# Putting House Deed in Joint Names



## Belguy

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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## OhGreatGuru

_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.


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## MoneyGal

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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## MoneyGal

X-post with OGG.


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## OhGreatGuru

MoneyGal said:


> ...
> 
> 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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## OhGreatGuru

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.


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## MoneyGal

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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## kcowan

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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## Belguy

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.


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## MoneyGal

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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## Belguy

Thanks, MoneyGal!!

Aside from the house, does putting mom's bank accounts and investment accounts in joint names create any problem with the CRA?

Would these accounts transfer tax free to me upon her death (or to her upon my death)?


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## Karen

Belguy, I'm going to be very blunt and express some concerns I have about what's going on here - I'm sure I'm not the only one wondering.

You stated in your original post in this thread that your mother has always said she wanted her total estate to be divided equally between her sons and that her will states that. You say that, as her executor, you intend to do that, but then you acknowledge that you are aware that by encouraging her to add your name to the title of all her assets, her estate will have virtually no assets to be divided. The questions that come to my mind are as follows:

1. What is your mother's mental condition? Does she completely understand the consequences of adding your name to her assets - that by doing so she has, in effect, nullified her will? 

2. Have you discussed this with your brothers, or are they going to get an unpleasant surprise when your mother dies? If your reasons are legitimate, you should be able to tell them about it. If you don't want to do that, it would make me wonder whether your motives are questionable.

3. Have you considered whether or not what you have done might be considered elder abuse of a financial nature? If your mother is strongly under your influence or if she suffers from any degree of dementia, I would think your brothers might suspect that and legally challenge what you have done.

4. What has the fact that your brothers "each live in a common law arrangement" got to do with any of this? Are you suggesting that they don't deserve a share of your mother's assets because of that?

Please understand that I'm not accusing you of anything, and that I may have midunderstood your intentions as expressed in your original post. If so, and you fully intend to divide all your mother's assets equally with your brothers, even those that will be in your name after her death, I sincerely apologize for my questions.


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## OhGreatGuru

Belguy said:


> Thanks, MoneyGal!!
> 
> Aside from the house, does putting mom's bank accounts and investment accounts in joint names create any problem with the CRA?
> 
> Would these accounts transfer tax free to me upon her death (or to her upon my death)?


Bank accounts - no tax implications. 

investments. Depends on the nature. If they are interest-bearing only, there are no real complications. Your mother can continue to report the interest in her name up until the date of her death. (See previous comment about income from joint accounts for administration purposes rather than beneficial transfer.)
Accounts earning capital gains are more complicated. Capital gains can only be deferred on investments transferred between spouses. Either your mother pays capital gains on 50% at time of making joint account (it is a "deemed disposition"), and her estate pays capital gains on 50% at the time of her death. Or, you convince CRA that you did not receive benefical ownership until her death, in which case her estate pays capital gains tax on the full amount.

Otherwise, I would reiterate my previous concerns, and Karen's, that putting all your mother's assets into joint ownership with you effectively subverts the intent of her will - or at least it makes it possible for you to do so. Unless your brothers are on board with how you are planning to distribute your mother's assets, you may be seeing them in court. (And frankly if they have any sense they wouldn't agree to it, no matter how trusting your relationship is. What happens if you get run over by a bus before the estate is settled? All the assets are in your name, not your mother's, so the provincial trustee will find there is nothing in her estate to dispense, and your brothers get nothing. And you might leave all your assets to the Humane Society, so they get nothing from you. What happens if you get married and your spouse acquires a claim on your assets?)


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## kcowan

belguy
One possible solution is to buy term insurance for the principal amounts of your brothers' share with them a beneficiaries.

Does your will leave everything to them? What if you predecease your mom?


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## Belguy

I put my mother's assets in our joint names to minimize the effects of probate and to allow me to manage her accounts according to her wishes.

Her non-registered accounts are all in interest-bearing investments and her RIF's contents include bond ETF's.

My mother and both brothers are fully aware of what I have done and I have always been forthright with them.

It seems to me that, whatever you do, is not an ideal situation but I know what goes on in my head and that I am a completely honest person who will fullfill my mother's wishes exactly as stipulated in her will--that is that everything is divided equally between her three sons.

That said, if I had it to do all over again, I probably would have left the deed to the house only in her name even though I also live here and I would not have put the bank accounts and investments in our joint names.

Whether or not to now undo what I have already done is now the question.

What do you think given what you know?

One thing that I do plan to do immediately is to provide each of my brothers with an up-to-date list of all of mom's assets to protect myself against any possible accusation that I am withholding anything upon mom's passing.

I cannot foresee any situation that would cause me to handle mom's affairs in anything other than the upmost of integrity if for no other reason than I would have to live with myself. As I am now a senior myself, with no other family, how could it ever be worth it?

Oh, and one other point--my own will leaves everything equally to my two brothers.


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## Karen

Thank you very much for clarifying that, Belguy. I now feel completely assured that your intentions are honourable. I'm not sorry I asked, though, because it wasn't clear in your earlier posts, so it gave you the opportunity to explain more fully. I suspect that what happened is that you yourself, knowing that your motives were honest, didn't stop to realize how it could sound to others reading what you wrote. So thanks again for the explanation - my faith in humanity has been restored!


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## kcowan

Belguy
Have you consulted with your brothers about how your mom's investments are made? Do they agree?


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## Belguy

Keith, according to mom's wishes, her investments are all very conservative including a premium money market account and laddered GIC's for her non-registered accounts and two of her RIF's, and (up until now) a diversified portfolio of bond ETF's for one of her RIF's.

The question that I now have is can the bond investments be considered as conservative given all of the cautions out there that bond funds could be hard hit in a period of rising interest rates?

Also, what if I became incapacitated, due to a stroke or whatever, and yet still lived for several years in an institution? Would mom then be unable to sell the house due to joint ownership and, upon her death, would my brothers be unable to do anything with the house until I died?

One question leads to another!!

Thanks again to Karen, Keith and everyone else for your kind interest and help with something that now seems more complicated than it first appeared to be!!!


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## humble_pie

dear Belguy,

some of the concerns you raise apply to all of us who might be thinking about the terms of their will. And especially to those of us with minor dependents or other dependents who might be planning for what would happen to our portfolios if we were to be incapacitated (note, in this latter scenario we are not dead yet, so our estates cannot be distributed.)

a common arrangement is for an individual to have a lawyer prepare a special power-of-attorney, sometimes called a mandate, that will govern what happens should he or she become incapacitated (mine will have 2 people as attorneys.)

the individual then chooses an investment counsel or other professional advisor in advance. Should he become seriously ill, the attorney or attorneys act to deliver the portfolio and all its assets immediately to the professional manager. For an older person making such plans, it might even be a good idea for the individual, the attorney(s) & the financial advisor to all briefly meet together while the individual is still in good health.

with respect to your house and a possible episode of prolonged incapacity, the attorneys should be able to act in your place & stead. Presumably you & your brothers would want your surviving mother to remain in her residence as long as she was able; but if any sale were contemplated the attorneys named under the mandate should have the power to authorize such sale.

2 other thoughts that occur to me are that, in your family, the ultimate beneficiaries are likely to be the spouses of your brothers and/or the children of your brothers. Do you have nieces & nephews belguy.

and the 2nd of these 2 thoughts is that it is a good idea to commence discussion with, and regular disclosure to, your brothers. However this is going to involve their spouses, who will hear about everything secondhand. It might even involve their children, if these are adult children, if they are indeed the ultimate beneficiaries as mentioned above.

what i am getting at is that communication is all very good, but it might also bring some accompanying difficulties, human beings being what they are. The more people you have looking over your shoulder, the more chances that somebody is not going to see things your way. So i am wondering whether, before you involve your brothers (and willy-nilly their spouses & families) you might want to consult a family lawyer with whom you feel comfortable.

are you still in touch with the lawyer who drew your will and your mother's will. Is he or she a legal professional with an instinct to unite a family (ie a nurturing instinct) rather than a conflict-oriented barrister; but having at all times, due to his or her profession, an acute awareness of all your legal responsibilities as your mother's caretaker and - somewhat more dangerous - as the owner of her assets with intent to distribute even though nothing is binding upon you.

in any event you will need a lawyer to prepare a living power-of-attorney.

in addition to a lawyer, perhaps an experienced social worker might be a useful person to consult.

then you would work with these professionals to design the program under which your brothers - and possibly their spouses - can be drawn into your communication circle.

an alternative could be a trust company (plus or minus the lawyer and/or the social worker) although i am not especially knowledgeable in this area.

my whole point is that you may need a small circle of trustworthy, capable people to assist you and, if need be, to stand in your place and stead, as you and your mother grow older. It takes time and care to find & recruit the members of such a circle. Is it possible that you might consider working on this while you are strong & well.

it is true that all of the above will charge fees, especially the investment counsel. But please remember that in this scenario, you are incapacitated in a hospital ward, while possibly your heirs bicker & your mother is neglected. So one asks, what better could the funds be spent upon, than upon highly reputable services to keep the aging seniors as well & as comfortable as possible.

best wishes to you,
hum


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## kcowan

The other concern is that professional portfolio managers are fine with fees and mutual funds. So getting someone who will continue with ETFs might be a bit of a search? What do your brothers think about ETFs?


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## iherald

MoneyGal said:


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


Internet opinions are clearly superior!


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## Belguy

Thank you, humble pie, for your detailed and thoughtful response which I will try to digest.

My two brothers live in common law relationships and I do have nieces and so I have no idea what will happen when mom's and my money eventually passes to them. However, that is not something that keeps me up at night because, when it becomes theirs, it becomes their concern.

I had no idea of how a simple, straightforward estate, with no business holdings etc., would lead to such a field of quicksand!!!


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