In Ontario, there are several strategies you can consider to pass real estate to your child in a tax-efficient manner:
If the real estate you’re passing on is your primary residence, it may be exempt from capital gains tax under the Primary Residence Exemption. This exemption allows homeowners to designate one property per family as their primary residence and potentially avoid paying taxes on the appreciation in value when transferring it to their child. However, it’s essential to ensure that the property qualifies as a primary residence and to follow the necessary reporting requirements.
You can transfer ownership of the property to your child as a joint tenant with the right of survivorship. This means that when you pass away, the property automatically transfers to your child without going through probate. This can help avoid probate fees and streamline the transfer process. However, it’s crucial to consider the implications of joint ownership, including potential creditor claims and loss of control over the property.
Setting up a trust can be an effective way to transfer real estate to your child while retaining control over how the property is managed and distributed. Trusts offer flexibility in terms of timing and conditions for transferring ownership, and they can provide tax benefits such as income splitting and capital gains exemptions. Consulting with a trust and estate planning professional can help you design a trust that meets your specific needs and maximizes tax efficiency.
Instead of transferring the entire property at once, you can consider gradually gifting portions of the property to your child over time. This can help minimize the tax implications of transferring a large asset and allow you to take advantage of annual gift tax exemptions. However, it’s essential to be mindful of the attribution rules, which may attribute income or gains back to you if you continue to benefit from the property after transferring ownership.
Estate planning can be complex, especially when it involves significant assets like real estate. Consulting with a tax advisor, estate planner, or lawyer who specializes in estate planning and real estate law can help you develop a personalized strategy that minimizes tax liabilities and achieves your long-term goals.
By carefully considering these strategies and seeking professional advice, you can pass real estate to your child in Ontario in a tax-efficient manner while preserving your family’s wealth and legacy.
