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Legal Ease
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Category: Canada Law
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Experience:  Lawyer
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Are quit claims on property recognized in Ontario Also, would

Customer Question

Are quit claims on property recognized in Ontario? Also, would the remaining property owner have any financial responsibility re: capital gains if the property were not being sold?
Submitted: 4 years ago.
Category: Canada Law
Expert:  Legal Ease replied 4 years ago.
Please explain the basic facts so that I can provide a more meaningful answer.
Customer: replied 4 years ago.
My mother, husband and myself are listed on the title to our cottage in Sauble Beach, Ontario, originally owned by my grandparents. Can my mother simply execute a quit claim, ending her ownership and taking her name off the property and leaving us as sole owners. As such, would there be any capital gains issues for anyone involved. Where would one obtain such a form, does this involve a solicitor or is a handwritten letter what is required?
Expert:  Legal Ease replied 4 years ago.
This is not her principle residence is it?
Customer: replied 4 years ago.
No. We are all Michigan residents and the property in question is seasonal. My mother does not use it and has not contributed any monies to it in any fashion re: taxes or upkeep in +/- 10 years.
Expert:  Legal Ease replied 4 years ago.
The way this works is that your mother can do a simple transfer to transfer her interest to you.

But, there will be capital gains tax. They way this works is that she will have to pay capital gains on her portion. Capital gains are calculated by using the fair market value of the property now and subtracting the fair market value of the property when she inherited it. This is because there is a deemed disposition at death at fair market value.

Because of tax treaties between the US and Canada anything she is taxed on in Canada will be taken off any taxes she may have to pay resulting from this transfer in the US.

You will need a lawyer to assist you because the transfer has to be registered in the Land Registry office.

Let me know if you need further clarification.
Customer: replied 4 years ago.
In other words, a quit claim is not recognized in Ontario? At this point, we are listed as joint tenants in common. If we were to change the deed to joint tenants with right of survivorship, that would only entail use of an attorney plus re-filing the deed? We are looking to avoid capital gains taxes.
Expert:  Legal Ease replied 4 years ago.
There's no way to avoid capital gains tax in Canada. It's simply unavoidable. It doesn't matter how the property is transferred. There's a deemed disposition on death so it's just unavoidable.
Customer: replied 4 years ago.

The botXXXXX XXXXXne is we do not actually need to transfer ownership. We are looking to simply allow for sole ownership for my husband and myself upon her demise and keep this property OUT of the personal trust/estate she has set up in the US for which my stepfather is executor. As joint tenants in common, this is what would happen at this point. We would either like to:

1. Change the deed to joint tenants with right of survivorship; or

2. Have her sign a quit claim which would not necessarily be filed but held onto if needed.

 

So, my original question is does Ontario recognize quit claims? Are there capital gains taxes due upon simply changing the deed to read 'with right of survivorship' from tenants in common?

Expert:  Legal Ease replied 4 years ago.
You can change the deed and capital gains taxes will not arise now. They will arise when she dies though.

Yes. Quit claims deeds are recognized but they don't prevent capital gains tax from accruing.

In Ontario if you hold the title as joint tenants, not tenants in common then there is an automatic right of survivorship. The asset doesn't form part of the estate but there's capital gains.

So, it's simple to preserve your interest upon her death. You just cannot get out of the capital gains tax. Then again it's her estate that will most likely have to pay the taxes when she dies. You would only if there was no money in the estate to pay them.
Legal Ease, Lawyer
Category: Canada Law
Satisfied Customers: 85407
Experience: Lawyer
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Customer: replied 4 years ago.
Thank you very much! As this property originally came through my grandparents who left it to my mother and her sister (who we bought out), I certainly am aware you can't make an end run around your capital gains taxes! Like I said, our concern is in maintaining sole ownership should something happen to my mom and keeping her share out of my stepfather's control via his executorship of her estate and trust here in the US.
Expert:  Legal Ease replied 4 years ago.
You are very wise and I understand your concerns completely.

Good luck.

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