Sunday, June 30, 2013
Transferring family land to the kids - how? And more importantly, why?
Posted by Lynne Butler
"I am signing a parcel of land which I inherited from my father, over to my son and daughter. Can I write up a letter of transferal and have it notarized by a justice of peace, or do I need to have a lawyer handle it? Should the transferal be under "tenants in common?"
Writing up a letter of transferral, notarized or otherwise, will not transfer the title to your children, which means they won't own it. It will have no effect whatsoever, no matter who notarized it. You have to use the transfer of land forms provided by the local land titles registry. You can get the forms either by going in person to the land titles registry, or by searching online to see if your province has a website that posts the forms.
In the "interesting links" section of my blog, I've provided links to the various land titles registries that provide online manuals that I know about. The forms vary widely from province to province.
The main reason you need the forms is that the forms will cover off all legal requirements such as needed information, value, affidavits, proper signatures, witnessing etc. Once the forms are properly executed by everyone, they are filed at the registry and a new title is produced showing the new owners.
A lawyer can help you with the forms, but you don't have to have a lawyer for that if you feel you can find your way around legal documents yourself. However, the real value of the lawyer is not limited to filling in a form. The real value is the advice you get, and the process of evaluating the steps you want to take to see if they really will achieve your goals. Sometimes there are better ways to do things. Sometimes there may be tax consequences you didn't think about. Sometimes you're creating as many problems as you're solving.
I'll tell you right up front that I am not a fan of a parent leaving one property to two children. It doesn't work out well, no matter how often you tell yourself that family problems only happen in "other" families. Why would you expect two different people with different lives, different agendas and different goals to be able to agree on all the issues surrounding a single property? Why are you doing this? How does it benefit them to own this together? To me, it's very unrealistic.
A lawyer would discuss all of those eventualities with you. The lawyer would talk about how you are placing a potential tax burden on your kids by transferring land to them, if they own their own homes already. A lawyer would suggest other solutions, including transferring the land to one of them and equalizing them using other assets, perhaps even life insurance. Or dividing the parcel and giving each half of it. You would at least go through the process of giving your idea a good examination.
I believe that you don't really know the end result you want to achieve because you asked whether the title should be put into tenants in common. The other option, of course, is joint ownership with right of survivorship. You can choose either of these alternatives, as long as you understand the consequences of them. With a right of survivorship, when one child dies, the other one who survives will own the property. There will be nothing for the first child's family. I don't know if that's important to you or not.
If the title is set up as tenants in common, when one child dies, his or her share will become part of his or her estate and be governed by the will. Sometimes parents like the sound of that because it leaves something to the first child's family. What they forget is that it's only half a title. What earthly good is half a title to anyone?
Please take the time to give your idea of transferring the land some serious thought. It's an important decision and an important asset. And I'm so glad you took the time to send me this question and do some research before going ahead!