The principal residence is usually home to your kids; even after they leave home and settle down. Wishing to limit Estate Administration Taxes, many individuals bring their child on title in joint tenancy (thereby, taking advantage of the right of survivorship). Here are five things to consider before you give your child an interest in your principal residence:
1. Joint Tenancy means that upon death, the child will acquire 100% ownership of the home. Even if you wished for the home to be sold and the proceeds divided between your other children, legally speaking, the child who is the "surviving tenant" is not legally obligated to do so.
2. To draw on your home equity or to remortgage, you will need the cooperation of the child.
3. Estate Administration Tax is just under 1.5% of the value of your estate. Consider if the tax payable is worth saving considering the loss of control and potential exposure to estate litigation.
4. There is a capital gains exemption available upon sale of a principal residence. Reach out to an accountant to determine what impact the transfer to joint tenancy will have on your eligibility to claim the exemption.
5. If the child you choose to share ownership with is married at the time that he or she acquires ownership of your home, the share acquired would be considered a marital asset. If the marriage dissolves, the ownership may be considered in the calculation of marital assets.