The Bare Trust Agreement is a document that is made when a borrower mortgages a property for another party that is family-related.
This type of agreement allows the title to be transferred, in the future from the “family-related borrower”, back to the “intended borrower”. It also can avoid capital gains and land transfer taxes in future transfer transactions.
Legally it is performed as a title transfer refinance.
Please speak with your lawyer about the bare trust agreement. When purchasing a property for your loved one there is a chance that a bare agreement can be applied.
Things that must be considered for the intended borrower:
- The account should be joint that the mortgage is coming out of. The mortgage account should be set up jointly
- Bills and expenses for the house must be in the name of the intended borrower. Joint ownership is a good idea.
- The property tax bill should come out with the mortgage. If not, please put in both names as this will be also paid from the intended borrower’s account
- Never rent or claim rent on this property, as it would be seen as a gain and therefore incur capital gains.
This type of process applies to all borrower types. Also, there are some other items to consider when purchasing a property with your parents.
When you are purchasing a property in this type of situation, a consult with a lawyer and a Mortgage Broker/Agent is always best practice.
