What if my Mom's name isn't on the house when Dad dies?

Do you ever wonder whether the legal documents and arrangements you've had in place for years need to be updated to suit your current situation? If so, you're not alone. Here's a question I recently received on this blog that is similar to many reader questions:

"My father has the house in his name only. My parents have been together for 60 years (and in the same house). Should my mother push to have her name added to the deed or is it assumed that after 60 years of being in the house it's considered hers too? My father's health is starting to fail and I just want to make sure everything is in place. He did leave her the property in his will, but not sure if that would cause tax issues?"

As your father makes these decisions about his property, here are some of the things he should consider:

If only one name is on a land deed, it will not be assumed that anyone else owns it. Not even a spouse of 60 years.

The contents of the house, on the other hand, will be assumed to belong to your mother if she outlives your father, and vice versa.

Depending on where in Canada your parents live, your mother might have a dower right to the property. That right only exists in a couple of provinces today. It gives a married person the right to live in the matrimonial property for the rest of his or her life, but it does not convey ownership. The spouse with the dower right could not sell or mortgage the property, which would eventually pass to the beneficiaries of the first spouse's will.

The fact that your father has left your mother the house in his will is good, as on the face of it this means that she will not lose her home should her husband pass away. She needs that peace of mind, as any of us would.

I don't believe that any tax issues would arise from this transfer, assuming that the house is your father's principal residence. From the information you gave me, I'm prepared to assume that it is his principal residence until I hear otherwise. Each of us is allowed to own and eventually sell/give away a principal residence without having to pay any tax on the transfer. So that means no tax to the estate because of transferring the house.

Your mother should not experience tax issues because of the house either, as Canadians do not pay tax on property we inherit from Canadian estates. This is not to say there will be no tax payable on anything in the estate; my answer is restricted to the tax situation on the house.

Please understand that I'm giving this answer with only a few words of facts. There could be other facts that affect the situation (for example, why is it in your father's name only anyway?). It never hurts to discuss tax questions with an accountant.

For the sake of completeness, I'll point out the downside of having the house only in your father's name and his leaving it to your mother in his will. First of all, debts and expenses of an estate must be paid before a beneficiary gets anything. If there are a lot of debts in the estate, it's possible the house would have to be sold to pay them. Secondly, the probate fee you pay at the court is based on the value of the estate. Some provinces, especially Ontario and BC, have high probate percentages, and if the house is in the estate (which it will be if it's in your father's name alone) it will increase the cost of probate.

These are all factors for your father to contemplate before making a decision about what is best for himself and for your mother.

You said your father's health is failing. If this means that his mental health has begun to deteriorate, it may soon be too late for him to make legal documents dealing with his property. He doesn't need perfect mental abilities of course, but he does have to be able to understand what he is doing, and the effect his actions will have on his family. If he is going to make changes, it will have to be done soon.

I'm really glad that you're helping your parents by openly discussing these issues with them and finding the information they need. I hope my answer helps with the decision-making process.

Capital gains tax on homes passing to the next generation

Capital gains tax continues to be something that requires a lot of attention in estate planning. This is another excellent question from a reader that deals with capital gains tax. I'd like to share it with you.


Hi Lynne, You mention that houses passing to children are not taxable. What about houses which pass to a niece and nephew? Is there any difference. I am referring to adults when I say niece and nephew.Both have their own principal residences and would probably rent or sell the houses in question.There are 2 houses in question. One is the decedents principal residence and 1 is a rental property.Appreciate your help. Thanks


The statement "houses passing to children are not taxable" is an over-simplification of what I've said, and isn't accurate. Let me clarify that. There is no capital gains tax on a transfer of a deceased person's home to someone else if that home was the deceased's principal residence. It doesn't matter whether the person receiving the home is a child, niece or nephew, as the key element in the transaction is the fact that it's the deceased's principal residence.


If the house being transferred was not the principal residence but was a cottage or rental property, it is subject to capital gains tax, even if it's being given to the deceased's own children. So  you'll find that the two houses in this reader's question will be treated differently by Canada Revenue Agency no matter who they are given or sold to.


The reader mentions that the niece and nephew each already has a principal residence of his or her own and will probably rent or sell the house they receive, which seems likely. When the niece or nephew sells the house they receive from the estate - whether that is done within months or not until years later - that niece or nephew is going to have to deal with capital gains tax as the extra house is not his or her principal residence. The capital gains tax will apply to any increase or loss in the value of the house from the time the niece or nephew received it until the time it is sold.


These are the general rules of capital gains tax. The reader would probably benefit from a one-on-one discussion with an estate planning lawyer or tax accountant to learn more about how the capital gains tax will affect the situation.

Why holding the family cottage in a trust can make sense

The question about how to pass the family cottage on to the next generation continues to generate quite a bit of discussion. I found the attached article from Tim Cestnick of the Globe and Mail really useful. It explains the benefits of holding the cottage in a trust while you're alive. Click here to read the story.

The principal residence exemption

This post from the Canadian Tax Resource Blog has a very good explanation of the principal residence exemption to the capital gains tax rule, and how to apply it in your case. Click here to read it.

Is there capital gains tax when I sell an inherited property?

The following is a question I received from a reader. It's a variation on a question that I hear a lot, so I thought I'd address it here. Just a caveat - when you ask me questions here on this blog, I don't get to know the whole picture, so my answers are necessarily general. You should always back up this information by talking to a lawyer or accountant in person.

"My father died this past November and left everything to myself and sister, including his house/property. If we sell this property this summer, do we have to claim a capital gains? If so, on what part?"

On the transfer of the property from you to a third party, you are probably going to be liable for capital gains tax. The period that you're on the hook for is from the date you acquire it to the day you sell it. Since this period of time will be only a matter of months, the property might not incur too much of a gain in that time, and therefore your tax will be small. You and your sister can split the tax between you as you are both inheriting the property.

Note that if the property in question is your principal residence (which doesn't seem to be the case here), the tax is not payable on your sale of it, because this is an exception to the general rule of capital gains.

Now let's look at the first transfer - that of the property from your father to you. Since you describe it as "house/property" rather than just "house", I'm assuming there is something more than just a house. When these items transfer to you, there is no tax for you personally to pay. However, there certainly may be taxes that must be paid by the estate.

When your father passed away, there would have been no capital gains tax payable on his home (principal residence). Note that only 3 acres of property can be included in the principal residence exemption. If there was an additional property, such as a cottage or revenue property, there is capital gains tax payable on that property. Keep in mind that if the property sits in the name of the estate for a long time, there may also be tax payable on the increase in value while it's in the estate name.

As you can see, it seems a simple question but the answer is complicated. This is why I recommend that you sit down with an accountant to figure out the tax details.

Can I have my parents' house as part of my share of the estate?

The executor of an estate is usually given instructions in a Will that direct proportions or percentages of the estate to certain beneficiaries. For example, a Will might say "divide my estate equally among my three children", or "give 25% of my estate to my daughter". Most of the time, the Will doesn't say which specific assets go to each beneficiary. This is intentional, as most of the time we don't know at the time we make our Wills exactly what we will own when we pass away and we want to create flexibility.

This leaves the decisions about the distribution of certain assets to the executor. With a properly worded Will this decision becomes much easier. On occasion, a Will directs an executor to sell everything and distribute cash to the beneficiaries, but this is rare.

When there is one major asset in the family, such as a business or farm, the Will should give instructions about how to deal with that asset, and what to give the other children in the family who are not receiving that asset.

Most Wills allow the executor to use his or her discretion in allocating individual assets to individual beneficiaries. This is where the powers given to the executor in the Will become important. The Will should allow the executor to decide whether some assets are to be sold and others are to be given to someone as they are. It should allow an executor to roll some registered assets over to a spouse or disabled child. Where there is a gift to a charity, the Will should allow the executor to choose to donate capital shares rather than cash, if that is to the advantage of the estate.

It is possible for a beneficiary to receive his or her parents' house as part of his or her share of the estate, assuming there are no contrary instructions in the Will. For example, an estate worth $800,000 might be divided between the deceased's two children, so that each of them is to receive $400,000. If the deceased had a house worth $300,000, then one beneficiary could receive the house plus $100,000 while the other beneficiary would receive $400,000 in cash.

If, on the other hand, the whole estate is worth $500,000 and the house is worth $300,000, the house is worth more than one beneficiary's entire share. He or she can't inherit the house without making up the difference between the share and the value of the house.

Before deciding to transfer a house to a beneficiary, consider whether there are any tax consequences. If the house in question was the deceased's principal residence, there is no capital gains tax arising on the transfer of the house, but if it is a cottage or revenue property, there will be tax. If the tax is paid out of the residue, as it normally would be, this could mean that the beneficiary who is not receiving the house is paying some or all of the tax on it.

Also consider the contents of the house, as well as any sheds, garages, shops etc on the property. The contents may well be distributed separately in the Will, so the beneficiary should not assume that the contents are included.

The basics of capital gains tax and the principal residence

As I've mentioned several times in previous blog posts, Canada doesn't currently have any direct death or inheritance federal taxes. But when a person passes away, his or her estate must pay income tax outstanding as well as capital gains tax.

Capital gains tax is the tax paid on the increase in value of certain assets known as capital property. The type of capital property dealt with by executors most often is real estate, though other assets such as the shares of a privately-owned corporation are also capital property.

Capital gains tax works like this. On the day you first acquire an asset, it has a value (called the adjusted cost base). If we are dealing with real estate, the value is normally the price you paid for the property. Over the time that you own that property, it gains in value. The longer you own it, the more likely that the value will increase. On the day you get rid of the asset - by selling it or transferring it under your Will when you die - it therefore has a greater value than it did when you got it. The difference between the value on the day you got it and the value on the day you dispose of it is known as the capital gain. You have to pay tax on one-half of that increase in value.

As an example, let's say Leia buys a house for $150,000. She owns it for many years and when she dies, her executor is going to sell the house. Now it's worth $550,000. The capital gain on the property is $400,000. Leia's estate has to pay tax on half, or $200,000. This doesn't mean that there is $200,000 in tax owing. It means that $200,000 is added to income for that year on the tax return, and the executor will use as many tax deductions, exemptions etc as he or she can to reduce how much tax must be paid.

If the property was worth less at the date of her death than it was when Leia acquired it, she would instead have a capital loss that she could apply to her return.

This is triggered by Leia's death because in law you are deemed to have sold everything you own one minute before you died. This means that even if your executor is not selling the house but is transferring it to a beneficiary, you are still deemed in law to have sold it at fair market value.

There are some exemptions to the rule about capital gains. The one that is important to most executors is that a person does not have to pay capital gains tax when he or she disposes of his or her principal residence. So if the house Leia owned was her principal residence, the $200,000 would not have to be added to her income.

On the other hand, if the house Leia owned was a summer cottage or a rental property, the tax would be owing.

Your principal residence doesn't necessarily have to be the house you live in most of the time. If you happen to own another house that is worth more, you could designate that more expensive one as your principal residence (don't do this without talking it over with your accountant first!).

A married couple only gets one principal residence between them.

Before taking any steps to avoid capital gains tax by setting up trusts or joint ownership or other ideas, you absolutely must speak with an accountant or estate planning specialist about your specific situation. Often people set up schemes to avoid one thing but they haven't looked at the whole tax picture, such as potential tax hits when a property is transferred from an individual to a trust or to joint owners. There may also be other tax solutions available that you hadn't thought of.