Gifting Real Estate to your Adult Children



"If the property qualifies as your principal residence, there may be no capital gains tax payable"

Consider the impact of potential capital gains tax, what might happen to the property if your child gets divorced or dies, and whether there’s a chance you’ll need that asset in the future.

Q. My daughter and I own a condo together, and I’d like to gift my share to her. What is the process? –Dina


A. As with most financial decisions, I think it’s important here to consider what your intention is with this gift, Dina. Do you simply want to make a gift? Or are you trying to avoid future income tax or to minimize estate administration tax (probate) upon your death?


When you gift a capital asset, like real estate, stocks, mutual funds or exchange-traded funds (ETFs), to an adult child, the gift is considered to take place at the fair market value. Parents often think they can avoid or reduce tax payable by gifting real estate at an artificially low value but, unfortunately, the transfer must take place at the actual value, even if no money is changing hands.


If the property qualifies as your principal residence, there may be no capital gains tax payable. But at the same time, gifting it to your daughter—unless she lives in the condo and the property can qualify as her principal residence—may be counterproductive. That is, the transfer may cause future appreciation of your share of the property value to become taxable to your daughter, when it may have otherwise been tax-free if the property stayed in your name.



https://www.moneysense.ca/columns/ask-a-planner/gifting-real-estate-to-your-kids-is-it-worth-it/

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