Best Way to Inherit a Home in Ontario - 5 Quick Tips
Inheriting a home from a loved one — whether a parent, grandparent, or other aging relative — can feel like a blessing, but it’s important to approach it strategically.
Decisions made now can have major tax and legal consequences down the road. Below are some common options, along with their pros and cons, when it comes to passing a home between generations in Ontario.
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1. Outright Gift or Transfer While Alive
Adding your name to the title or “selling” the home for $1 might seem like a simple shortcut — but this often comes with tax downsides.
Capital Gains Tax: If the property is not a principal residence, the person transferring it will face capital gains tax based on the difference between the purchase price and the current fair market value.
Loss of Step-Up in Cost Basis: If you receive the property while they’re alive, you inherit their original cost basis. If you sell it later, you could owe substantial capital gains tax.
No Probate Savings: While this avoids probate, it can trigger taxes that outweigh any savings.
Bottom line: This method often causes more harm than good, particularly from a tax perspective.
2. Put the Home in a Trust
Placing the home in a trust with you named as the beneficiary is a popular approach in some countries, and has limited application in Ontario.
In Ontario: Trusts can work, but are complex and subject to taxation rules like the 21-year deemed disposition rule (which may trigger capital gains every 21 years).
Bypasses Probate: Assets in a trust typically avoid probate fees.
Still Complicated: Trusts should be set up with the help of an estate planning lawyer due to their complexity and costs.
Bottom line: A trust can help, but it’s not a one-size-fits-all solution in Ontario and needs professional setup.
3. Leave the Home in a Will
This is the most straightforward and common method in Ontario.
Step-Up in Cost Basis: Upon death, capital gains are calculated as though the home was sold at fair market value — but the estate, not the beneficiary, handles this. If it's a principal residence, the capital gains may be exempt.
Probate Fees: Ontario probate fees (formally called Estate Administration Tax) are roughly 1.5% of the home’s value.
Takes Time: Probate can take several months to over a year, during which you may not be able to sell or rent the property.
Bottom line: This is tax-efficient for many, especially if the home qualifies as a principal residence, but probate costs and delays must be expected.
4. Consider a Transfer-On-Death (TOD) Deed – Not Available in Ontario
In some jurisdictions, a TOD deed allows property to pass to a beneficiary without probate. Ontario does not offer this option. Instead, you’ll need to plan through wills, trusts, or joint ownership — all with unique implications.
5. Joint Ownership With Right of Survivorship
Adding a child or heir as a joint owner can seem like a workaround to avoid probate, but it’s risky.
Capital Gains Tax: If the child isn’t living in the home, their share of the property could be taxable when sold.
Legal Risks: If the joint owner goes through divorce, bankruptcy, or legal trouble, their share could be exposed to creditors.
Loss of Control: The original owner gives up partial control of the asset.
Bottom line: This strategy is often discouraged unless it's been carefully planned with legal and tax advice.
Final Advice
Every family’s situation is different — especially if long-term care, Medicaid/ODSP planning, or multiple beneficiaries are involved. A consultation with an estate planning lawyer who understands Ontario law is one of the best investments you can make. Mistakes in inheritance planning can result in tens or even hundreds of thousands in unnecessary taxes, fees, or legal battles.
