As a notary public, I get a lot of calls about real estate, estate planning and transferring property between family members. If you’re considering adding or removing an owner from title, or transferring (an interest in) property between family members, here’s what you need to know.
What is a family transfer?
A “family transfer” of real estate is a broad term that refers to transferring an interest in property between family members. Property may be transferred in exchange for money, as an outright gift, in connection with the creation of a bare trust,* or as a strategic part of a person’s estate planning.
Common family transfers include:
- adding a parent to the title for mortgage qualifying purposes;*
- adding a child or spouse as a “joint tenant” on title for estate planning purposes;*
- removing a family member from a property title;
- gifting (any interest in) property to a family member.
Key issues and considerations in family transfers of real estate:
- The property title must always match the mortgage.
This means that all registered (legal) property owners must also be borrowers under the mortgage (or secured line of credit). So, if you have a mortgage and want to add another owner to title, you’ll need to either (a) payout the mortgage or (b) get the bank’s consent to add the person to the mortgage at the same time that they are added to the property title.
- Each family member should expect to hire their own notary or lawyer.
Due to the potential for conflict between family members (and, often, absence of a contract or written agreement between the parties), both the transferee – the person buying or acquiring the interest in property – and the transferor – the person conveying, transferring, giving away or selling part or all of their interest in property – should expect to hire their own notary or lawyer. Doing so ensures that both the transferor and transferee receive advice that is in their respective best interests so that they can make informed decisions before a transfer of property occurs.
- Beware of taxes.
For transferees, a key consideration is property transfer tax (PTT), which is payable based on the fair market value of the interest in property that is being acquired. In some cases, it is possible to apply for an exemption from PTT. Ask your notary about PTT and available exemptions. For transferors, one key consideration is capital gains. Before transferring your property, consult your accountant with respect to GST, non-resident tax, Underutilized Housing Tax (UHT), Speculation Tax, capital gains and federal anti-flipping legislation.
- Intention! Intention! intention!
The best way to protect your interests is to be clear with your notary about your intentions and objectives. Why are you transferring (an interest in) the property? What do you hope to achieve? Is this transfer a true gift or is money being exchanged? Are you transferring property for no money with the intention of creating a trust (separating legal and beneficial ownership)?* Discussing, documenting and understanding the intention and objective of the proposed transfer (prior to registering the property transfer) will allow for the structuring of the property transfer in a way that best achieves your goals and ensure that your notary and accountant can advise you appropriately.
Summary
There are many types of “family transfers” in real estate; often these transfers can be much more complex than property owners anticipate, so it’s a good idea to seek professional advice in order to determine the options and impacts of structuring your family transfer. Need advice or have questions? Give us a call: 604-576-3211.
*Notes about real estate trusts:
- BC law requires a Transparency Report to be filed at the Land Owner Transparency Registry when a transfer of real estate creates a bare trust. Your notary can assist you with this.
- The Canadian Federal Government has made changes to trust reporting rules which require trustees to file (annual) T3 Trust Income Tax and Information Returns. If you are considering a family transfer that would create a trust, or if you have already created a bare trust of real estate, consult your accountant as soon as possible.
