Should you put your adult children on title to your condominium or home? We have received reports that this is a very divisive topic in retirement communities, and we would like to provide some key context and information to help you determine whether this makes sense for you.
The potential benefits
For most people, the key benefits of putting an adult child on title to your property are summarized as follows:
- Putting your adult child on title to your home can enable your child to better assist you with arranging for maintenance and paying the bills should you lose capacity to do so – the adult child becomes an actual legal owner of the property after all.
- Putting your adult child on title may allow the property to be passed to that child outside of the court probate process (the official process through which the Court “proves” your will) after you are deceased, and therefore save you probate and legal fees.
It is important to recognize that in Alberta, fees for probate are paid out of the estate to the government based on a fixed fee schedule, with this fee capped at $525 (for estates which are worth more than $250,000). This is different from other provinces where the probate fees are a percentage of the estate (and can accordingly be quite expensive for larger estates). Given that a title transfer may involve land title fees well in excess of $200 (ultimately being based on the value of the property), the total amount saved in probate fees may be fairly minor.
You should also consider whether there will be other substantial assets which must be probated (such as registered investments without a registered beneficiary, non-registered accounts, or substantial bank accounts) as it could be the case that your Will ends up being probated regardless of how your property is dealt with. In this scenario, you would see only a small reduction in your legal fees by having the property dealt with outside of the probate process, given that your heirs would still have to probate your other assets.
The potential pitfalls
There are serious risks involved with putting your adult child on title to your property, which are summarized as follows:
- Putting your adult child on title to your home results in the adult child becoming an actual legal owner of your property. This means that your child could potentially secure debt or loans against their ownership interest in the property, and that your adult child’s creditors could register judgments and liens against title. Even if you are sure that your adult child does not have any outstanding judgments or debts, they could run into trouble in the future, which could result in your interest in the property being seriously harmed or diminished. By putting your adult child on title, you are giving up control over a crucial retirement asset – the home you live in.
- You might create future litigation if you have multiple children and put only one of your children on title. In Alberta, there is legal presumption that where a gift is given without any consideration (i.e.. without any value given back in return) to an adult child, this gift is returned back to the estate in the form of a “resulting trust” when the giver passes away. Accordingly, it can be unclear whether the adult child was meant to inherit the entire property (to exclusion of siblings), or whether the adult child was simply meant to manage the property with it being shared between all of the children as their joint inheritance. This lack of clarity often results in very contentious and expensive litigation between the children.
We note that the potential for litigation exists whenever a parent gifts title to property, cash, or any other substantial asset to an adult child outside of the formal Will. We strongly recommend meeting with us to discuss any plans to do so, and to ensure that the transaction is properly recorded and documented, as this may help prevent litigation from arising between your children in the future.
Are there are any alternatives to putting your adult child on title?
If you wish to ensure that your adult children can assist you with managing your property into your golden years but do not wish to put that child on title, you can instead appoint one or more of your adult children as an “enduring power of attorney” – this authorizes your adult child/children to act on your behalf as your fiduciary in managing your finances. An enduring power of attorney can take effect immediately or upon you being found to lack mental capacity, and it can be broad or very limited as to the authority given to your adult child. Our Wills and Estates Department would be happy to assist you with this.
What should you do?
Ultimately, it is up to you to decide whether the potential benefits outweigh the potential risks involved with putting an adult child on title to your home. We would recommend meeting with us to further discuss these risks and benefits, and to craft an estate plan that will best ensure that your estate is protected, and your testamentary wishes are properly and effectively carried out.
