When it comes to supporting your family’s future, many parents are thinking beyond just emotional support. They’re thinking about how to create generational wealth and stability for their children, long after they’re gone which, for some, includes helping your kids buy a home.

In a recent study of Canadian homebuyers found that 48% received financial help from their or their partners parents, another 20% used inheritance (ZOLO 2024 Housing Market Report).

That’s why Adam recently joined Cole Seabrook from CI Assante Wealth Management and O’Farrell Wealth & Estate Planning in their webinar all about taxation and estate planning when it comes to helping the next generation. This webinar also features Sean Lee, an expert Mortgage Agent from Tango Financial.

Whether you’re looking to help buy your kids their first place, pass down the family cottage or their childhood home, or simply get organized for the future, this conversation covers the key steps (and common mistakes) to be aware of.

Watch the full replay below, or keep reading for a few key takeaways on how to plan ahead and build the future that you want for your family.

P.S. Send this to your child if they’re considering buying their first home!

Helping Your Kids Buy a Home: What To Know

As mentioned in the very first paragraph of this blog, around 48% of homebuyers are receiving money from their parents or relatives to purchase their property. Now, as the parents in this situation, you need to provide clear expectations to your child regarding these funds.

Are these a gift? Are you expecting to be paid back? These are questions that should be made very clear from the beginning of this process.

If you are providing a loan for your child, we like to say you should treat this like a business plan. Sit down with your child and workout the details of your loan. As with any loan there are terms for repayment which should be mutually agreed upon. You’re doing this because you love your child and want to set them up for a financially stable future, however that doesn’t mean you don’t need to implement fair, but strict, terms for your repayment.

Before providing a loan you should ask yourself the following questions and figure out which terms make sense for all parties:

• Do you want a lump sum repayment when they sell their home? Or before that?
• Would you like them to start sending you money on a regular basis until the loan is repaid?
• Will you give them a grace period before they have to start repayment? Will you be charging interest?

Again, you’re likely considering this arrangement because you love your child and want the best for them but if this leads to tension and resentment, no one wins.

Rules & Documentation for Borrowed or Gifted Funds

When it comes to gifting or lending funds to your child for the purchase of their home, there are some strict rules to consider.

First, funds for a downpayment cannot be borrowed, they must come from your child’s own savings. Any funds that are used towards a down payment must be in a Canadian financial institution for at least 30 days prior to being used.

Should you wish to gift your child the funds for a down payment you can do so by providing documentation to their lender to show that the funds are a gift and not a loan that needs to be repaid. Typically, this is a simple gift letter that acknowledges the recipient (your child), the donor (you), the amount you’re gifting. Your mortgage broker or lender should be able to provide you with a template for this. It’s also important to note that gifting is restricted to direct family only.

If you are not giving your child a gift and you require repayment of the loan, they cannot use this money as part of their downpayment. Lenders can only accept certain loans for down payments and anything outside of those types can be considered mortgage or loan fraud. Speak to your lender/mortgage broker about accepted loans.

If you are providing a loan to your child it can be used for the following home costs:

• Land Transfer Tax
• Legal Fees
• Title Insurance
• Home Inspection Services
• Adjustments (pre-paid property taxes or condo fees)
• Bridge financing (if they are selling one property to finance another)
• Renovations or Immediate Repairs

Co-Signers vs. Guarantors: What’s The Difference?

Another very common practice when parents want to help their children purchase a home is co-signing the mortgage or becoming Guarantors. But there is a key difference between the two.

Co-signing your child’s mortgage essentially puts you on the mortgage as co-applicant, meaning all of your income and liabilities are used for the approval of the loan. Sometimes this can increase the pre-approval amount, depending on your financial profile. If you are retired, your income will be based on CPP or OAS payments, as well as private pension plans. Co-signing a mortgage is not restricted to family.

It’s important to note that when you co-sign a mortgage for someone, you become a co-owner of the property which means you will be on title. This means that you are just as responsible for the repayment of the mortgage as your child or the primary applicant and will be held liable for the mortgage.

Alternatively, if you become a Guarantor you are not on title of the property. A Guarantor is someone used to guarantee the payment of the loan. Their income is not used and will not strengthen the buying power of the applicant, however it will make the profile stronger. As a Guarantor you are legally promising to cover the mortgage payments if the applicant is unable to do so but you are not on title and therefore do not own the property. 

A Guarantor is helpful for those who are self employed, have little to no credit history or their income is too low to qualify.

Pros & Cons: Co-signer vs. Guarantor

Description	Co-Signer	Guarantor
On Property Title	✅	❌
Helps with Borrowers Income	✅	✅
Helps with Credit (for the Borrower)	✅	❌
Legal Responsibility	✅	✅
Owns Part of the Property	✅	❌
Tax Implications	✅ will possibly have to pay land transfer or capital gains	❌ no tax implications
Easy To Remove	❌will likely require refinancing	✅
Easy To Obtain	✅	❌ dependent upon lender
First-Time Home Buyer Advantages	✅ in some cases you may have adjusted land transfer fees proportionate to the co-signers ownership percentage	✅

Maximizing Tax Advantage Accounts (RRSP, HBP, FHSA)

Regardless of the role that you are planning to take in your child’s home buying process, they should be aware of all of the tax advantage accounts and programs available to them as a first-time buyer.

Here is a quick breakdown of some of the programs available to Canadian first-time homebuyers:

• The Home Buyers’ Plan (HBP). The HBP allows first-time homebuyers to withdraw up to $35,000 (per person, $70,000 total for joint buyers) from their RRSP tax-free to buy or build a qualifying home. Repayment to your RRSP is required within 15 years starting the second year after your withdrawal.
• The First Home Savings Account (FHSA). The FHSA is a registered account that allows homebuyers to save for a downpayment by combining the benefits of an RRSP & TFSA. The FHSA allows for tax-deductible contributions as well as tax-free withdrawals for a qualifying first home. The account is limited to $40,000 in total contributions and must be used within 15 years of opening the account.
• Land Transfer Tax Refunds. First-time homebuyers will receive up to $4000 as a land transfer tax refund, however the refund may be reduced if one or more of the purchasers are not a first-time buyer.
• First Time Homebuyers Credit. First time buyers can claim up to $10,000 for the purchase of a qualifying home. If one purchaser is not a first-time homebuyer only the person who is can claim the credit.
• GST/HST New Housing Rebate. You may be eligible to claim all or part of the HST/GST on a new or substantially renovated home. This only applies to homes under $450,000 (with partial rebates for homes under $350,000).

The Importance Of Planning Ahead: Estate Planning Considerations To Set Your Kids Up For Success

Now, moving on from helping your children buy their homes, let’s break down the importance of retirement and estate planning so you can best set your family up to benefit from your hard work.

Is It Too Early to Start Planning For Retirement?

It’s never too early. 

So many people have an idea of how planning for retirement works but without professional help, they’re leaving a lot of things on the table. Most people set up their RRSP and have a ‘set it and forget it’ mentality. They often contribute on a regular basis, in many cases have employers match contributions, and they don’t think much else of it.

The problem with this mentality is that you will likely have other income sources when you retire including CPP and OAS as well as private investments, like rental properties and stocks, and private pension plans. All of these things will count toward your taxable income during retirement and without a proper plan you can run into major tax implications.

By creating a strategic plan for retirement pulling from all of the above mentioned income sources, you avoid overpaying in taxes and underestimating your retirement income, allowing you to feel more financially free. 

You can use retirement calculators to get a sense of what your income will look like or you can speak with Sean from O’Farrell Wealth to get personalized advice.

If you’re hoping to leave something behind for your children/grandchildren, it’s important to consider estate planning along with retirement planning.

Estate Planning: Common Mishaps & Mistakes

Most parents want to leave their kids with something after they pass, whether that be property, cash or investments. But proper planning is so important otherwise you can unknowingly stick your family with debts and fees to pay.

Here are a few key considerations when Estate Planning:

• Equalizing your estate. You may want to do this to ensure everything is equally divided between your children when you pass. When doing this you can account for any gifts or advantages given to them while you were living. For example, if you helped one child with the purchase of their home but not the other, you can make up for that difference in this process. This can help avoid conflict between your children after you’ve passed.
• Naming beneficiaries for specific assets. By naming your beneficiaries on RRSPs, TFSAs and other accounts, you can help your beneficiaries avoid probate fees and other estate fees, and it can often be a faster/simpler transfer.
• Having a clear will regarding properties and non-registered accounts. Again, in your will you can clearly outline who will be inheriting what properties or accounts to avoid unfair distribution.
• Whole Life Insurance. If you have whole life insurance and you choose to have the tax-free lump sum amount (the “death benefit”) go to your estate or a named beneficiary. Naming a beneficiary can help avoid probate fees. You can also use this money to cover tax liabilities if your estate will have to pay capital gains on rental/secondary properties. 

By having a very clear will with all of the above mentioned aspects, you will help to avoid conflict and confusion after your death. By being proactive, creating a clear plan with the help of a professional, and updating your plan regularly you can effectively set up your family for success.

The biggest mistake you can make when it comes to estate planning, is having no plan at all. So many people leave writing their will and estate planning until they’re ill or it becomes urgent and that leads to poor planning and missed opportunities to create a better future for your family.

Best Practices for Real Estate in Your Estate Planning

Planning for property inheritance in estate planning can feel very overwhelming. I’m sure you’ve heard horror stories of siblings fighting over their 33.33% ownership in a property before leading to a fire sale and fractured relationships.

The best way to avoid that is to have a clear written plan that includes:

• All of your owned properties
• Named beneficiaries for specific properties, avoiding vague terms like “divide equally”. You can assign specific properties to one person or outline that properties should be sold and then split equally.
• Consider equalizing the estate. For example, you can equalize the estate by providing one child with a high-value property and the other with an equal-value insurance payment.
• Think about probate. Your properties will go through probate (fees associated with your estate). This can be avoided if the properties are put into a trust or is jointly owned with the right of survivorship. Talk to a professional about strategies to reduce probate costs. 

Again, the best way to properly plan for this is to speak with a professional including your Financial Advisor and even your Mortgage Broker and Realtor.

Supporting The Next Generation One Step at a Time

Helping your children enter the real estate market and setting them up for financial success is about more than just lending a hand. It’s about making smart, strategic decisions that protect your family’s financial future.

Whether you’re navigating the first-time homebuyer process with your kids, exploring estate planning options or figuring out how real estate fits into your long term goals, having the right team on your side makes all the difference.

Our team understands Ottawa’s complex real estate market and the unique needs of families looking to build generational wealth through real estate. We’re here to guide you every step of the way including introducing you to other trusted professionals like Cole Seabrook & Sean Lee.

Let’s make sure you get the support you need today, to set you up for a lasting legacy tomorrow.

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