Siskinds Law Firm
By John Morrissey
March 12th, 2024
Probate planning pitfalls: The risks that you need to consider before adding your child to the title of your home for estate planning purposes
When it comes to estate planning, people often become fixated on ensuring that their estate does not have to pay Estate Administration Tax (also known as “probate tax”). This fixation is largely driven by the fact that if one’s estate is not subject to probate tax, there will be more money for the beneficiaries of the estate on distribution.
There are many clever estate planning strategies that eliminate, reduce, or at least defer an estate’s tax liability. One such strategy includes adding an adult child to the title of your home as a “joint tenant”. By operation of law in Ontario, when one joint tenant of a property dies, the surviving joint tenant inherits the home by “right of survivorship”. When a joint owner inherits a property by right of survivorship, the home does not form part of the deceased’s estate and consequently, the value of the home is not included in the value of the deceased’s estate and therefore, is not taken into consideration when calculating the amount of probate tax that needs to be paid.
Although well-intentioned, a testator’s goal of evading probate tax by adding a child to the title of their home does not come without risks.
In fact, taking this step is loaded with risks and the result could be financially disastrous—not only for the beneficiaries of an estate, but for the testators themselves during their lifetime. Without careful planning, a testator’s act of adding an adult child to the title of their home has the propensity to lead to the ironic result that the testator or the testator’s estate ends up paying much more in legal fees than the estate ever stood to save by not having to pay probate taxes.
