home. For example, transferring ownership of property from parent to child before death could potentially avoid probate when done correctly.
If your children are financially able, you could also consider letting them purchase the house from you while you rent it back from them. However, remember that this path could have capital gains implications if this becomes their second property.
Another option might be to age in place and have your adult child move in with you, potentially putting their name on the title as a joint tenant. Under this arrangement, ownership automatically transfers in the event you pass away. Again, the legalities involved are beyond the scope of this post, and a consultation with an estate lawyer would be beneficial.
Probate is a major component of estate planning. The posts below will help guide you through the process:
- What Does an Executor of a Will Do?
- What Are the Best Practices When Handling an Estate Sale?
- How Long Does Probate Take When Selling a Loved One’s House?
Navigating Probate
Your estate typically needs to go through probate before your house can be sold or transferred and the terms of your Will fully settled. This means the courts review your Will and authenticate your Estate Trustee or Executor and grants permission for your home to be sold.
Probate is often a lengthy process due to backlog in the courts. You can help by ensuring your Will is clear and uncontested and that everyone around you knows what your wishes are.
Deciding your next steps isn’t easy, but you will get through it with the support of your family, along with some guidance from professionals. If you do decide to bequeath your house in your Will, you are leaving a priceless legacy that your family will cherish for a lifetime.
Do you need extra support during a sensitive transaction? Our Peterborough real estate agents can give you the compassionate guidance you need. Reach out to team@jeffandkatie.ca or call 705-243-9797 with any questions.
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