Gifting Real Estate to Children: Options for Estate Planning

house and keys

One of the biggest decisions parents face regarding estate planning is how to transfer their real estate to their children. This can be a complex and emotional process, but you must understand the options available to make an informed decision. The article will explore some of the most common ways parents can gift property to their children.

Option 1: Outright Gift

The simplest option for gifting real property to children is an outright gift. This involves transferring property ownership to the child without any conditions or restrictions. However, parents should consider the tax implications before making an outright gift. 

In Canada, transferring ownership of a property can trigger a capital gains tax. This tax is calculated based on the difference between the property’s fair market value and the original purchase price at the time of transfer. Additionally, parents need to consider the potential impact on their financial situation, as gifting a property may impact their income or assets.

Option 2: Joint Tenancy

Joint ownership allows parents to share ownership of the property with their children. The primary benefit of joint tenancy is that it provides for the property’s ownership transfer without triggering a capital gains tax. 

However, there are potential drawbacks to joint tenancy. For example, if the child gets divorced or has financial difficulties, their share of the property could be at risk. Additionally, the child’s share of the property may pass to their own heirs rather than back to the parent if the child predeceases the parent.

Option 3: Trusts

Trusts are legal arrangements where a trustee holds property for the benefit of the beneficiaries. Parents can create a trust and transfer ownership of the property to the trust. The trustee can then manage the property on behalf of the beneficiaries, which would be the parents’ children. 

A trust offers several benefits, including tax savings, asset protection, and control over property management and distribution. However, trusts can be complex and may require the assistance of a lawyer or financial advisor to set up and manage.

Option 4: Life Estate

A life estate is a legal arrangement where the parent retains ownership of the property during their lifetime, but the child is granted the right to use and occupy it. Once the parent passes away, ownership of the property transfers to the child. 

Life estates can offer several benefits, including the ability to transfer ownership of the property without triggering a capital gains tax and the ability for the parent to maintain control over the property during their lifetime.

Option 5: Family Limited Partnership

A family limited partnership (FLP) allows parents to transfer property ownership to their children while retaining control over it. Parents can transfer ownership to the FLP and give their children shares in the partnership. This option can be helpful for parents who want to minimize taxes and protect assets from creditors, but it’s important to work with a lawyer or estate planner to ensure that it’s done correctly.

Key Takeaway

When it comes to transferring property to children, there are several options to consider. Each option has advantages and disadvantages, and you need to choose the one that best fits your situation. Whether you choose a simple transfer, a trust, a joint tenancy, a life estate, or a family-limited partnership, working with a lawyer or estate planner can help you navigate the legal and financial complexities of the process. 

At Dreyer and Associates, we understand the importance of protecting your assets and ensuring that your property is transferred to maximize tax benefits and minimize risks. Our will and estates lawyers can help you explore your options and create a customized plan that meets your unique needs.

Call 604-539-2103 or email us at to book a consultation.





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