Estate Planning Your Title/ Posted in Featured Articles, Real Estate
When purchasing a home, you will need to decide how to register your title. This will involve at least some basic estate planning choices being made.
The most common option is for spouses to register as joint tenants. This means they will each own an undivided 50% interest and will have rights of survivorship, i.e. on the death of one of the spouses, the title will go to the surviving spouse (even if they only survive for an instant). If your spouse is the one you want to have the property after your death, then this is the most efficient and cost effective way to register your title.
With the frequency of blended families these days, many couples will want their interest in the property to go to their children instead of their spouse. In these cases the title should be registered as Tenants in Common, i.e. there is no right of survivorship. On the death of a party, their ½ interest will go to their estate and be disposed of according to their Will. In order to provide for the needs of the surviving spouse, the parties may make a written agreement to the effect that the survivor may stay in the property for a set period of time and after the expiry of that time, the whole property will be sold. The survivor will keep their ½ of the proceeds and the other ½ going to the deceased party’s beneficiaries named in their will.
Sometimes lenders may require a parent to co-sign a mortgage for their child and may even require them to be on the title to their child’s property. Most lenders will accept a mere 1% interest, so that 99% stays in the child’s name. This will minimize the Property Transfer Tax if the child qualifies for an exemption as a first time home buyer. In these cases there should be some understanding that the 1% interest will go back to the child once the lender allows the parent to be released from the loan. This may be a very important document should the parent(s) pass away while title is still in their name.
If you are considering purchasing a new property or adding a family member or friend as a registered owner on title to your property, please contact us to discuss your options.
image courtesy of Sarah_Ackerman