Gifting Assets to Family: What You Should Know First

Gifting Assets to Family: What You Should Know First

For many families, supporting the next generation isn’t just a financial decision, it’s a heartfelt one, too. Whether it’s helping your child buy their first home, easing the weight of student loans, or passing down the family cottage that’s been the backdrop for years of memories, the desire to give is deeply personal.

But even the most well-intentioned gift comes with strings attached… some visible, others hidden in the fine print of tax law or estate planning. That’s why it’s important to take a step back and think things through to ensure your generosity doesn’t unintentionally create issues for you or your family.

Ways to Gift Property to Family

There are several ways to transfer wealth to loved ones, for example, you can:

• Directly gift cash or transfer investments
• Transfer real estate 
• Establish a trust and list your family members as beneficiaries
• Including gifts as part of your Will

Each approach has different pros and cons, which we’ll explore later. The right fit will depend on your goals, timing, and overall financial picture.

Key Considerations Before Gifting

1. Financial Impact
Once a gift is made, it’s no longer yours. It’s essential to ensure that giving today won’t compromise your future needs, especially if the gift involves a valuable asset in your overall financial plan.

2. Tax Implications
In Canada, gifting property (outside of a spousal transfer) triggers a deemed disposition at fair market value. This means any capital gains accrued on the property are taxable in the year of the gift. The same applies to gifted investments or foreign-denominated assets, which may include currency gains or losses.

Gifting Canadian cash? No capital gains apply. Gifting a rental property? You may face both capital gains and recapture of previously claimed depreciation.

3. Legal Risks
Once transferred, the property could be sold, mortgaged, or even divided in a divorce settlement. Depending on your province, family law may treat a gifted home as a marital asset. You can reduce risk by using strategies such as holding the property in a trust or structuring ownership through a corporation.

Gifting Now vs. Leaving an Inheritance

This is one of the most common questions we hear, and for good reason. The decision to gift during your lifetime or leave assets through your estate carries important implications.

Gifting Now

• Pros: You get to see the impact of your gift while you’re alive, whether it’s helping a child purchase their first home or easing a grandchild’s debt burden. Lifetime gifts can also reduce the risk of family conflict after death and may avoid the costs and delays associated with probate.
• Cons: The tax bill is immediate. In most cases, you’ll be taxed on any appreciation in the value of the property at the time of the gift. There’s also the risk of needing those assets later, particularly if your retirement or health needs change unexpectedly.

Leaving an Inheritance

• Pros: Assets continue to grow in your name, giving you full control and financial flexibility during your lifetime. Inheritance transfers through a Will also allow for strategic planning using testamentary trusts or other structures. Tax on capital gains is still payable at death, but there’s no immediate tax cost during your lifetime.
• Cons: There’s less certainty around how your estate will be managed, and distributions can sometimes be delayed or disputed. If equality between children is a concern, leaving all gifts to your Will may increase the risk of tension or legal challenges, especially if one child receives use or benefit from a property during your lifetime.

A Balanced Approach
Many families find success using a blended strategy, gifting smaller amounts now while preserving the rest for future inheritance. This can allow for tax-efficient giving over multiple years and provide a “test run” of how responsibly beneficiaries manage gifted assets.

We often advise clients to consider the timing, tax impact, and intent behind the gift, and whether it contributes to long-term harmony within the family.

Final Thoughts

How We Can Help

Gifting can be a beautiful part of your legacy, but it should be done strategically. Every family’s situation is unique, and there’s no one-size-fits-all approach. We can work with your accountant and legal professionals to help ensure your gifting decisions align with your financial plan, protect your interests, and support your loved ones in the way you intend. We’re here to help you plan smart, tax-aware strategies that reflect your values and your goals. 

Disclaimer:
This content is for informational purposes only and should not be considered legal or tax advice. While we help clients navigate the financial aspects of gifting strategies, we do not provide legal or tax services. We recommend working with a qualified legal or tax professional to assess how any gifting strategy aligns with your personal circumstances. We’re happy to collaborate with your external advisors to ensure all aspects of your plan are carefully considered.