We’ve all heard it: “My neighbour added their kid to the house title to avoid probate. Maybe I should do the same?”
On the surface, it sounds like a smart, simple estate planning shortcut. But before you rush off to add your child’s name to your property, it’s worth understanding what’s really involved. What seems like a minor paperwork update can quickly open a can of legal, tax, and family-related worms—and no one wants to deal with that.
As estate lawyer Kate Wright puts it:
“Probate avoidance is not the be-all and end-all. It shouldn’t be driving the bus.”
Probate has a bad reputation. It’s correctly seen as slow, bureaucratic, and expensive (especially when you add in the associated legal fees). But in Ontario, probate fees are “just” 1.5% of the value of assets over $50,000. To put that in context, if your house is worth $800,000, the probate bill would be $12,000. As it turns out, that cost may be a pittance compared to the risks that come with adding a child to your home ownership.
Let’s walk through some of the unintended potential consequences of this probate avoidance strategy:
Challenges with the Principal Residence Exemption
Here’s what most people don’t realize: when you add a child to your home title, CRA may consider that a partial sale of the property. Unless your home is your principal residence, that “gift” could trigger capital gains tax—even if no money changes hands. Further, it may also impact your child’s ability to claim the principal residence exemption on their own home! Suddenly, what was supposed to be a cost-saving move ends with an unexpected tax bill.
And while we are discussing unintended consequences, adding a child to title may affect their ability to use an FHSA, the Home Buyer’s Plan and the First Time Home Buyers’ Tax Credit when they are buying their own home!
When Your Child’s Problems Become Yours
Adding your child to your title also means their financial or legal problems could affect you. If they’re involved in a lawsuit or go through a divorce, or have financial difficulties, your home might be considered part of their assets. That could mean your family home ends up in court.
The “Equal Inheritance” Trap
Many parents plan to leave the house to one child and balance the books by giving other children equivalent cash or investments. In theory, it sounds fair. But property values often grow at a very different rate than investment portfolios or life insurance. And, they also have very different tax treatments meaning that even in the highly unlikely circumstance where the before-tax inheritance is equal, it almost assuredly won’t be on an after-tax basis!
As wealth advisor/financial columnist David Christianson notes:
“When part of the family is suing the other part, it never feels like a win.”
Loss of Control
Once your child is legally on the title, any major decision—like selling the house or refinancing—requires their consent. Even the most supportive, respectful relationships can become strained when money, property, or timing are involved. And while most parents assume their kids will “go along with the plan,” that’s not always how life plays out.
Final Thoughts
To wrap things up, while adding a child to your title might seem like a smart move to save on probate, it can easily create a host of new problems—tax liabilities, creditor exposure, lost benefits, and family conflict, to name a few.
In estate planning, the goal isn’t just about saving money, it’s about preserving clarity, control, and peace of mind for everyone.
So, before you sign any title transfer forms, give us a call and we can walk through all the pros and cons in detail and see whether it truly makes sense. You, and your family, will be glad you did.
Enjoy the rest of the Summer! – Mat
[1] Communication based on an original article written by Jonathan Got in Advisor.ca: Should Clients Add Kids to Their Home Title?
