People trust advisors. They listen. They sign papers. They do as they are told. Sometimes that is the right move. Sometimes it is the wrong move. In estate planning, the stakes are high. Small errors now can become costly surprises later.
The myth says this. If you gift your home or other property to your children while you are alive, you will avoid taxes, probate, and estate disputes. You will protect your legacy. You will save money for your heirs. Many people hear this and nod. It feels logical. It sounds proactive.
Canada does not have a formal federal gift tax. That is true. But that does not mean gifts are automatically tax-free.
When you transfer capital property during your lifetime, the Canada Revenue Agency treats that transfer as a disposition at fair market value, which, in practical terms, can trigger capital gains tax on the growth in value since you bought the property.
What you avoid in probate fees, you may create in income tax. That can be a six-figure switch in the wrong direction for many families.
The rule is not obscure. The CRA describes transfers of capital property and the consequences of deemed dispositions in clear terms. (Government of Canada)
Imagine you bought a house for $120,000 many years ago. It is now worth $520,000. If you gift the house to your child while you are alive, the CRA will treat the disposition as $520,000.
Your adjusted cost base remains $120,000. The capital gain is $400,000. Under current rules, half that gain is taxable as income. The tax bill can be large. It can be tens of thousands of dollars. That burden falls on you the moment of transfer. If, instead, the house passes by will, the estate receives a deemed disposition at fair market value at death.
Sometimes the tax position is similar. But in other cases, spouses can defer tax, or the estate structure can allow planning that reduces immediate taxes. The point is this. Gifting is not a magical escape hatch from income tax.
- Title and control
- Loss of senior benefits and creditor protection
- Probate and settling the estate
Planners sometimes gift assets to avoid probate fees. Probate fees differ by province. In Alberta, they are comparatively modest. But the savings from avoiding probate can be small compared with the tax bill and the loss of flexibility that comes from a lifetime gift.
- If the gift is to a spouse and you use a transfer that qualifies for rollover rules, the tax may be deferred. The Income Tax Act has exceptions and elections that can help in spousal transfers. (Canada.ca)
- If a parent needs to qualify for a government benefit that requires lower assets, and gifting is the only route, the tradeoff may be worth it. But it may lead to a second look by the CRA.
- If there are family dynamics or urgent creditor issues where transferring title today avoids a near certain disaster tomorrow.
- Testamentary transfers. Passing the property at death lets your estate use orderly tools and sometimes defer tax. It lets the executor manage sale timing. It keeps you in control while alive.
- Joint ownership with right of survivorship. This can pass property outside of probate in some provinces. But it brings its own risks. Joint ownership exposes property to co-owner creditors and can complicate incapacity planning.
- Trusts. Properly drafted trusts may offer tax and control benefits. They can keep the property managed according to your wishes. They also require careful drafting and administration.
- Sale to children at fair market value or via vendor take back mortgages. This can transfer ownership while dealing with tax consequences through structured payments.
- Why is gifting the right option for my goals?
- What will my immediate tax bill be if I gift today? Show me the math.
- How will gifting affect my eligibility for senior or disability benefits?
- What happens if my child divorces, declares bankruptcy, or dies?
- Can we achieve the same result with a will, trust, or other tool?
- What are the probate and administration consequences in Alberta specifically?
- Show me the worst case and the best case.
If you live in Alberta, we will explain how provincial rules shape the result. We will show you Alberta resources and court rules when they matter. We will coordinate with your accountant. We will keep sentences short and steps clear. We will not hide the tradeoffs.
Estate planning is about choices. Each choice trades one risk for another. The most dangerous advice is the advice that sounds like a shortcut. Gifting property feels neat. It may be dangerous. It may cost your heirs more than you saved. Before you transfer the title, get the math. Get the law. Get independent advice.
Estate planning is about choices. Each choice trades one risk for another. The most dangerous advice is the advice that sounds like a shortcut. Gifting property feels neat. It may be dangerous. It may cost your heirs more than you saved. Before you transfer the title, get the math. Get the law. Get independent advice.