Beware joint ownership risks during estate planning

Testators should know the risks before using joint ownership as an estate planning tool. 

There are certainly good reasons for owning property jointly with a beneficiary – top among them its effectiveness as a way to transfer assets while avoiding the 1.5 per-cent probate tax otherwise payable on assets in a person’s estate. 

However, there are other risks inherent in the process, as an elderly Port Hope man recently discovered when he tried to row back on a joint tenancy deal with his grand-niece after relations between them soured while he was still alive.  

According to a court decision in the matter, the man originally transferred half of his home – which he previously owned alone following the death of his partner – to his grand-niece as a joint tenant with right of survivorship back in 2012. 

But by 2020, the man had developed a fear his younger relation would take steps to force him out of the house and instructed his lawyer to revoke the joint tenancy in favour of a tenancy-in common arrangement that would revoke any rights of survivorship. 

When both sides sued each other, Ontario Superior Court Justice Robret Charney concluded that the 2020 switch from joint tenancy to tenancy in common was valid, but that the right of survivorship could not be revoked, meaning that the grand-niece will keep her half of the house when her great uncle dies. The judge also delivered a perfect summing up of the case: 

“As [the elderly man] has now discovered, joint tenancy is a risky way to minimize probate fees. The legal fees that both parties will have to pay to resolve this dispute will far exceed any probate fees that [the grand-niece] would have had to pay,” he wrote. 

Homeowners who heed the judge’s warning may find they have other options, depending on their reason for adding a person to title. For example, a bare trust may be a more appropriate mechanism for someone who wants to retain control of a property during their lifetime and ensure that it falls into their estate after death. 

Real estate is not the only asset that parties hold jointly, but the same principles apply for testators considering adding a beneficiary to a bank or investment account. 

Again, there may be tax advantages to setting up a joint account with a child, which allows the property to flow automatically to the co-owner by right of survivorship. 

But problems can arise when there is any doubt over what the testator meant to happen to that jointly-held property. In fact, disputes along these lines are among the most common causes of estate litigation in Ontario. 

Most of the cases that end up before the courts concern parents who added one of their children to a bank account – often for estate planning purposes, but sometimes simply for convenience. 

Whatever your intentions for joint property, it’s important to get them down in writing ahead of time so that everyone is on the same page about why the joint owner has been added, what they can do with the property, and what will happen to it when you die. 

Disclaimer: The content on this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this website are advised to seek specific legal advice by contacting members of Laredo Law (or their own legal counsel) regarding any specific legal issues.