Joint Tenancy is a long-established and the most common way that couples or co-owners hold title to property. This is because it has the advantage of passing the property automatically to a survivor when one of the owners passes away. All that is needed is a death certificate to change the title. There is no need for probate, wills, etc. Title simply passes automatically to the survivor. It is also a common way for people to do some estate planning to save on probate (Will Certification Fees) which can easily be $15,000-$20,000 including legal fees on an average home in Toronto (more on that in our next issue). A recent case, see link below, casts some doubt on the effectiveness of Joint Tenancy as a title holding and estate strategy, but here are the bullets:
1. NOT all joint tenancies are equal.
While a couple purchasing a property as joint tenants may have equal ownership and rights, when a property is transferred into a joint tenancy as a gift or without any money being paid or without equal contribution, the Courts may conclude that no real or beneficial ownership was transferred. Instead, they may conclude that all that was transferred was the right of survivorship, meaning that only when one owner passes does the other owner have an interest. Unless it is absolutely clear and can be demonstrated that the person gifting the property intended to give full ownership rights, the person receiving the property may not be entitled to any ownership interest during the lifetime of the person who gave an interest in the property. The consequences of this can be quite severe in a later ownership dispute.
2. Legal Clarity and Planning are Essential.
When transferring the property as a gift, aside from the tax consequences, which we will discuss in our next newsletter, it is critical that the parties understand the meaning and intent of the transfer. One party may expect to receive full ownership because of the transfer, whereas the other party may just want give a right of survivorship. This makes it critical that the intentions of both parties be laid out clearly and in writing before the transfer is made and legal advice obtained to make sure all of this is properly documented to avoid disputes and legal action at a later time.
3. It takes just ONE party to terminate a joint tenancy.
The right of survivorship depends on the joint tenancy Continuing. However, either joint tenant can unilaterally terminate the joint tenancy and end the right of survivorship at any time.
Practical Tips for Owners and Estate Planners:
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Before You Transfer: Always consult a lawyer before adding someone to title, even if it’s a family member.
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Document Intentions: Clearly record whether the transfer is intended as a full gift, a gift of survivorship only, or another arrangement.
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Understand Joint Tenancy: Know that it can be severed unilaterally, affecting inheritance rights.
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Update Your Will and Estate Plan: Ensure all real estate transfers align with your estate goals and legal documents.
Dig Deeper: