Transferring property to family members

Transferring property to family members is common for income splitting, probate savings, creditor protection and estate planning. It also carries real tax consequences for the person making the transfer.

On transfer

A gift or transfer to a spouse generally happens at cost, so no tax arises right away. A transfer to anyone else, such as an adult child, is treated as a sale at fair market value, which can trigger a capital gain.

Attribution of income and gains

Attribution rules can treat income or gains earned by the family member as yours. Whether they apply depends on who receives the property and how it was transferred.

When attribution does not apply

• The income is business income, not investment income
• The transfer is at fair market value, or the loan charges at least the prescribed rate with interest paid by January 30 each year
• The spouses separate or divorce
• After the death of the transferor

Planning considerations

Transfers of property between family members should be evaluated from both an immediate and a long-term tax perspective.

A transfer that appears straightforward may trigger a deemed disposition at fair market value, resulting in a taxable capital gain even where no cash changes hands. Depending on the property and the relationship between the parties, attribution rules may also affect how future income and capital gains are taxed.

Additional considerations may include land transfer tax, the principal residence exemption, potential double taxation, and the impact of changes in beneficial ownership.

Particular care is required when adding family members to property titles for estate planning or probate purposes. Legal ownership, beneficial ownership, and the intention of the parties should be clearly documented to avoid unintended tax and estate consequences.

The appropriate structure will depend on the nature of the property, the intended transfer, and the family's broader tax and estate planning objectives.