Why you shouldn’t add your kids to the title of your house

One of the most common questions I get asked is how difficult it is to add an adult child to the title of your house. The correct question, though, isn’t whether it’s easy to add them on title. The correct question is whether it’s the right thing to do. And the answer is, usually not.

There are a lot of things that can go wrong by adding someone on title. The very first is that you no longer have sole control over the asset. Quite literally, your house is no longer your own. In Ontario, any joint owner can, without notice to anyone else on title, sever a joint tenancy and make the house owned as tenants in common, which means that they can gift, sell, or bequeath their share to someone else. This can make your life very difficult.

Second, your house is now someone else’s asset. This means that their share can be claimed by creditors during a bankruptcy, or a spouse on divorce or death.

Third, and perhaps most important, you probably won’t even save the taxes you think you’re saving by doing this. Most people want to do this in order to save money on probate taxes. However, by giving someone what is, legally, an investment property, you have made your principal residence – otherwise completely exempt from capital gains taxes – subject to them. Capital gains tax is significantly higher than probate tax, so if the market goes up at all, which it has a habit of doing, you could end up paying far more than you would have through probate taxes.

As always, get advice before jumping into this. The attempted cure might end up being worse than the perceived disease.