2023-07-23 23:30:00
Many parents wish to invest with their children in the purchase of a condo or a house and are wondering how to proceed given that a minor cannot sign a contract before the age of 18. It is not a question here of leaving a property as an inheritance, but rather of initiating a real estate investment processor with his child.
Here is an overview of the steps to follow.
Ensure the interest of the child
Such a process, which involves the child’s participation, should not be undertaken if the child has no interest in it. The vocation of investor is not innate, what pleases one may not suit another. Above all, do not make a child bear responsibilities that he is not ready to assume.
It is therefore appropriate to present the project to the child, emphasizing the advantages and the obligations that this entails. If the reception is positive, address the issue of involvement. Does he simply want to participate in the purchase or also take part in the management and maintenance of the building? Depending on the answers obtained, your role as guide takes shape, the aim being to share the project with your child.
How to proceed
Since your child cannot sign a contract due to his age, you will have to act as a nominee. What is it regarding?
The nominee contract is a mandate by which a person (the agent) acts for another person (the principal), under a secret agreement concluded between them, by performing acts with third parties and letting them believe that he is acting for himself.
As a result, you can secure the financing for the purchase of the property and become a co-owner.
L’accord secret
In addition to factual information, the document should specify the following points:
Role of each of the parties, hence the importance of having previously discussed with your child in order to determine his involvement Breaking the agreement. What happens if one of the parties does not respect its commitments? Death of one of the parties Serious illness preventing one of the parties from fulfilling its obligations Bankruptcy of one of the parties
Disclosure
A copy of the nominee agreement must be sent to Revenu Québec before the 90th day following the date of conclusion of the nominee agreement. In the event of omission, the parties may be assessed a basic penalty of $1000 plus $100 per day of delay up to a maximum of $5000,
At the federal level, disclosure is not mandatory, but it is recommended that each party mention it in a letter accompanying the annual tax return following the date of signature of the nominee agreement.
Gain en capital
Both at Revenu Québec and at the Canada Revenue Agency, when the parent hands over the property to the child who is the beneficial owner, there is no capital gain for the parent.
In conclusion
Buying a condo or a house with your child is a good way to ensure financial security. However, although the operation is well intentioned, it should be done with caution in order to respect the pace and preferences of the child.
Advice
Seek the help of a legal advisor or a tax specialist to guide you through the nominee process Before committing to a real estate purchase, carefully assess your child’s financial capacity to assume the resulting obligations Establish written agreements with your child
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