Transfer Ownership of House to Family Member in Canada

Conveyance of a house to a family member in Canada is a major process that is typically precipitated by an intent to pass on the title, estate planning, or an effort to address family finances. Thus, the process of transferring property from one family member to another may not just be legal but also legal, tax, and financial. In this blog, I will take you through the ownership transfer process of a property, the taxes associated with such transfers, and the real estate lawyer involved in such a process.

Why Transfer Ownership of a House to a Family Member?

Before going into the details of how to transfer property ownership, it’s important to understand the common reasons why individuals opt for this route:

Gifting Property:This is commonly practised whereby parents transfer the ownership of a property to their children as a way of passing on assets or as a way of enabling the child to acquire a home without the normal purchase procedures.
Estate Planning: The owner can transfer the assets for estate planning purposes and may prevent probate or other issues in the future.
Managing Family Assets:At times, the movement of property within the family can be seen as a restructuring of family assets and at times it can be for tax strategic planning reasons too.
Financial Assistance:Transferring ownership enables parents or grandparents to offer monetary help in a way that will help the family member with a valuable property..

Even though such reasons are rather sensible, the process demands a lot of legal procedures and tax consideration to avoid any legal issues.

Key Considerations Before Transferring Ownership

Inheriting property to a family member might sound easy, but it entails some legal and financial repercussions. Before making a decision, it’s important to consider the following:

Capital Gains Tax
Any other properties of the individual, whether they are personal or business properties, receive the capital gains tax in Canada, in cases where they are sold or transferred.

For instance, you sell a second residence, for example, a cottage or a rental property, to a relative. In that case, the appreciated value of the property may be taken to mean that you are liable for capital gains tax.
Land Transfer Tax (LTT)
It is worthy of note that in most of the provinces in Canada, a change of ownership of any immovable property no matter the relationship between the parties always leads to payment of land transfer tax.

The percentage of LTT differs from province to province but it is important to note that there are conditions that allow an exemption or a reduction of LTT when transferring property to family members. A lawyer can advise in establishing whether one is liable to the aforementioned exemptions as well as compliance with the provincial laws.
Mortgage Considerations
This poses some slight difficulty if there has been a mortgage on the property before the transfer of ownership. In some cases, the claimant, the family member who is now the property owner, may have to assume the mortgage debt, which should be approved by the mortgage lender.

This could mean they would have to qualify for the mortgage on the mere basis of their credit score. If the mortgage aspect is not properly handled it may result in legal and financial implications.
Property Taxes
Besides the land transfer taxes, property taxes can also be influenced by the transfer. The family member receiving the property should make sure that they are ready to take on the new tax implications of this change of use or value of the property as an investment property rather than an owner-occupied property among others.

Steps to Transfer Ownership of a House to a Family Member

The process of transferring ownership of a house to a family member in Canada typically follows these steps:

Obtain a Real Estate Lawyer
The first and most important thing to do when transferring property is to engage the services of a real estate lawyer. Purchasing and selling real estate properties include legal processes, and this is not an exception when it comes to purchase and sale between the immediate family. The lawyer makes sure that the transfer is under Canadian laws of property and assists in understanding tax and mortgage matters.
What Does a Real Estate Lawyer Do in a Transfer?
Draft a Deed of Gift or Sale
The deed will outline:
- The details of the property being transferred.
- The names of the individuals involved.
- The terms of the transfer (whether it’s a gift or sale).
Your lawyer will ensure this deed meets the legal requirements of your province and reflects your intentions accurately./p>
Address Any Mortgage Issues
The mortgage lender must be informed of the transfer if there is a mortgage on the property. If the family member taking ownership plans to assume the mortgage, they will likely need to qualify with the lender. In some cases, refinancing may be required to accommodate the new owner. This process can take time and requires careful consideration of the financial implications for both parties.
Submit Required Documents to the Land Registry
Once all necessary documents have been drafted and signed, your lawyer will submit them to the provincial land registry office to make the transfer official. This step legally changes the ownership of the property, and it’s essential to ensure that all documents are submitted correctly and promptly.
Pay Taxes and Fees
After the documents are submitted, any applicable taxes and fees, such as land transfer taxes and legal fees, must be paid. Your lawyer will inform you of the exact amounts and help you navigate any potential tax breaks or exemptions. Paying these fees promptly ensures that the transfer is completed without delay.

Potential Challenges in Transferring Property to a Family Member

While transferring ownership of a house to a family member may seem like a simple transaction, several challenges can arise:

Family Disputes:If there are multiple heirs or family members involved, disputes can arise over the value of the property, the fairness of the transfer, or the terms of the gift.
Tax Implications:Misunderstanding capital gains tax, land transfer tax, or other financial obligations can lead to unexpected costs for both the giver and the recipient.
Mortgage Issues:If the new owner doesn’t qualify for the existing mortgage or needs to refinance, this could delay the transfer or cause financial strain.

Having a real estate lawyer involved from the start can help mitigate these challenges by ensuring that all legal, financial, and family considerations are addressed.

Conclusion

Transferring ownership of a house to a family member in Canada involves careful planning, legal documentation, and understanding of tax obligations. While it may seem like a straightforward process, numerous legal and financial complexities must be addressed. With the help of an experienced real estate lawyer, you can ensure that the transfer is completed smoothly and in compliance with Canadian property laws.

If you’re considering transferring property to a family member, HouseClosing is here to help. Our expert team of real estate lawyers will guide you through the process, ensuring a seamless transfer that protects your interests. Contact us today for a consultation and take the first step toward a hassle-free property transfer!

Soni

Soni With 5 years of experience in bookkeeping and banking, Soni is a highly skilled professional known for ensuring financial accuracy and managing efficient banking operations. She specialize in maintaining precise financial records, handling reconciliations, and streamlining financial processes for businesses. Her attention to detail and commitment to financial integrity helps HouseClsoing.ca achieve their financial goals with confidence.