Sutton Group - Select Realty Inc., Brokerage
Independently Owned and Operated
519.433.4331
250 Wharncliffe Road North
London, ON  N6H 2B8
Canada
 

Ann Smith
Broker


Platinum Award Recipient

519.697.3544
519.433.4331
1.866.851.1534
Fax: 519.433.6894
Email: ansmith@sympatico.ca

 


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Transferring Property to Family Members

By Ann Smith, Broker

Property transfers to family members are not as straight forward as one might think. Despite familiar parties, it is in everyone’s best interest to obtain professional advice. Although it sounds nice to gift property to someone dear, it may not be as easy as you’d think.

The most common form of deed is a warranty deed (sometimes called a "grant deed"). A warranty deed transfers ownership and explicitly promises (warrants) that the grantor/seller holds good title to the property.

The other common form of deed is the quit claim deed, which is used most commonly in Canada. A quit claim transfers any ownership interest the grantor/seller has in the property, but makes no promises or guarantees about what that interest is or that the title is good. Quit claim deeds are most commonly used to clear up title problems, to transfer property between spouses after a divorce, or in informal transactions between friends or family members.

Quit claim deeds are being used more often because our aging population is looking to transfer real estate within the family. But this could potentially lead to several issues, including lawsuits, as family members realize the shortcomings of the quit claim deed method.

Normally, if an individual sells or gives property to family members, other than a spouse, they are considered to have sold the property for its fair market value. As a result, they have to recognize a capital gain on the difference between the original cost and the property’s current value. The taxable portion of a capital gain is 50% meaning 50% of the capital gain is subject to tax at the individual’s applicable tax rate. Special “rollover” rules exist which avoid the basic rules if the property is used in a farming business and transferred to a child, grandchild or great-grandchild (including a spouse of a child or child of a spouse).

To ensure a solid, unquestionable transfer of property, consult a property transfer team including a Realtor, lawyer, and financial advisor. Keep it structurally, financially, and emotionally sound. The last intention here is to harbor any hard feelings or incur unnecessary expenses.
 

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Ann Smith, Broker
Your Real Estate Consultant…For Life!