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Putting your interests first

What are the benefits of adding an adult child as a joint tenant holder to your principal residence during your lifetime?

The Canadian Revenue Agency provides for certain tax exemptions that help facilitate estate planning. One of these include tax exemptions on any capital appreciation to your principal residence. This means that if the value of your principal residence has appreciated from for example, $800,000, to $1 million at the time of your death, the $200,000 capital appreciation would be exempt from taxation. This would be true whether you sold your house immediately before death or were deemed to have disposed of it upon death. This however should not be the end of your estate plan.

In order to maximize the monetary interest your children receive from your principal residence you should also consider the consequences of property transfer tax and probate taxes on the value of the equity you have saved in your home. If you simply pass your interest in your principal residence to your children via your will, the property will not only be subject to property transfer tax, but the entire value of the equity you saved in your home will also be subject to probate taxes.

To facilitate a more tax effective way to transfer the interest in your principal residence to your children upon your death, you may want to consider adding your children as joint tenants to your principal residence. By doing so, the property will automatically transfer to your children and the other surviving joint tenants upon your death. This will eliminate the need to pay any property transfer tax and allow you to avoid paying probate fees on the equity saved in your property; thereby, leaving more to your children.

Adding your children on as joint tenants to your principal residence also has some negative legal consequences and may not be suitable for your individual circumstances. For advice specific to your circumstances consult a lawyer. The above is not intended to be, and should not be taken as legal advice.

The material contained in this article/video/blog is for your general information only and is not intended to be, nor should it be taken as legal advice.

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