Putting House Deed in Joint Names
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Thread: Putting House Deed in Joint Names

  1. #1
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    Question Putting House Deed in Joint Names

    As I live in my mom's home with her, and my two brothers live out of town, a few years back, we went to a lawyer and changed the deed to put mom and I as joint owners. My brothers each live in a common law arrangement. I thought that this might be the best thing to do since I also lived in the home and could claim it as my principal residence. Thus, when mom died, I figured that the home would go to me along with mom's other investments, which are in both of our names, would pass to me without going through probate. Mom has always said that, upon her death, she wanted her total estate to be divided equally among all three of her sons and, as executor of her estate, that is what I will do. Her will states that everything is to be divided equallys but, aside from her RIF's and house contents, her house and investments are currently owned jointly by both of us.

    In the current issue of MoneySense magazine, they state that you cannot avoid paying capital gains taxes by making a child a co-owner of your home. It goes on to say that "if you add a child's name to the title for your home, the CRA views that event (which we did ten or so years ago) as a taxable disposition of 50% of the house's value at fair market value. The capital gains taxes on that portion are due right away says Kathy Munro, a tax partner with PricewaterhousCoopers in Toronto.

    This leads to a couple of questions:

    Are there any positive reasons to having put this house, which we are both living in, in joint ownership on the deed?

    Also, were any taxes actually due at the time that we made this change when the purpose of changing the deed was because the house was the principal residence of both of us and we thought that having it pass smoothly at the time of either of our deaths would save on probate costs?

    Any other thoughts and/or advice would be appreciated. I would be pleased to provide further information if required.

    Thank you for any help that you might provide.


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    Are there any positive reasons to having put this house, which we are both living in, in joint ownership on the deed?

    It removes the house from the estate, so it's not subject to probate or probate fees.

    Also, were any taxes actually due at the time that we made this change when the purpose of changing the deed was because the house was the principal residence of both of us and we thought that having it pass smoothly at the time of either of our deaths would save on probate costs?

    No, because although your mother was deemed to have disposed of 50% of the FMV of the house, it was exempt from capital gains by her principal residence exemption. Similarly when she dies, her estate does not owe capital gains on the remaining 50% for the same reason. The article you refer to must have been talking about secondary residences, like cottages. However, you should have had an appraisal done 10 years ago to determine the FMV. 50% of this would be would be your "deemed acquisition cost" for your share, in case of any future capital gains that you make. Provided it remains your principal residence until you sell it, it should make no difference, because of your principal residence exemption. But if your circumstances should change and for some reason it becomes a secondary residence, the adjusted cost base would become important. It may be worth your while to get an appraisal, or at least an estimate of its value 1o years ago, for record purposes.

    As I live in my mom's home with her, and my two brothers live out of town, a few years back, we went to a lawyer and changed the deed to put mom and I as joint owners. My brothers each live in a common law arrangement. I thought that this might be the best thing to do since I also lived in the home and could claim it as my principal residence. Thus, when mom died, I figured that the home would go to me along with mom's other investments, which are in both of our names, would pass to me without going through probate. Mom has always said that, upon her death, she wanted her total estate to be divided equally among all three of her sons and, as executor of her estate, that is what I will do. Her will states that everything is to be divided equallys but, aside from her RIF's and house contents, her house and investments are currently owned jointly by both of us.

    I hope your brothers are not of a suspicious nature, because what you have done effectively defeats the intent of your mother's will. Ownership of the house and investments automatically passes to you outside of the will/estate. The will is attempting to dispose of assets the estate no longer owns. Your brothers will be dependent on your good faith to give them a share of assets that will be in your name. This is one of the problems that advisors warn people about regarding setting up joint accounts to avoid probate.

    You and your mother need to rethink this, and consult her lawyer and/or bank official on the easiest ways around. You may also need to have a heart-to heart talk about whether everything should be divided equally if you are charged with looking after her and her home. Your brothers could be added as joint account holders on investment accounts; they could be made beneficaries of RRIFs & insurance policies; or assets could be divided into 3 roughy equal piles, and each pile put into joint ownership with a different sibling. Technically putting an investment account into joint ownership represents a deemed disposition, with capital gains consequences, but there is an exception if it is done for estate planning/administrative purposes only, and "beneficial ownership" is not considered to be transferred until death. Lawyers like to have written agreements to this effect, but I think it is done pretty routinely without challenge from CRA if the accounts are not unusually large, and the joint onwership is between ageing parents and their adult children.
    Last edited by OhGreatGuru; 2010-10-29 at 03:24 PM.

  3. #3
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    Your situation is unusual in that you live in the house with your mother. You may wish to get a professional tax or legal opinion on this matter, but here's what I can offer:

    Your mother will have been deemed to have disposed of 50% of the interest in her house when your name was put on title as a joint owner. IF there were capital gains taxes arising from this deemed disposition of 50% of her interest, they would be due and payable at that time.

    (There were almost certainly no gains due at that point; all gains on capital property were exempt from taxation prior to 1972 and gains on PR were not taxable from 1972 onwards, at the rate of ONE PR per family.)

    From the point at which you became the joint owner with her, both of you have the intention of sheltering any gains in your respective half-ownerships of the property using the capital gains exemption.

    Here's where I don't know the answer to your questions about whether any tax would be payable at the point of a future disposition, and here's why: it may not be possible for a mother and son to EACH claim the PR exemption for ONE property. All the rules I know about w/r/t limits on PR exemptions in families relate to spouses, not a parent and child pair.

    Normally, you can only roll properties over on a tax-free basis to a spouse or a dependent child. It is relatively clear that there is probably no capital gains tax owing from your mother's disposition 10 years ago - but my question would be whether you BOTH can claim this house as your PR from that point onwards.

    If you are worried, I would seek a professional opinion. Not an Internet opinion.

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    Senior Member MoneyGal's Avatar
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    X-post with OGG.

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    Quote Originally Posted by MoneyGal View Post
    ...

    Here's where I don't know the answer to your questions about whether any tax would be payable at the point of a future disposition, and here's why: it may not be possible for a mother and son to EACH claim the PR exemption for ONE property. All the rules I know about w/r/t limits on PR exemptions in families relate to spouses, not a parent and child pair.

    Normally, you can only roll properties over on a tax-free basis to a spouse or a dependent child. It is relatively clear that there is probably no capital gains tax owing from your mother's disposition 10 years ago - but my question would be whether you BOTH can claim this house as your PR from that point onwards.
    ...
    Joint ownership is no problem. See IT-437R http://www.cra-arc.gc.ca/E/pub/tp/it437r/it437r-e.html

    8. For purposes of claiming the principal residence exemption for a property, paragraph 54(g) requires that the taxpayer own the property "jointly with another person or otherwise". These words include sole ownership, joint tenancy, tenancy-in-common and co-ownership.

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    PS. It actually makes sense to me to keep the house out of the estate to avoid administrative hassles in transferring ownership potentially twice, assuming OP wishes to eventually become sole owner, and trying to deal with potential tax consequence if her brothers "sell" their share back to her. Also avoids probate fees on what is probably the largest asset in the estate. But then mother needs to re-think whether "everything in estate" should be divided equally.

  7. #7
    Senior Member MoneyGal's Avatar
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    OGG: I understand that joint ownership is no problem. I am the co-owner of my PR with my husband.

    The issue is that the tax rules specify that there is on PR exemption *per family,* and "family" is typically defined as parents and minor children. Because Belguy lives in the house, I suspect that he can claim this as his PR as well as his mother continuing to claim it as her PR. However, I don't know the answer and cannot find a definitive reference.

    My question is only whether the "one PR per family" rule is violated when the child co-owner is not a minor.

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    I think you need an advanced ruling form CRA. It makes sense that you should not have to pay CG on your share. But it violated the rules. I think the rules are intended for an offspring that does not inhabit the home. So your situation would represent an exception.

    (BTW my brother lived with my Dad in the family home until Dad died, and their lawyer recommended against transferring the title. We were going to transfer 100% of the ownership to my brother so that he could then claim it as his PR. The lawyer said that any savings would be more than offset by the legal fees to ensure that his origninal "will" intent was met.)

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    I would sincerely like to thank everyone for your responses which I will review.

    My apologies for not responding sooner but I have been having problems being able to post new threads or replies which seems to be some kind of a problem with my browser.

    I kept getting the message at the bottom of that page indicating that "You may not post new threads, replies, attachments, or edit your posts".

    Has anyone ever had this problem? I still don't think that everything is working smoothly as it was previously but at least I am making progress by being successful in posting this reply.

    It would probably help to be a computer expert which I am definitely not!!

    Anyway, I hope to be participating again by being able to post new threads and reply to existing threads when I am able to get whatever problems I have straightened out.

  10. #10
    Senior Member MoneyGal's Avatar
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    Belguy - I hope your posting problems resolve!

    I spoke with two CAs earlier this week and asked them whether there was any issue with a PR held jointly by a mother and adult child, when the child has no other residence. Both of them said that they did not think there was any issue to be worried about.

    I also read the MoneySense article. The article could have been more clear - the intention was to describe a situation in which the child (who co-owns a house with a parent) also has a completely separate principal residence.

    The long and the short of it is that I don't think you have anything to worry about from a tax point of view in co-owning a house with your mom.


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