Estate Planning

Use caution before putting your kids on title of your principal residence

Use caution before putting your kids on title of your principal residence

Teresa was a 72-year-old widow with 3 adult children. Two of her kids, Bill and Matt, lived in other cities. Her daughter Sandy lived nearby and was actively helping to care for Teresa.

One of Teresa’s best friends passed away. Teresa heard that, before her friend passed away, her friend listed a son as a joint owner of her home so that the son could inherit the house immediately and without probate fees. Teresa thought this was a great idea so she put Sandy as a joint owner of her home.

Sandy was married with two children and did not live with her mother. Sandy owned a very successful business and struggled to try to balance all of her priorities – children, career, marriage, etc. Sandy’s marriage started to have problems a few years later. Sandy and her husband finally came to a point where they decided to separate and get divorced. The relationship became so tense that her husband decided to include Teresa’s home as part of Sandy’s assets, and demand a share.

Soon after, Teresa started to get ill. Bill and Matt started to blame Sandy for their mother’s illness — blaming the illness on the stress of her home being attacked by Sandy’s ex-husband. Teresa got so ill that she had to be moved into a nursing home. In order to pay for a nursing home with the comforts Teresa wanted, Sandy needed to sell Teresa’s home. When Sandy’s ex-husband heard of the plan to sell the house, his lawyer put a caveat on the house to protect his claim. Now, if the house is sold, half of the proceeds from the sale of the house cannot be released to Teresa!

As a result, Teresa and her children decided not to sell the house until Sandy’s divorce was settled. However, this forced Bill and Matt to start paying for their mother’s nursing home bills and this created more tension between the siblings.

Problems got even worse when Teresa died. Teresa’s Will said that all her assets would get divided and shared equally by her three children. Other than the house, which was worth $400,000, Teresa had less than $100,000 in financial assets when she died.

When Teresa died, Sandy automatically became the sole owner of the house because she was the joint owner of the house. Her ex-husband has an even bigger target to attack now – even if he is ultimately unsuccessful.

From the point of view of Bill and Matt, they each have $30,000, after taxes, from their mother’s estate whereas their sister now has a $400,000 house and $30,000. Bill and Matt are very upset because they do not see this as being an equal division of assets as stated in their mother’s Will.

Teresa’s decision to make Sandy a joint owner of her house was not part of a well-considered estate plan. No one should make a similar error.

5 Reasons not to put a child as a joint owner of a parents home

One has to be very careful about putting an adult child, or someone other than a spouse, as a joint owner because there are some serious potential disadvantages.

  1. In most cases, the child will not be eligible to claim the house as their principal residence. As a result, there may be potential income tax consequences. From the time the child is listed as a joint owner, he or she becomes legally liable to pay capital gains tax when the home is sold. A principal residence is one of the few assets that gets preferential income tax treatment, so losing this potential benefit is something you want to avoid.
  2. Once a person becomes a joint owner, the equity in the home becomes available to the child’s creditors. This can be a particularly problematic issue if the child goes through a divorce. The child’s spouse could demand to be paid some of the equity in the property during the divorce.
  3. Property is an asset and banks have no problems using property as collateral for loans. When you put your child as a joint owner on your residence, your child can now use the property as collateral for a new loan. If you want to sell the property, proceeds from the sale of the home could end up going towards repaying the loan first.
  4. As a joint owner, the child can prevent you from selling the property. You cannot fully dispose of a property unless all the owners agree to the sale and sign the deed of sale.
  5. Proceeds from the sale of your home are not available to other beneficiaries. Remember, when you list someone as a joint owner, then the property does not go through your estate. As a result, your other beneficiaries will not inherit any interest in the property.


  1. The Blunt Bean Counter

    Jim, great cautionary tale. In one of my blogs last week I warned about the dangers of trying to save taxes, including probate taxes at the expense of other considerations, your blog explicity reflects some of those dangers.

    • Jim Yih

      thanks Mark! I’ve been enjoying your articles!

  2. Leigh

    To avoid the case of Sandy inheriting the house entirely on her own, Teresa could have set all children as joint owners on the house with her. That’s what one of my relatives did, who had two children.

    • Jim Yih

      Thanks for the comment Leigh. The problem of putting all the kids as joint owners is the loss of the principal residence exemption. I still think it may be better not to put the kids on title especially here in Alberta where probate is not a big deal.

      • Allison Feenstra, CPA, CGA

        Have you considered that the principal residence exemption could be maintained by putting the kids on title as bare trustees and preparing a bare trust agreement so that they do not have beneficial ownership?

  3. Derrik Hubbard, CFP

    Jim –

    Great advice.

    I didn’t see this listed as a reason in your article, but in the US a joint owner loses their step up in tax basis they would have received if they had inherited the property.

  4. Daniel


    If an adult child lives in a house (alone) and has for many years purchased by their mother and with the title in their mother’s name, does the adult child (as the beneficial owner) report the gain/loss on the sale of the home or does their mother as the legal title holder?

    Thank you.

    • Jim Yih

      The legal owner is responsible for tax implications

      • Ray, CPA

        Jim, actually it is the Beneficial owner that overrides the legal title for tax liability, see CPA comment above you never responded too.

  5. trina santiago

    Mymother in law is planning to buy a condo unit, is it possible to name it over our 1 year old daughter??

  6. Jason Davis

    Dear Jim, almost twenty years ago my mother inlaw to evade capital gains told the IRS she sold her house to me and my wife. I am confused how a person can tell the IRS they sold their primary dwelling and keep a portion of the primary dwellings land and still get the tax benefits. When the City let her know they were on to her scheme she went up to the City and filed out a “Parent to Child Transfer” and wrote “Gift” on the paper work when she put me and my wife on the deed as co-owners.

    The part she left out was told the City it was a gift to keep property taxes from going up. Now after twenty years she wants to force us to sell the primary dwelling we bought twenty years ago. I thought when you sell a asset and claim the $500k tax exemption that’s for selling one’s entire primary dwelling and all land associated with the primary dwelling.

    Being ever so sneaky, she’s trying to rip us off now, I would like to get a great attorney who can prove she gave us the property but we paid her a monthly amount of cash under the table so the taxes would not go up. If I am on the deed for one-third ownership and she wrote “gift” on the Parent to Child paperwork does that men she gave me and my wife the house?

    Why have we been paying for something she gave us twenty years ago? What kind of lawyer would you hire to go after someone whose greed has made them blind? Can they take you off the deed if they put two people on the deed and wrote it down as a gift?

    The insanity of all this was it was suppose to be our inheritance and we paid for it. What type of lawyer would you use to focus on being on the deed and having her write it was a gift on City legal work? She’s the most greedy person I have ever met. Thank you for your ideas, I am so shocked how ugly family can be!

  7. Jason Davis

    Dear Jim, the above post is confusing because my situation is a nightmare all to evade paying taxes by a corrupt lady. Does a person have to live in a primary dwelling to claim it in their taxes? She never lived in the primary dwelling and kept part of the land instead of selling it all like the IRS publication said must be done. I am on the deed and now that its being sold I want every penny that’s owed to me after such a horrible real estate scam. What kind of lawyer could help me focus on the “Gift” area she gave me ten years ago? If she gave me the house why am I still paying her money for it? I am on the deed, its a big mess all because she was dishonest.

  8. Ontario Canada

    Hi Jim, about 10 years ago my mother transferred her primary residence to one of her sons. He listed his residence same as his mother. He was married at the time and lived elsewhere and had not lived there since then or prior to that.
    He received the house as Beneficial Owner, with no value attached as per the title search.
    About 7 years after this transfer removing his mother he added his wife. Again, neither him nor his wife lived there. Two years after adding his wife his mother went into a nursing home and the couple sold the house. He and his wife kept all the proceeds. So for a ten year period he and later his wife were the owners, his mother lived there during that time and paid all bills, including property tax and up keep, but he and his wife benefited from the sale. What tax implications if any and can his sibling do anything? The other siblings are now responsible for any costs above her pensions and will be paying for her funeral expenses.
    The son that was gifted the house is also joint on her bank account where her pensions are deposited, his sibling have no idea how much is in that account and he will not disclose that info. He expects that when it needs money, he only needs to ask and all siblings need to pitch in, blindly.
    Ontario Canada

  9. Dave Otten

    Good stuff. We’ve recently been wondering if my mother should put my name on the title of her home so it is just a smooth transfer when she passes.

    I only see it being a benefit to put my name on title if it is in fact going to become my primary residence which it is going to be. I currently rent after selling my home 4 years ago.

    The way I understand things is that if the family home becomes my primary residence I will not pay any capital gains tax when I sell the home.

    Could you please tell me if that is in fact true or not.

    The home in question is located in Forest, Ontario, Canada.

    Thank you in advance for your time.

    Have a great day!

  10. ForHer

    Should I make my legally blind daughter an owner of our home. Doing so exempts property tax. She’s only 5’y years old.

  11. Questioner

    If my father puts my uncle on title of the house, does my uncle’s wife have any rights or claims on the house if my uncle dies before my father?

  12. Corinne

    My son and his wife would like to get a loan/mortgage and build a second home on the same property as our principal residence which is currently paid in full. They have been renting on our property for several years but want to invest in something for themselves. We like the idea because it will keep our family close and we know we can get along. In return they would like to be put on title as joint owners with us for the percentage of their investment. We assume if anything unforeseen should ever happen to their marriage his wife would be entitled to 1/2 of their percentage on the assessed value of the home at that time. He is our only child and if both my husband and I were to die everything would belong to him. As it is all of our principal residences would there be a tax implication. When we become senior citizens will we get the lower tax rate (BC). Also can you explain Capital Gains in a situation such as this. Can you provide any other cautions/suggestions/comments please.

  13. Monica

    how about if you own 50% of the property and your parent owns the other 50%? My mother-in-law wants to sell us her share but she only wants 40%. What are the tax implications? What would my siblings in law? Can they sue us in the future if the price of the house go up by 50% or more? My in law said they shouldn’t complain us she will give them cash as well however she doesn’t have will.

  14. Vicky

    I’m not a canadian, but my minor son is. I would like to give him one of my investment condo anyway, in that case what’s the downside of listing him as the property owner?

  15. Paula


    my husband I are getting separated. Is there a way to put 25% of the house into a trust of our 3 kids. Once the house is sold, the trust will automatically get 25%.

  16. Mike

    Hi there, question hopefully someone can help with.. my parents cosigned on the loan and purchase agreement of my house. They have their own residence and I live here as my primary residence. If I were to sell would they pay tax on the capital gains as it isn’t their primary residence? Thanks in advance

  17. Denis Poirier

    Hi my mom’s house has me and my sister as well as my mother on the deed. Now my sister who lives in another province has stopped paying taxes on her own house in that province. The unpaid taxes and interest from my sister’s house are now billed to my mom’s address. I don’t know what to do. My mom will now be forced to pay for my sister’s house taxes or risk losing her house just because her kids are part owner of the house. Any advice?

Leave a reply

Your email address will not be published. Required fields are marked*