Rights & Money

His Name or Hers?

By Olev Edur


My 70-year-old mother is planning to sell her house and buy a condo. Should we put it in her name only, both our names, or my name only? I’m her only son and have powers of attorney for her financial and health matters.

In your home province of Ontario, probate fees can be quite substantial, amounting to almost 1.5 per cent of a condo’s value. On a typical residence in the Greater Toronto Area, where you live, this could amount to $10,000 or more. If your name were on the deed, then probate—and that fee—wouldn’t apply. In addition, the probate process can take some time, whereas if your name were on the deed, the transfer would be fairly quick and straightforward.

There is, however, a major caveat when it comes to you putting your name on the deed, whether as a joint owner or full owner. Presumably this condo is your mother’s principal residence and would therefore be eligible for the principal residence exemption (PRE), so any gains in the property value would be exempt from tax.

But you can shelter only one property with your own PRE; if you already own your own home and then put your name on the condo deed, future gains on one property would become taxable. (You can generally shelter whichever you want, depending on which has the greater gains, as long as you live in it at some point during the year.) You’d be turning a tax-free property into a partially or wholly taxable one.

For example, if that $650,000 condo were to rise in value by $200,000 over the next 10 years and you went the joint-ownership route, you’d be considered a half-owner and half of that profit—$100,000—would be deemed yours. Assuming a 40 per cent marginal tax rate, you’d be on the hook to the tune of $20,000 in tax. (Only half of any capital gain is taxable.) If you were to put the property in your name only, you’d owe $40,000. Of course, this being a capital gains tax, it wouldn’t be payable until the property is sold.

If, on the other hand, you don’t already own a home, you don’t need to worry about this tax bill.

I suggest that you consult a financial adviser, who can help determine your best option. The fees should be relatively minor compared to what you stand to gain (or lose).