I have been asked many times about transferring a property into joint names with a child in order to avoid probate tax. There are a few things to consider here:
- You may not avoid probate tax anyway. The government takes the position that, if an asset is an estate asset, it must be claimed on the probate application even if it is held by a joint owner. So unless your child actually contributed to the property, they may still be on the hook for that tax.
- The bigger issue: you may avoid probate tax and end up with your child having to pay capital gains tax. If your child has their own house already, and this is not where they live, then this is a secondary property. When your child goes to sell it, they will have to pay capital gains tax on any increase in value from the time that you added them on title.
Whenever you are thinking about doing something for a tax benefit, be very careful – and always talk to an accountant first.
