Ask a Lawyer – “Should I add my children as joint owners of my home?”

Q: I have heard that adding my children to the title of my home is a useful estate planning tool to avoid probate fees and simplify the administration of my estate upon my death. Is this true?

A: Whether to add your children to the title of your home is a significant decision that requires careful consideration of the pros and cons and an assessment of your personal circumstances.

What does it mean to add your children to the title of your home?

The effect of adding your children to the title of your home is that they become an owner of the property immediately, meaning that they will have all the same rights and obligations towards the property that you do, even while you are alive. This contrasts with leaving them the property in your Will, which will result in them obtaining title to the property only after you die.

Pros:

It is true that putting your children on title as joint owners will avoid probate fees, as title to the property will pass to them seamlessly upon your death and will not be subject to the estate administration process. However, it is a common misconception that New Brunswick has substantial inheritance taxes, similar to those that exist in the United States. In reality, probate fees in New Brunswick are presently $5 for every $1,000 in assets for an estate worth more than $20,000. As an example, for an estate valued at $100,000, probate fees will total $500.

Cons:

Adding your children to the title of your home can come with substantial legal and financial implications. For example, if you have a mortgage on the property, you will need the bank’s consent to add someone to title, which may require refinancing at a new interest rate. Similarly, if you ever wish to refinance, you will need the consent of your children to do so. If you wish to sell the property, you will need the consent of your children, and they will be entitled to share in the proceeds of any such sale. You could also be subjecting your home to unnecessary financial risk; if your children are sued, or rack up excessive debt, creditors may make claims against your home. 

You should also consider some potential tax implications. In the context of adding children to title, presently Land Transfer Tax in New Brunswick will be payable on 1.0% of half the assessed value of the property and is due immediately upon adding your children to title. For a property assessed at $400,000, this means you would have to pay $2,000 in tax just to add your children to title, in addition to applicable legal fees. Furthermore, if after your death your children sell the property, or the property is sold while you are alive, your children must claim capital gains on half of the sale price (unless it is also their primary residence); if the property was instead left in your will for the executor to sell, the proceeds of the sale would be delivered to your children tax free.

Conclusion

While adding your children to the title of your home can avoid probate fees, these fees are minimal while subjecting your property to substantial risks and tax consequences, meaning that it may be more advantageous to leave your property by Will. Mosher Chedore is pleased to provide expertise in the areas of property law and estate planning. For more information and estate planning advice, please contact us at 506-634-1600.