Many parents want to invest in buying a condo or house with their children and are wondering how to go about it since a minor can only enter into a contract when they are 18 years old. It is not about leaving a property as an inheritance, but rather about initiating a real estate investment broker with your child.
Here is an overview of the following steps.
Ensure the child’s interest
Such a process, which requires the participation of the child, should not be carried out if the child has no interest in it. The vocation to be an investor is not innate. What one likes may not suit another. Above all, do not leave your child with any responsibility that he or she does not want to take on.
Therefore, it is appropriate to present the project to the child, emphasizing the benefits and responsibilities it entails. If the response is positive, raise the issue of participation. Does he only want to participate in the purchase or also participate in the management and maintenance of the building? Depending on the answers received, your role as a guide will take shape, with the aim of sharing the project with your child.
Here’s how to do it
Since your child cannot sign a contract due to their age, you must appear as a candidate. Why is?
The nominee contract is an order whereby one person (the agent) acts for another person (the principal) under a secret agreement between them by acting with third parties and making them believe that they are acting for themselves.
This allows you to secure financing for the purchase of the property and become a co-owner.
The Secret Deal
In addition to factual information, the document should specify the following points:
- Each of the parties has a role to play so it is important that you have discussed this with your child beforehand to determine if they are involved
- breach of contract. What happens if one of the parties fails to fulfill their obligations?
- death of one of the parties
- Serious illnesses that prevent either party from fulfilling their obligations
- bankruptcy of one of the parties
disclosure
A copy of the nominee agreement must be sent to Revenu Québec before the 90th day after the date of entering into the nominee agreement. Failure to do so may subject the parties to a basic penalty of US$1,000 plus US$100 per day of delay up to a maximum of US$5,000.
At the federal level, disclosure is not mandatory, but it is recommended that each party mentions it in a letter covering the annual tax return after the date of signing the nominee agreement.
appreciation
With both Revenu Québec and Canada Revenue Agency, there is no capital gain for the parent when the parent passes ownership to the child who is the beneficial owner.
Finally
Buying a condo or house with your child is a great way to provide financial security. Although the surgery is well intentioned, it should be performed with caution to respect the child’s pace and preferences.
Advice
- Enlist the help of a legal advisor or a tax specialist to guide you through the nomination process
- Before committing to any real estate purchase, carefully assess whether your child is financially able to meet the resulting obligations.
- Make written agreements with your child