With GTA real estate holding steady at sky high prices, Millennials are left scratching their heads trying to find a way into the housing market. With the average resale price in Toronto more than $1 million, more young adults are turning to their families for help. But what does this mean for the Baby Boomers willing to shell out for their kids?
GIFTING YOUR CHILD A DOWN PAYMENT
When you gift your child a down payment, it can commonly be either an outright gift, or you may have to go on title to the property to secure the mortgage.
If the funds are an outright gift and you have other beneficiaries to consider, you need a Will. A down payment is a large gift, and you want to ensure that the other beneficiaries of your estate, your other children, as an example, are not disadvantaged. Your Will can be a powerful tool to equalize payments made to children during your life. Planning ahead is essential to anticipating and mitigating issues that may arise down the road. There is nothing worse than a family splitting up and fighting over money after a death.
Alternatively, the bank might request that you take a percentage of the ownership of the property.
Typically, this would be as tenants in common with your child, to secure the mortgage. You would minimize the size of your share, even though you are on the hook for the whole mortgage, and in your Will, you would leave your share to your child.
This way, you would use your Will as a means of assisting this child, while at the same time taking care of your other children or chosen beneficiaries, in a fashion to properly reflect an equitable outcome, or as you may otherwise require.
It is critical to plan for, and be clear on, what happens to the property if you or your child die. Whether it’s an investment or principal residence, property almost always forms the largest part of an estate.
If you don’t have a Will, upon death, that percentage of ownership will pass in accordance with law and either your spouse, children, parents or siblings could end up as the child’s partner in the child’s home; generally not a good result.
You also need to consider what would happen if your child dies first. If the child has a Will, he or she can designate what happens to the property – how it passes, who is responsible for maintenance, the mortgage payments, hydro, water and gas. Without a Will, it can all be a huge mess, as the matter trundles through the administration process, pending the appointment of an Administrator of their Estate. Real life can get complicated quickly.
While the housing market is steady, and your kids may be calling for help, don’t let this stress you out. Setting
up a Will is a simple and effective way to plan for the future, and account for the past. We can ensure that you know exactly what is going to happen to your property no matter what life throws at you.
Remember, it is critically important that you have your Will completed with Powers of Attorney – before closing. Please, don’t leave your family with a problem.
Jayson Schwarz LLM and Jacqueline Moneta are with Schwarz Law LLP. To suggest topics for future columns or ask questions, visit schwarzlaw.ca or email info@schwarzlaw.ca.