During your lifetime, you should not transfer ownership of real estate to your child(ren). Here’s why.

When it comes to real estate, there’s no way to sidestep the rules. If you’re considering gifting property to your child during your lifetime, it’s  important to know that land transfer tax and capital gains tax are unavoidable parts of the process. Gifting real estate is more complex than simply handing over the keys; it requires proper documentation and the guidance of a real estate lawyer to ensure everything is done legally
and correctly.

There’s good news, though. According to nbc.ca, you won’t need to pay tax on any capital gains if you are gifting your principal residence. If you want to gift your lakeside cottage or another investment property, however, think it over carefully - capital gains on second homes are taxable. 

Capital gains explained from moneysense.ca.

There is a principal residence tax exemption. What is it?

According to the Government of Canada, when you sell your home or when you are considered to have sold it, you do not have to pay tax on any gain from the sale because of the principal residence exemption. This is the case if the property was solely your principal residence for
every year you owned it.

If the property was your principal residence, you may be exempt from capital gains tax under the principal residence exemption. In Ontario, if no money changes hands, the land transfer tax is also waived.

How to transfer real estate that isn’t your primary residence to your children during your lifetime?

Transferring real estate to your children during your lifetime can be accomplished in several ways, but each method comes with important legal and tax considerations.

Gifting the Property: The simplest way is to gift the property outright to your child. This involves transferring ownership without financial compensation. However, in Canada, this is considered a "deemed disposition," meaning you are treated as if you sold the property at its fair market value.

If the property has increased in value since you acquired it, you may owe capital gains tax on the appreciation, unless it is your principal residence and qualifies for the principal residence exemption. If the property is mortgage free, there will be no Land Transfer Tax. If there is a
mortgage on a principal residence being gifted, Land Transfer Tax is payable on the amount of the mortgage being assumed as it is “consideration”.

Adding Your Child to Title: You can add your child as a joint tenant, making them a legal co- owner. This allows the property to pass directly to your child upon your death, bypassing probate. However, this also triggers the same tax implications as gifting, including potential capital gains tax and land transfer tax, if the residence is not your primary residence. We have more information on this in a recent blog post:
https://www.mcmurter.com/blog/helping-your-child-buy-a-home-2025. 

It also affects your ability to sell or mortgage your home as you will now need your child’s written consent.

Selling at Fair Market Value: You may choose to sell the property to your child at fair market value. This is treated as a regular sale for tax purposes and will also trigger capital gains tax if the property is not your principal residence.

Key Considerations:

• Any transfer of real estate must be properly documented with a real estate lawyer to ensure legal compliance.
• There is no way to avoid capital gains tax or land transfer tax when gifting property, except in limited cases such as when the property qualifies as your principal residence and it is not encumbered by a mortgage.
• Professional advice from legal and tax experts is highly recommended before proceeding, as improper planning can result in unexpected tax liabilities or legal complications.

We are here to help

The information provided in this article is meant to inform and to educate. We strongly recommend that if you have legal questions relating to real estate transactions, wills or estates, please reach out to a trusted lawyer for advice.

If you are in the GTA or Durham Region and are looking for an experienced real estate lawyer to help with a real estate transaction or simply to ask a question, McMurter & Associates has the experience to help you succeed.

To connect with a member of our firm, send us an email at info@mcmurter.com or call us at 1- 800-756-7138 or 289-949-2334 to schedule a consultation.