Clients often ask me if they should add one or more of their adult children on title of their homes, with the benefit being they would avoid probate fees on their home when they pass away. On a $2,500,000 home, that is a $35,000 savings, which understandably is a large enough amount to make it worth planning around.
One of the issues to be aware of is that by adding an adult child on title, you could be jeopardizing the tax-free sale of the home. This alone could far outweigh the probate savings, not to mention the additional risks to the home if the adult child were to go through a divorce or bankruptcy.
Another issue to keep in mind is how you would equalize the inheritance for your children if only one of them were on title of the property. If the majority of your wealth is in your home, you may not have enough other assets to provide an equal inheritance to each child.
With the additional costs and risks noted above, I most often recommend not adding adult children on title and instead having your home pass through your estate. Instead of focusing on probate savings, clients are better off reviewing income tax planning strategies in their estate planning, as there are greater potential savings when you compare the highest income tax rate of 53.5 per cent to the relatively low probate fee of 1.4 per cent.
In my video blog this month, I cover the reasons for my recommendations as well as the risks you need to be aware of when completing your estate planning. For more information on this and other estate planning strategies, please register for our upcoming webinar, taking place on September 28th at 7PM.