Coordinating Downsizing with Your Estate Plan in BC: What Homeowners Need to Know

Selling the family home is one of the most significant financial events in a person's life. But when you are also managing or updating an estate plan, the timing of a home sale can have lasting consequences for your family, your beneficiaries, and your legacy. Too often, homeowners in Greater Victoria treat downsizing and estate planning as separate projects, when in reality they are deeply connected. A decision to sell your home before you have updated your will, or to gift proceeds to a child without considering the tax implications, can create confusion and conflict for the people you are trying to help.

This guide explains how downsizing and estate planning intersect in British Columbia, and what you should consider before, during, and after your housing transition. As always, this information is educational and not a substitute for professional legal or financial advice. Every situation is unique, and the laws change over time. Consult a qualified notary, lawyer, or estate planner before making decisions based on this information.

Why your estate plan needs to change when you downsize

Your home is likely the largest asset in your estate. When you sell it and move to a smaller property, the structure of your estate changes significantly. The equity that was tied up in your home becomes cash, investments, or a smaller property. Your will, which may have been written years ago when your family home was your primary asset, may no longer reflect your current situation.

Here are the key documents that should be reviewed when you downsize:

Your will

Your will specifies who inherits your property after you pass away. If your will includes a specific bequest of "my family home at 1234 Oak Bay Avenue" and you have sold that home, that clause becomes meaningless. The beneficiary who was supposed to receive the home may receive nothing, while other beneficiaries may receive more than you intended. This is one of the most common reasons estate plans become outdated.

When you downsize, your will should be reviewed and updated to reflect:

• Your new property address. If you leave a specific property to a beneficiary, update the address and legal description.
• Changes in asset value. The equity in your new home may be different from the equity in your old home. This affects how your estate is divided among beneficiaries.
• New assets. If you invested the proceeds from your home sale, those investments are now part of your estate and need to be addressed in your will.
• Your executor. The person you named as executor may no longer be the right choice. Downstream factors such as their health, location, or relationship with you may have changed.

Power of attorney

A power of attorney (POA) gives someone you trust the authority to manage your financial and legal affairs while you are alive. If you become incapacitated without a valid POA, your family may need to apply to the court to become your committee, a process that is costly, time-consuming, and stressful.

When you downsize, your power of attorney should be reviewed for several reasons:

• Your attorney may need to sell your old home on your behalf. If you are in hospital or unable to manage your affairs during the downsizing process, your attorney needs clear authority to list and sell the property, sign documents, and manage the proceeds.
• Your attorney may need to buy your new home. If you are unable to sign the purchase documents for your downsized home, your attorney needs the authority to do so.
• Financial institutions may require a specific POA wording. Some banks and credit unions in Greater Victoria require a specific form of POA before they will allow your attorney to access funds or manage property transactions. It is worth checking that your POA meets their requirements.

Representation agreement

A representation agreement (RA) is a document that allows someone you trust to make health and personal care decisions on your behalf if you become unable to do so. While a POA covers financial matters, an RA covers medical decisions, living arrangements, and daily care.

When you downsize, your representation agreement may need updating because your living situation has changed. If you move from a house in Saanich to a condo in Langford, or to a retirement community in Sidney, your RA should reflect your new residence and any new care arrangements. If you move into a continuing care facility, your RA becomes even more important because it will guide decisions about your medical care and living preferences.

The timing of downsizing and gifting

Many downsizers want to use the proceeds from their home sale to help their adult children financially. Gifting money to family members during your lifetime can be a wonderful way to see your loved ones benefit from your generosity. But it also has implications for your estate plan, your tax situation, and your own financial security.

In British Columbia, there is generally no gift tax on cash gifts between family members. However, there are several considerations:

• Seven-year rule for gifts. While Canada does not have a specific seven-year rule (that is a UK inheritance tax concept), the CRA can look back at gifts made before death if there is a question about tax avoidance or if the gift was part of a larger estate freeze or tax planning strategy. More importantly, if you gift assets that later increase in value, the capital gains liability may still be attributed to you.
• Gifting and your own financial security. The most common regret I hear from clients who have downsized and gifted proceeds is not keeping enough for themselves. Before gifting, make sure you have a clear picture of your own retirement income, healthcare costs, and housing expenses for the next 20 to 30 years.
• Gifting and estate equality. If you gift a significant amount to one child but not others, your will should reflect that you have made an advancement on their inheritance. Otherwise, your estate may be divided equally, and the child who received the gift during your lifetime may end up with more than you intended.

The family home and the estate freeze

An estate freeze is a tax planning strategy that allows you to transfer the future growth of your assets to your beneficiaries while keeping the current value in your estate. For homeowners in Greater Victoria, the family home is often the primary asset that would benefit from an estate freeze.

If you downsize, the value of your home changes, and the estate freeze may need to be adjusted. This is a complex area of tax and estate planning that requires professional advice. A qualified estate planner or tax accountant can help you determine whether an estate freeze is appropriate for your situation and how downsizing affects the strategy.

Probate and the downsized home

When you pass away, your estate goes through probate in BC if you own real estate or have significant assets. The probate process validates your will and gives your executor the authority to distribute your assets. In BC, the probate fee is calculated on the value of your estate. As of 2026, the fee is approximately $14 per $1,000 for the first $25,000 of estate value, and approximately $14 per $1,000 on the value above $25,000, with a cap on the maximum fee.

Downsizing can affect probate fees in two ways:

• If you downsize to a less expensive home, your estate value decreases, and probate fees may be lower.
• If you sell your home and invest the proceeds, your estate value may be similar, but the assets are now more liquid, which can make the probate process simpler and faster for your executor.

Some homeowners use joint ownership of their home with an adult child to avoid probate on the property. Before doing this, it is important to understand the risks. Adding a child as a joint tenant means they own the property with you, which can affect your eligibility for the principal residence exemption, the BC Home Owner Grant, and your property tax deferment program. It can also expose the property to the child's creditors or to a claim in the event of their divorce. Professional advice is essential before placing a home in joint ownership.

When to update your estate documents

The best time to update your estate plan is before you list your home for sale, not after. Here is a suggested timeline:

• Three to six months before listing: Meet with a notary or estate planning lawyer to review your will, power of attorney, and representation agreement. Discuss how the sale of your home and the purchase of your downsized property will affect your estate plan.
• When you make an offer on your new home: Update your power of attorney to ensure your attorney has authority to handle both the sale of your old home and the purchase of the new one.
• After you close on your new home: Update your will to reflect the new property address and any changes in your assets. Update your representation agreement to reflect your new living situation.
• After you complete any gifting: If you gift proceeds to family members, update your will to reflect that you have made an advancement on their inheritance, if that is your intention.

Frequently asked questions