Transferring an Estate House to a Beneficiary Instead of Selling

Not every estate house needs to be listed for sale. If the will leaves the home to a child, or the beneficiaries agree that one of them will keep it, the executor can transfer the property directly to that person.

A transfer in kind still has steps and timing rules. Title has to pass through the executor first, the estate usually has to wait out the 210-day period, and property transfer tax can be avoided only if specific conditions are met. This guide walks through each one.

Selling is not the only option

When someone dies owning a home in their sole name, the executor usually has two paths: sell the property and distribute the money, or transfer the property itself to a beneficiary. If you are weighing a sale, our guide to selling an estate house in BC covers that route. If one sibling wants to keep the home and pay the others, see buying out a sibling's share of an inherited house.

This article covers the transfer itself: the house goes from the estate to the beneficiary entitled to it, without a sale.

The executor takes title first

Under the Wills, Estates and Succession Act (WESA), land that was not held in joint tenancy vests in the deceased's personal representative, who holds it as a trustee for the person beneficially entitled (s 162). A beneficiary entitled to the land can require the personal representative to transfer it.

At the Land Title Office, that means two registrations, not one:

• Transmission to the personal representative. Before any instrument dealing with the land can be registered, the person entitled must apply to be registered as owner (Land Title Act s 260). For a death after early 1977, the application relies on a court-certified copy of the grant of probate or administration and the part of the estate's statement of assets that describes the land (s 266). Once registered, the representative's title relates back to the date of death (s 264).
• Transfer to the beneficiary. The executor then signs a transfer of the property to the beneficiary, which is registered with a property transfer tax return and the other filings the Land Title Office requires.

If the home was held in joint tenancy with a surviving owner, the process is different; see our article on what happens to a joint tenant's title on death.

When the transfer can happen: the 210-day rule

A transfer to a beneficiary is a distribution of the estate. Under WESA s 155, the personal representative must not distribute the estate within 210 days after the grant is issued unless the court orders it, or, where there is a will, all beneficiaries with an interest in the estate and everyone who could bring a wills variation claim consent. Where there is no will, the consent of all intestate heirs entitled to a share is required instead.

The 210 days line up with the 180-day period to start a wills variation claim, plus time to serve it (s 61). If a claim is started, or another proceeding is commenced that could affect distribution, the executor needs the court's consent to distribute even after 210 days (s 155(2)).

In practice, executors also make sure debts and taxes are dealt with and that the other beneficiaries' shares are covered before handing over the main asset. Our article on the 210-day rule explains the timing in more detail.

Property transfer tax: the estate exemption

A transfer from an estate is a taxable transaction under the Property Transfer Tax Act unless an exemption applies. Section 14(3)(c) exempts a transfer from the trustee of a deceased's estate if all of these are true:

• The executor is registered on title in that capacity as the trustee of the land.
• The transferee is a beneficiary of the estate or of a trust under the will.
• The beneficiary was a related individual of the deceased at the date of death.
• The property qualified. Immediately before the death, it was the deceased's principal residence (or recreational residence), or it had been the beneficiary's principal residence for a continuous period of at least six months.

"Related individual" is defined narrowly. It covers a spouse, child, grandchild, great-grandchild, parent, grandparent or great-grandparent; the spouse of a child, grandchild or great-grandchild; and the child, parent, grandparent or great-grandparent of a spouse. Siblings, nieces, nephews and friends are not included. The related individual must also be a Canadian citizen or permanent resident.

A "principal residence" for this purpose is a parcel no larger than 0.5 hectares, with improvements designed for and used by no more than three families, all classified as residential. If the parcel is larger or has non-residential improvements, s 15 may allow a partial exemption. The Province's guidance identifies the claim on the tax return as exemption code 40.

Practical points before you transfer

• Mortgages and charges. The beneficiary usually takes the property subject to any mortgage. The lender's position needs to be addressed before the transfer.
• More than one beneficiary. If two or more people will own the home, decide whether they hold as joint tenants or tenants in common, and consider a co-ownership agreement.
• Equalizing shares. If the house is worth more than the beneficiary's share, the difference may need to be paid to the estate or balanced with other assets. The other beneficiaries' written agreement helps avoid later disputes.
• Taxes and costs. Speak with the estate's accountant about the estate's tax position before the house leaves the executor's hands.

A transfer in kind can save the cost and disruption of a sale, but only if the steps are done in the right order.

Keeping the family home? Plan the transfer before you distribute

Our probate and estate lawyers can register the transmission to the executor, confirm whether the property transfer tax exemption applies, prepare the transfer and any beneficiary consents, and help you time the distribution under the Wills, Estates and Succession Act.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.