Title Transfer from Parents to me?

[eblend]

Hi guys,

So my parents moved to Canada some 23 years ago as immigrants to give me and my sister a better chance at life. in their late 50s they finished paying off their mortgage and due to the downturn my mom got laid off (now 61 y.o) and my dad was on limited work schedule. Anyways, they don't got much life savings to their name, just whatever my mom had in RRSP ($80k or so) and my dad is very tired with working and wants to retire. He is 62.5 right now and is still a few years away at most. They will be getting their government pension and whatever little money my mom saved up in RRSP, and nothing more. My dad has been thinking about a reverse mortgage against the fully paid off home, but I don't know if that's a good idea. I suggested something to them but not sure if it's actually possible.

Would it be possible for my parents to sign the house over to me, and then I would pay them say $2000 per month for the next 20 years or however long they live, and they can continue living in the house? This would give them additional tax free funds on top of the pension and they could live a decent life?

Is that idea possible? Is there anything I would have to worry about, given how the house is basically given to me outside of the normal financial system? Taxes? Anything like that? If it is possible, what's the process to getting a title change? Please advise.

[Nufy]

Just have yourself added to the title...

When you parents die their names come off and you own the house...

The money you can do separately.

[TomcoPDR]

Do you already have your own primary residence?

[ercchry]

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Do you already have your own primary residence?

This: that would be a nasty cap gains bill if you sold it in the future if you already have a primary

Reverse mortgage is a decent product, maxes out at 50% equity though

Assuming you’re inheriting the home anyways, you would be able to sell it, pay the CHIP... or get a mortgage to cover it at that point. Would require an appraisal so would have the value of the house for when you assume ownership when they’re done with the home vs now

[eblend]

Thanks guys. Yes I own my own home, also mortgage free.

Kind of confused about capital gains tax thing. I did look into it back in the day and know that if inherited, and sold right away, there would be minimal if any capital gains.

I did think about just adding self to title as well, thought about that just after I posted. How would capital tax gain work in this situation? I don't really understand it when it comes to owning two homes.

[ercchry]

So not being a primary, it’s subject to cap gains... so basically any appreciation from when you own it, till you sell it would be taxable

Where as of course if it’s the parents house, and their primary there would be no taxes owed when ownership is transferred to you, so you’d save the 20 years of appreciation

[eblend]

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So not being a primary, it’s subject to cap gains... so basically any appreciation from when you own it, till you sell it would be taxable

Where as of course if it’s the parents house, and their primary there would be no taxes owed when ownership is transferred to you, so you’d save the 20 years of appreciation

Cool. So would owning it mean the moment it's signed over to me right? What if I do as someone suggested, and just add myself to title? How would it work in that situation?

[TomcoPDR]

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Cool. So would owning it mean the moment it's signed over to me right? What if I do as someone suggested, and just add myself to title? How would it work in that situation?

I think that’s when it’s deemed the value you’re 1/3 owner with your parents once you add yourself to title with them. So if u own it for another 20-30 years (considering u already have a primary), then once u inherit it then ur still due 1/3 capital gains

[suntan]

They’ll get CPP, OAS and GIS.

Sell the house. Move into a smaller place.

[ercchry]

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They’ll get CPP, OAS and GIS.

Sell the house. Move into a smaller place.

this probably makes the most sense, and your $2k a month contribution would go much further as a mortgage payment towards the smaller place.

they would have the majority of the current home's value up front, properly invested in something low risk for fixed income situations would mean in 20yrs that money would still be there, and hopefully the dividend makes up their monthly cash flow shortfall. plus you will build up equity in the smaller home on top of that. if they want to stay in their current place i think it would also make sense for you to actually purchase it up front with a mortgage because of this... the difference is staggering.

i"d say your initial idea, the cost would be on par with the CHIP (factoring in your lost opportunity cost on that money vs paying interest on the CHIP), while with you paying the same money into a mortgage means you are now leveraging that money while your parents can now earn on the full amount of equity from day one, a mortgage in your name will also mean much lower interest vs the rate of the CHIP, and i want to say you can write that interest off towards the future cap gains on this property.

based on a $500k property value:

After 10yrs, $2k/month (chip gets an extra $20k up front cause thats how it works) calculator says future value of $740k

CHIP: $363k equity left no cap gains
You: $240k "gifted", or $369k due to opportunity cost ($2k/month contributions, 8% annual return), leaves $371k equity minus $16k in cap gains
5%($25k) down mortgage: $2254/month at current variable rates (assuming parents still cover the same taxes and utilities as they would in the other options), on the $500k they would receive they would need 4.8% return to have $2k/month to spend. If 8% is our fixed variable, that would mean 3.2% growth, so in 10 years that money would be $685k

same 8% for op cost on the down payment, so -$29k there... at 10 years (if rates hold of course) you'd have $406k equity in the home, minus the op cost for DP means $377k minus $48k cap gains??? (Dunno how interest paid on mortgage factors in)

so all 3 have very similar equity left... BUT option 3 has an additional $685k kicking around

****taxes were not factored in, and income would effect government benefits... someone else can figure that out

[mr2mike]

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Is there anything I would have to worry about, given how the house is basically given to me outside of the normal financial system? Taxes? Anything like that? If it is possible, what's the process to getting a title change? Please advise.

Worry about other family members coming at you. Death does some crazy things to people. You better make sure deal is ironclad or you could alienate yourself from your family.

Sell the house, downsize them, have them move into a mother in law suite in your home or a laneway home or something like that.

[JRSC00LUDE]

It sounds like you need to talk to a tax accountant and estate planner.

[R-Audi]

I would think the easiest is to get them to sell the house, (no cap gains for them) and rent something smaller to live in. They get the proceeds from the house which should be more than enough to keep them living decently for the next XX years.

[bjstare]

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It sounds like you need to talk to a tax accountant and estate planner.

definitely just book a meeting with an accountant. Not saying the info here isn't useful, but the path you take here could (will) have big implications.. big enough to warrant spending a couple hundred bucks to talk to a professional.

[rx7boi]

Hope you can get something sorted out.

My parents are in the same position. Both recently retired and mid 60's, not much RRSP savings to speak of. The added complexity is for personal reasons, staying together is no longer a viable option.

[tonytiger55]

A financial planner would be a good way to go. They can give you realisitic idea of money needed and how to plan around it.

Just on a side note... does the house have a basement? If so could that be rented for additional income..?

[suntan]

Sex dungeon in the basement would bring in lots of revenue.

[eblend]

Hi guys,

At this points it's all just an idea. If push comes to shove, I could just support them with $$, just don't want to really give $$ directly, mostly due to my dad's bad habits (smoking + drinking), and I don't want to fuel those habits, I rather have him cut back. I think I will talk to a financial planner at some point to see what the best option is.

Moving into a smaller place isn't really an option, they current place is small as is, and my dad really loves gardening, so the land he has now is his main joy in life, can't take that away from them, at least not now, not while they are still very much capable. They do have a basement but it's has no separate entry, and I much rather give them money directly then have a stranger live with them.

Thanks for all the input, that's why I posted here to see what options are out there and get general advice, much appreciated.

[RX_EVOLV]

Defintily talk to an accountant and/or financial planner. Without appreciating your family dynamic, I would probably get them to sell the house and then help them (along with a financial planner) set up an income-generating portfolio with the proceeds so that it can provide supplement income to add to their CPP, OAS, etc. After that I would use the $2000/month (that you were prepared to give them) to buy an investment property under my name and let them live there for free (maybe I would even pay for all the expenses like utility, insurance, etc). When they eventually move onto an assisted living housing situation then you would end up with a nice investment property that hopefully have appreciated in value in addition to the equity you've built over the years. Win-win.

The biggest challenge I could foresee is how to manage the proceeds from the selling of their house. If this was my family, I can easily see my mom getting bored after retirement and going to the casino every day/week to kill time. Not gambling big. $20s in slot machines here and there... but if you start going every day or week, and you have a bank account with 6 figures in cash, it wouldn't take too many years to lose them all.

[mr2mike]

Yes, you can support them. But the name of this game is really avoiding paying more taxes than necessary. Keep Trudope away.

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Sex dungeon in the basement would bring in lots of revenue.

Double down with the webcam revenue.