The Great Non-Downsize: Why Seniors Are Staying Put and What It Means for Your Estate Plan

Understanding the Housing Trend That’s Reshaping Ontario Estate Planning

 
The conventional wisdom about retirement has long included a predictable chapter: empty-nesters sell the family home, downsize to something smaller, and free up equity for their golden years. But a significant shift is happening across Ontario – and it’s forcing families to rethink their Estate planning strategies.
 
 

The Reality: Seniors Are Staying Put

 
Recent data reveals a surprising trend: 91% of Ontario seniors hope to stay in their own home for as long as possible, and they’re acting on that preference. In the United States, “empty-nest baby boomers own 28 per cent of the nation’s large homes [with three or more bedrooms], while millennials with kids own just 14 per cent” – and Canadian patterns are remarkably similar.

This “aging in place” phenomenon means that seniors are selling their homes later in life, freeing up fewer houses for young families. In Ontario’s already tight housing market, this trend has significant implications that extend far beyond real estate into the realm of Estate planning.
 
 

Why Seniors Aren’t Downsizing

 
Understanding why seniors are staying put helps illuminate the Estate planning challenges this creates:
 
 

Financial Barriers

Buying and selling homes has become very expensive, thanks to elevated house prices. Many seniors find that after accounting for real estate fees (approximately 5% plus HST), land transfer taxes (doubled in Toronto due to municipal taxes), legal fees, and moving costs, the financial benefit of downsizing evaporates.
 
 

Emotional Attachment

 
For many seniors, their home represents decades of memories, established community connections, and emotional security. The prospect of leaving behind a lifetime of roots often outweighs potential financial benefits.
 
 

Limited Suitable Options

 
The market for age-appropriate housing – whether retirement communities, accessible condos, or right-sized homes – hasn’t kept pace with demand, leaving seniors with fewer attractive alternatives.
 
 

Market Timing

 
With Ontario’s housing market showing volatility, many seniors are hesitant to make major moves during uncertain times.
 
 

Estate Planning Implications: What This Means for Your Family

 
This trend toward aging in place creates several critical Estate planning considerations that Ontario families must address:

1. Increased Property Values in Estates

When seniors hold onto valuable family homes longer, these properties often represent a larger portion of their Estate. This can create several challenges:

• Capital Gains Tax Exposure: While the principal residence exemption protects the family home from capital gains tax, other properties (like cottages or investment properties) may face significant tax bills
• Liquidity Issues: A large portion of the estate tied up in real estate can create cash flow problems for settling debts, taxes, and distributing bequests
• Unequal Distribution: Real property is harder to divide equally among beneficiaries than liquid assets

2. Long-Term Care Funding Challenges

With seniors staying in their homes longer, families must plan for the reality that substantial long-term care costs may need to be funded while preserving the family home. This raises important questions:

• Should the home be sold to fund care, or should other assets be liquidated first?
• How can families ensure adequate liquidity for care costs without forcing a property sale?
• What happens if the senior requires institutional care but wants to preserve the home for their spouse or family?

3. Maintenance and Property Management Issues

Aging in place often means aging properties require increasing maintenance and updates. Estate plans must consider:

• Who will manage property maintenance if the senior becomes unable to do so?
• How to fund major repairs from fixed incomes or other Estate assets
• Power of attorney arrangements that specifically address property management decisions

4. Family Dynamics and Expectations

The traditional expectation that seniors will downsize and distribute assets during their lifetime is being challenged. This shift requires:

• Earlier family discussions about inheritance expectations and property succession
• Clear communication about parents’ intentions to age in place
• Revised estate planning that accounts for property retention rather than liquidation

Strategic Estate Planning Solutions

 
To address these challenges, Ontario families should consider several strategic approaches:

1. Comprehensive Property Planning

• Property Power of Attorney: Ensure your power of attorney documents specifically address property management, including authority to arrange maintenance, manage rentals, or make accessibility modifications.
• Joint Ownership Considerations: Adding adult children as joint owners can facilitate property management but has significant tax and legal implications that require careful planning.
• Property Trusts: Consider holding the family home in trust to provide management flexibility while preserving ownership intentions.

2. Liquidity Planning

• Life Insurance: Additional life insurance can provide the liquidity needed to pay estate taxes and equalize distributions among beneficiaries when real estate makes up a large portion of the estate.
• Investment Portfolio Management: Maintain adequate liquid investments to fund long-term care costs without forcing property sales.
• Reverse Mortgages: For seniors with limited liquid assets, reverse mortgages can provide funding for home maintenance and care while allowing them to age in place.

3. Care Planning Integration

• Long-Term Care Insurance: Consider insurance products that can fund care costs while preserving estate assets.
• Family Care Agreements: Formalize arrangements where adult children provide care in exchange for eventual property inheritance.
• Home Modification Planning: Budget for accessibility improvements that may be needed to support aging in place safely.

4. Tax Planning Strategies

• Principal Residence Designation: Ensure proper designation of the principal residence to maximize the capital gains exemption.
• Income Splitting: Consider pension splitting and other income splitting strategies to minimize the overall family tax burden.
• Estate Freeze Techniques: For families with significant property wealth, consider estate freeze strategies to limit future growth in the parents’ estate.

The Broader Market Impact

 
This trend has implications beyond individual families. Demographics also play a role in the buyer’s market dynamic—downsizing seniors and growing families have different needs, influencing the types of homes in demand. With seniors holding onto larger homes longer, young families face increased competition for suitable housing, potentially driving up prices and creating multi-generational housing pressures.
 
 

Communication Is Key

 
Perhaps the most important Estate planning consideration is open family communication. The assumption that seniors will downsize has influenced many families’ financial and life planning. When parents choose to age in place, it’s essential to:

• Discuss intentions early and revisit them regularly as circumstances change
• Plan for multiple scenarios, including what happens if health or financial circumstances force a change
• Coordinate with siblings to ensure everyone understands and agrees with the approach
• Review estate documents regularly to ensure they reflect current intentions and circumstances

Moving Forward: Practical Steps

 
If your family is navigating this trend, consider these immediate steps:

1. Review your current estate plan to ensure it accounts for aging in place scenarios
2. Assess the liquidity of your overall estate and consider whether additional liquid assets are needed
3. Discuss property management arrangements with trusted family members or professionals
4. Evaluate your power of attorney documents to ensure they provide adequate authority for property-related decisions
5. Consider professional guidance from estate planning lawyers familiar with Ontario’s property and tax laws

The New Reality

 
The expectation that seniors will automatically downsize is becoming obsolete. This shift requires a fundamental rethinking of estate planning strategies to account for scenarios where seniors age in place with significant property assets.

Rather than viewing this as a departure from traditional retirement planning, families can see it as an opportunity to create more flexible, comprehensive Estate plans that account for changing demographics and personal preferences.

The key is recognizing this trend early and planning accordingly. With proper preparation, aging in place can be financially viable while still preserving family wealth and ensuring smooth estate transitions.

At SmartWills, we help Ontario families navigate the evolving landscape of Estate Planning, including the unique challenges presented by aging in place. Contact us to discuss how these trends affect your family’s Estate Planning strategy.

You might want to check out our blog post on Who Counts as a Grandchild in your will?