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Tuesday, March 29, 2016

Adding someone to the title of your house may be the easiest mistake you'll make

I encourage the readers of this blog to ask questions for several reasons. The most important reason is that I want to know what's on your minds. I want to know what information you need so that I can figure out what role I can play in getting that information out there.

There are some topics that pop up time and time again, and even though I've answered similar questions many times, I keep answering them. I recently received a question about adding names to property, and regular readers of this blog know that I've talked about that endlessly. But seeing the question asked so casually made me think about how vulnerable many people are. They have no idea how much trouble they are causing themselves and their families by taking legal steps they should simply not take.

Here's a question I received recently:

"How easy is it to add someone to the title of my house? Can it be done at anytime or is this a question that I should be asking a bank?"

Here's what I gather from the question:
1. You expect to hear that it's easy to add someone, probably because you've heard from friends or others that it's easy.
2. You don't realize that you are affecting your own legal rights, as evidenced by the fact that you think this is a question to ask a banker.
3. Your plan is likely aimed at avoiding probate or otherwise involved with what happens to your house on your death, because you came to a blog that's all about inheritance.

Why oh why do people keep adding others to their titles? It DOESN'T WORK. Okay, I acknowledge that there are some good reasons to add a person. Perhaps you have just married and you want to own your marital home in joint names. I'm on board with that. But when it comes to inheritance issues, adding people to titles is almost always the absolute wrong way to go about things. Sure, your friends found it easy to add the kids but wait until those friends pass away and the kids have to deal with the mess left behind. It won't seem so easy then.

Instead of looking at adding a name to your title then making that step fit your goal, do things the other way around. What are you actually trying to achieve? What is the goal? And can it be achieved in some other, better way than risking what may be your largest asset?

Yes, there is risk. A great deal of risk when you add someone to your title. You do realize that "adding" them means you're giving it to them, right? I mean, you can't just remove them later if you change your mind. Keep this golden rule in mind: adding them is easy, but r
emoving them is not.

You can't remove them because by adding them to the title, you've created legal rights for them. You've given them the rights of an owner. The fact that the property is "really" yours will not exist in law. And this is where the risk to you comes in. If the other owner - the person you've added - gets divorced, you could lose your home because it's actually one of that person's assets too. Same for that person being sued or losing a business. You could well lose your home because "adding" someone was easy and you didn't think of the consequences.

This brings us back to your goal. What is it you want to achieve? Is your goal to avoid probate fees? We now know that adding the kids' names to the title of the house no longer works. The house still goes into the estate despite the joint names.

Are you trying to leave the house to the kids? Why not just leave it in your estate and use your will to give the estate to the kids? That avoids creating a tax bill for the kids, and avoids that whole idiotic practice of expecting several children to own one house together.

I urge you to sit down with an estate planning lawyer before you make any changes to your title. Find out the pros and cons of your proposed steps. Review your goals and find out how they can be achieved more efficiently and safely. Make sure your plans for your home are not made in isolation, as they have to work with your will, your insurance, designations made on your financial instruments, and other variables such as separation agreements.

Making one big mistake - and carelessly adding a name to a title is a big one - can mess up your entire estate plan and leave your family with a confusing, costly mess.






31 comments:

  1. Agree with your comments. If absolutely needed for some specific reason but do not want to transfer legal ownership, you could possibly document with a bare trust declaration - but definitely not ideal and doesn't help you if probate avoidance is the goal (which rarely should be the primary/only goal).

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  2. My spouse and I have separated, but still both dwell on our jointly owned property (separate dwellings). We have an only child, whom both of us agree shall inherit the property. But say I die first, and my spouse remarries or takes a common-law partner; is there not a danger then that she would come to inherit at least some of the estate? This is the only reason I had thought to add our daughter's name to the property.

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    Replies
    1. Yes, if you pass away your spouse could enter a new relationship and that could well end up with the new person inheriting from your spouse. Just to make sure that you are fully advised and informed, see a lawyer in your province to talk about how the law treats a matrimonial residence. For example, if your spouse marries someone else and they live in the house, what rights will the new spouse have in the home, and will those rights override your daughter's name on the title? As I said in the original post, it's best to start with a goal (i.e make sure your child inherit) and then look at all available options to see what will work best.

      Lynne

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    2. Thanks, Lynne for this very helpful reply. I'm already overdue for seeing a lawyer so will act on that today.

      Delete
  3. Could you please explain this:
    " adding the kids' names to the title of the house no longer works. The house still goes into the estate despite the joint names."

    Everything I have read indicates that when a parent adds a kid to the house (right of survivorship), after the parent dies the house automatically then belongs to that kid. (not really a 'kid', probably middle-aged by this time).

    This would be the first I heard of anything different, but I admit I never know where to look.

    Also, what would be the point, then, of adding a kid to the house deed if after the parent death it becomes part of the estate anyway?

    And further, why warn people off doing it if it makes no difference when they die for having done it?

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    Replies
    1. The things you are reading used to be right. It all changed in 2007 with two cases from the Supreme Court of Canada, one called Pecore and the other called Saylor.

      Now the rule is that if a parent adds a child or children to an asset, the asset is considered to be held in trust for the estate and does not go to the child. This only changes if there is independent evidence that the parent actually did intend for the asset to go to the child for that child's own use. If it was only put into joint names to avoid probate or for convenience, it does not go to the child.

      People continue to add kids to the title because they too have read things or heard things that lead them to believe it's a good estate planning move. Those articles are either from another jurisdiction, are out of date, or are simply wrong. It doesn't help that some holders of assets such as banks are being reluctant and slow to apply the new rules and are giving inconsistent information to consumers.

      I warn people off doing it because having the kid's name on the property causes confusion and resentment among the kids. It causes delays while they try to figure out how a will that says they each get an equal share works when one gets the house. It ends up with extra legal fees as they fight about whether the one on title took advantage of the parent. The one with the name on the house tries to get the estate to pay for the tax hit they've incurred and the others refuse. It's usually a mess, and it often takes a lawsuit to figure it out.

      Lynne

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    2. Thank you for this kind and helpful reply. It clarifies a lot, and will be useful in future to others I am sure. We now have something to "look up". :-)

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    3. You're welcome. A good place to do free legal research is www.canlii.org, which is run jointly by the provincial law societies.

      Lynne

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    4. Lynne,
      It isso nice that you are helping people in this way.

      Delete
  4. Can you confirm that "Adding the kids names to the deed never works" in our situation. My husband and I purchased a cottage in joint ownership. Our principal residence is in the city. A few months after purchased we added our two adult children to the ownership as joint owners. The intent was to allow our children to jointly own the cottage upon our death avoiding capital gains tax as we have seen so many cottages being sold as the children cannot afford to pay the tax. Our lawyer indicated on the new title that the reason for the transfer was for estate reasons. Are we now at risk?

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    Replies
    1. I can't give advice to someone when I haven't seen their documents and I know nothing about them, but I can comment on how the general rules should apply. I find the phrase "for estate reasons" to be utterly useless, as it can be taken to mean pretty much anything. The joint ownership question turns on whether you as parents intend for your children to own the cottage for their own use, or whether you intend just to avoid probate fees. Seems to me that either of those things, even though legally they are opposites, could be described as "estate reasons". In my view, you're at risk anyway because you have two extra people on your title, either of which could cause you to lose your cottage due to their divorce, car accident, or being sued. Also, no matter how many people you add, you are not going to avoid capital gains tax on your cottage. Adding people will have no effect on that. If the kids can't afford to pay the capital gains tax on the cottage and the cottage is not available to be sold, then other things in the estate will have to be used to pay the tax. If avoiding it was that easy, everyone would do it.

      Lynne

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  5. Back in 2008 my mom put me on house deed. Value house at the time was 70,000. She has since passed away. I am now selling the house for 110,000. What amount will I have to pay capital gains tax on?

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  6. Hi, my mother put my name on her deed in 2008 (value of house at that time was 70,000 - although there is an affidavit attached to deed saying 35,000). She passed away in 2010. I am now selling the house for 110,000. What amount will i have to pay capital gains tax on? Many thanks.

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  7. 2. If I want to leave my new wife the house in my Will will she legaly own half the house or would my ex with have the

    3. Could I add mynew wife to title with out the consent of my exwife?

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  8. My exwife and I are on title for a house in Alberta. I curently live in the house with my new wife of almost 2 years.

    Questions:

    1. What rights does my new wife have to the house if I die?

    2. If I want to leave my new wife the house in my Will will she legaly own half the house or would my ex with have the right the house only?

    3. Could I add mynew wife to title with out the consent of my exwife?

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  9. due to the fact I had no credit rating, and was new in the relationship with my now comon law husband I put my moms name on our house. Is there a way to add me?

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  10. My spouse & I are care givers to our daughter who is receiving Ontario Disability Support Benefits. Our daughter lives in the same dwelling. My intent is to add my daughter to the property title so that on my spouse's and my death, our daughter will already be on title. Because our daughter lives in the dwelling, the asset is not considered to be her asset as this is her principle residence. My question is this: My reasoning in adding her to title (She's single) is for her security only. Ontario estate taxes will have to be paid regardless, however I st want to now if it s prudent to add our daughter to title legally now rather then her name not being shown on the deed. *NOTE* She has a Henson Trust and as well, I have appointed Scotia Wealth Management (Scotia trust Co.) as my executor of my estate. Thank you for your anticipated response.

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  11. Hello, My mom is thinking of adding my name to Title of her home because I am buying out my brothers (we will get legal letter done etc). I am currently living in the home and the home needs renovations and I will be paying for the renos and everyone is in agreement that the house will be given to me once i pay my brothers off. What is ramifications of me adding my name to title. Should my mom pass away I hope not to have any problems from my brothers since we will have letter drawn up. But would I have to pay fees etc once she passes away etc. We live in Toronto, ON I would like to know what I am up against. Your help is greatly appreciated.

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  12. This story reveals all the reasons to never add your children to the title of your home or joint on your bank accounts. My mother in law passed away in June 2017 and in the end she had nothing. Her pensions paid for her nursing home rent, but everything else was gone. She had only two sons, but the youngest convinced her to sign her house over to him (100%) and add him to her bank accounts.
    In 2016 my husband obtained his mom's Power of Attorney, but because the account was joint with his brother the bank denied the power of attorney unless the brother joint on account gave permission. It was not until 2017 he finally convinced a branch manager to add the Power of Attorney to the account as view only. Five years of bank statements revealed a lot about his younger brother, lump sums over the years had been transferred from his mom's account to accounts in his brother's name. This account was their moms, the only deposits her pensions. When the mom went into a senior res from the hospital, the youngest son went right to the house that night and started dumping drawers into a box. He sold her house and he and his wife took the proceeds for themselves. He gave his mom nothing. Her bank statements indicated over a five year period about $50,000 was transferred by the son to himself. Even when the mom's dementia progressed and she went to a nursing home, the youngest cleared out her account and left her $840. Also after transferring the deed to her son she continued to pay all upkeep and bills on the house including property tax. This son took his mom to the cleaners in every sense of the word.
    The eldest son, ended up paying for the funeral, but the youngest showed up and he and his wife put on a show.
    A week after the funeral, the sons went to the bank and the bank played right into his thieving hands by suggesting no estate account just deposit any estate cheques to her existing account joint with the one son. Note her will was joint executors and joint beneficiaries.
    After the damage the youngest son did there was nothing left for the joint beneficiary, except the funeral bill he paid.
    These actual events, should be enough to change anyone's mind about adding your children to the title of your home or to your accounts. The final results, her family no longer exists. The eldest holds the guilt about not seeing what his brother was up to so he could help his mom and I can say the youngest son holds no remorse for his actions.
    The mom was in the hospital and was taken right to the senior residence, they denied her requests to go home and pick her clothes. We heard over and over from her and others, that made her sad. Her granddaughter took her clothes over and a little at a time they went through them. My daughter was also upset that her Nonna could not pick what she wanted from her house, but I assured her, that she would be more upset, seeing her belongings dumped all over, with no care taken. Parents if for no other reason, consider all of your family members before making such a huge mistakes. In this case the people feeling guilty were not the actual guilty parties.

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  13. Thank you for the post. I have a question regarding my father's situation. I am removing my name from the house and mortgage for personal reasons and my father will be adding his brother instead because my father does not have an income. My father has a verbal agreement with his brother that he is really the only owner. In the case where my father's brother were to die before my father, does his estate have a right to my father's home? Thanks.

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    Replies
    1. Verbal contracts may be valid, but not those regarding land. All agreements to do with land must be in writing to be valid. This means that if your father's brother does not honour the verbal agreement for some reason, the estate is going to have a very difficult time enforcing its claim. It can be done, of course, but it would probably require a lawsuit. It would seem, based on what you've said, that a quick agreement between them, which doesn't have to be fancy, would save everyone a lot of trouble and money in the future.

      Lynne

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  14. Lynne, the goal is to have time to clear out the unoccupied (15 years) house owned by my 97 year old aunt, still of sound mind, for whom I have sole POA for property, joint POA for health (with a cousin) and I am an executrix, joint with yet another cousin, who is an executor. Our Aunt lives in an apartment (with my assistance, and that of others) as a "shut-in".
    The goal is to clear out and sell the house without concern about her inability to sign a real estate sale agreement, should she become mentally, physically, or completely incapacitated, but still living, and while I am still able to do so. She will need funds for a funeral and a who knows what else prior to that.
    Can she & I draw up a legal document to put the house in my name, so I can proceed without her signature on the sale, with stipulation that all pproceeds from the sale go into her estate? Or do you have other suggestions?

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    Replies
    1. You already have a document that will allow you to sell the house on her behalf and which obligates you to put the proceeds into her account. That's the Enduring Power of Attorney. It appears that you don't really know how to use that document, so perhaps you should sit down with a lawyer for a bit and talk about what it allows you to do and what it does not.

      There is no reason for you to OWN the house in order to sell it for her. That's just extra cost and extra paperwork, and a huge extra risk for her.

      Lynne

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  15. Hi Lynn,
    I have been married to my husband for 10 years and we have two kids.
    After our marriage, he bought a business and a house that we still live in right now. I have asked my husband to add my name on the deed of the house and a partner in the business corporation, however he finds it weird that I ask him to do that. Just recently, he sold his older business and bought a new one, and shain didn't add my name to it.
    I am self employed since last 3 years and work about 15 hours only when my kids are in school. I also help him in his business whenever I get time in between the home, kids and my work. On Papers, his accountant shows his business income as a split between my husband and I, to avoid paying too much tax. However, I don't ever get my 'income' from his business, since he claims that he pays the mortgage and all the other bills. No doubt he works hard, but I worry that whatever he has is not safeguarded to protect his family incase of any unfortunate event.
    My husband evades the topic about Wills, Deed, POA or life insurance policies for the both of us, calling it as a biggest scam. I'm worried about the financial security of my children should I pass away before my husband. I have RESP saved for both my kids since I get some child tax benefit, and that's pretty much the only saving we have.
    I would like to know my rights as his wife and as a mother of his children, without divorcing him or separating from him. Should something happen to him before me, is there anything my kids and I would own or are there legal complications since there is no Will, no Deed or POA
    Your help would be greatly appreciated. Thank you.

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  16. I live in now and since we are having issues with the bank I went to see my own lawyer about solidifying my estate. He suggested there is a document where I can put my daughter on the house through registry of deed and on my bank account with the provision that it is for estate planning only. she will not be able to empty my accounts, her creditors can't touch the accounts nor can she sell the house from under me. She is my only beneficiary. Are you familiar with this? I know your other blog is full about beneficiaries inheritances so if I may a second question......the bank holding the estate account is dragging their heels on paying out debts occurred by the beneficiaries and are not giving the executor access to he estate account. Is this legal? All balances to the bank ie mortgage, credit cards etc are paid. The bank wants the receipts submitted to them for payment. Seems like money grab to me.

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  17. Hi Lynn,

    Two questions.....first we a are currently probating my mothers will and the house has been sold. Due to issues with the bank over the estate account...which will be question 2 I went to see my own lawyer. He said that I could sign a specific form that will allow me to put my daughters name on my house and bank accounts that indicate it is only for estate planning and she cannot sell my house nor could her creditors touch my accounts. Is this correct? Question 2 the bank which has my moms estate account will not give my brother, the executor, access and are requiring us to submit receipts for funeral, obituary, probate etc to them for payment. Is this legal, will stated he was the executor and was to pay bills etc.....seems like money grab to me as they want money for every bill submitted. I have 4000.00 in receipts related to death and six months later they are not paying. Receipts are probate fee, obituary, oil for her house, memory box and engraving for ashes etc...

    Thank you for your time and this blog!

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  18. My father's Bank would not speak to me until I receive my Certificate of Estate trustee. I live in Ontario. My bank account is jointly owned (Last survivorship option.)When I die, my daughter can move the funds into her account to avoid probate fees. As for the deed, my lawyer added my daughter (s joint tenant) for 1/2 ownership and when I pass, the remaining ownership (My property) flows through the Will to my daughter. Simplicity at its best.

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    Replies
    1. Well, Doc, unless you have only one child, I sure hope your will deals with those joint assets. It is no longer true that joint property between a parent and a child flows to the child automatically. If it were really that simple, everyone would not now be in court fighting about joint property.

      Lynne

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  19. Hi there…read a few of the postings here and thought I ask about our story: it’s a brady bunch situation…divorced Mom of 3 boys meets widowed Dad of 3 boys – they marry, they celebrate 30 some odd years together as husband and wife. The Dad passes away and leaves a will. The will states that everything is left to his wife until either her death or she sells the family home. Upon either situation the sale of the house will be divided 50/50. Half will go to the wife. The other half will be divided equally between the Dad’s 3 boys as per his will. Recently, the step-mom informed the Dad’s 3 boys that they are now responsible for paying probate based on the value of the family home (appraised at his time of death). How does this work? And she has also been advised by her lawyer that her 3 step-sons should be listed on the title of the house. We don’t think this would be in anyone’s best interest. So our questions would be: who is responsible for the probate tax? And why should we be added to the title of the house? Any suggestions would be very much appreciated.

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    Replies
    1. The probate tax is payable by the estate. I don't know why she thinks the sons are responsible for it. Even if the house was the one and only asset in the estate, the probate fee comes off the proceeds, which are split 50/50. So, I can't explain that one.

      As for putting the sons' names on the title, I expect that they may not want to keep the house in the name of the estate any longer than they have to. This is so that the estate will not have responsibility for the house. For example, if there is no money in the estate to pay for maintenance or property tax or insurance for the house, where is that money coming from? If there was money left in the estate that could be used for this purpose, then putting the house in all the sons' names may not be the best idea.

      Every decision made is a balance of risk and benefit and cost.

      Lynne

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  20. Hi Lynne.
    I own a home with my partner as joint tennants. Both of us are on title. He is self employed and had his mother act as a guarantor. Her name is also on title as a joint tennant however it was mentioned that upon her death her portion goes to her estate which I believe is not reflective of a joint tennancy agreement. Why would this be the case and if my partner died before her, what would happen to our joint tennancy?

    ReplyDelete

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