The family home in the estate plan

Fewer places are more important to a testator than the family home, but it doesn’t always get the attention it deserves in an estate plan. 

As typically the most valuable single asset in any estate, it stands to reason that the family home is also one of the more likely to cause a fight among beneficiaries.  

And that’s before you layer on the lifetime of emotional baggage that siblings can bring to their parents’ house – particularly if it’s the same place they all grew up.  

If it’s possible, testators should canvass their children about what they would like to see happen to the property after they’re gone, and let them all know the final plan, just so there are no nasty surprises when the contents of the will are revealed.

In my years of practice, I have found some parents rush into joint ownership with a child without a full understanding of the consequences.  

There are certainly good estate planning reasons for joint tenancy, which allows the property to flow automatically to the co-owner by right of survivorship and avoid the 1.5 per-cent probate tax otherwise payable on assets in a person’s estate.  

And the savings can be significant, especially considering the Great Toronto Area’s hot property market right now: if the only asset in an estate is a $1-million home, then the probate tax – chargeable on all assets over $50,000 – amounts to more than $14,000. 

Skipping probate can also shorten the period between the homeowner’s death and the property’s sale, since there’s no need to wait around for a court to give its blessing to the executor’s appointment as trustee – a process that can last for months. 

However, leaving one child a house, may breed resentment by unbalancing beneficiaries’ shares in the estate, while homeowners may have had other reasons for adding a person to title. For example, a bare trust may be a more appropriate mechanism for someone who wishes to add a person to title while retaining control of a property during their lifetime, and ensuring that it falls into their estate after death. 

For some very lucky older homeowners, the “first dealings” rule provides a relatively simple route to avoiding probate.  

If the owner purchased the property before Ontario’s conversion from the old Land Registry System to the newer Land Titles System – which began in the 1980s – their home could be “Land Titles Conversion Qualified,” allowing the estate to bypass probate.

Just a small portion of the province’s real estate remains on the old system, but it’s important to know that the tax break only applies when the owner had a valid will in place at the time of their death. 

Whatever your intentions for the family home, it’s important to find an experienced lawyer who can guide you through the process. Disclaimer: The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this website are advised to seek specific legal advice by contacting members of Laredo Law (or their own legal counsel) regarding any specific legal issues.

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