Estate Planning: Advantages and Disadvantages of Joint-Ownership

Wills & Estates - Blog
Aug
October 2, 2019

Estate Planning: Advantages and Disadvantages of Joint-Ownership

by
Gareth Green

Clients often ask us about the main things they need to consider in order to have a well-thought-out estate plan, and our response is always the same: depending on their individual circumstances, there are many factors that must be considered to ensure their families are cared for and their money goes where they intended it to go.

One important factor to consider is whether to hold assets in joint tenancy or tenancy in common. For example, when the family home is held in both spouses’ names, it is important to consider the advantages and disadvantages of whether to register it as joint tenants or tenants in common, as either option will have a significant but different impact on their estates.

Joint Tenancy vs Tenants in Common

The primary difference between joint tenancy and tenancy in common is that joint tenancies allow two or more people to own property equally with the “right of survivorship”. Whereas, right of survivorship does not apply to property held as tenants in common and the property can be held in different proportions(i.e. unequal shares of interest in the property).

If property is held by two or more people as joint tenants, the interest in that property will automatically transfer to the surviving joint owner(s) upon the death of the other(s) through a process called “right of survivorship”.However, with tenants in common, the deceased person’s interest in the property will form part of their estate and will be distributed according to his or her Will or through the laws of intestacy.

Advantages of Joint Tenancy

In Canada, the three main advantages to transferring property into joint tenancy are that:

  1. you can save on legal fees as well as probate fees (i.e. approximately 1.4% of the value of the estate) that would otherwise be paid on estate assets at the time of your death;
  2. the joint asset is automatically transferred to the surviving joint owner(s)without the need for probate; and
  3. you could prevent a spouse or a child from challenging the Will against those assets in joint tenancy under the Wills, Estates and Succession Act, 2009
Disadvantages of Joint Tenancy

However, the forgoing does not mean that it is always a good idea to transfer property into joint tenancy. For example:

  1. if you transfer your home into joint tenancy, you may lose the principal residence exemption for that portion transferred into the name of the other person. Further, if there is a capital gain resulting from an increase in value of the property, then a capital gains tax might be payable on the other person’s portion of the property at time of sale or death;
  2. property held in joint tenancy is subject to any adverse circumstances affecting the other person, such as a family law claim, a serious accident for which they are liable, or a judgement against them; and
  3. under the law of survivorship, if both parties die within 5 days of each other, the shares of the assets fall into each party’s estate and are divided according to the terms of their Will, which neither party may have intended. 

Needless to say, it is important to carefully weigh all of your options when considering whether to place assets into joint tenancy with another individual. Our experienced lawyers are here to help walk you through that process and determine the best approach. 

For more information on our estate planning services, please feel free to contact us through our website, or call us at (250) 385-6004 / (888) 385-6004.

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