The pros and cons of joint tenancy

Planning for one’s death can be both overwhelming and time-consuming. Getting quality legal assistance can offer essential support in navigating the planning process. A lawyer specializing in estate planning can advise you about various techniques to minimize the expenses incurred by both you and your loved ones and eliminate potential conflicts that might result from a poorly planned estate.

In dealing with a person’s home, many individuals opt to transfer title to himself or herself together with another person, before their own death, as joint tenants. The purpose of such a transfer is to offset the consequences, both administrative and financial, of transferring title via a will or probate. Whereas it is typical for couples to own their home jointly, this practice has become increasingly common amongst elderly single parents with their adult children.

There is certainly an argument for this. Creating a joint tenancy provides a way for parents to save their children from the taxes associated with gifting a home under a will. It ensures that the deceased parent’s interest will automatically pass to the surviving children as joint tenants by right of survivorship. The parent can rest assured knowing that their gift will not attract estate taxes or land transfer tax that would otherwise be expected.

The right of survivorship associated with a joint tenancy exists independent of how much a joint tenant has actually invested in the property. The right kicks in by operation of law so that the deceased’s interest automatically vests on death in the surviving joint tenants and bypasses the deceased’s estate.

However, the right of survivorship is not absolute. A joint tenancy can be severed unilaterally by a joint tenant unintentionally. For instance, if a joint tenant decides to mortgage or transfer their interest to a third party before they die, the law will deem the joint tenancy to have been severed. Title to the property will then automatically be converted to a tenancy in common and strip the surviving co-owner of his or her right to complete ownership by survivorship.

In such a scenario, the survivor (presumably the child or children) will remain owner of a proportionate interest in the property as a result of the initial transfer, and the proportionate interest of the deceased will be dealt with in the estate of the deceased. If there is a will, the deceased’s interest will go as set out in the will. If there is no will, the interest will go pursuant to an intestacy, in accordance with the provisions of the Succession Law Reform Act.

There is also the possibility that one of the parties may intentionally sever the joint tenancy by registering the required document. In that case, the ownership becomes a tenancy in common with the consequences set out above.

Creating a joint tenancy as pre-emptive estate-planning strategy can have unintended and unforeseen consequences that should be seriously considered. Here are but a few examples:

  • A parent will be precluded from mortgaging or selling the entire property without first obtaining the express consent of the child as joint tenant.
  • A parent will not be able to cancel the transfer at some later date should they change their mind. What’s more, under the Partition Act, a child, as joint tenant, can try to force a sale of the property before the parent’s death in order to receive their share of the interest in the home.
  • The child’s interest in the property will be subject to the claims of the child’s creditors. If the child is married and the property is used as the family home of the child, the child’s interest can also later become subject to claims of the child’s spouse in the event of a marriage breakdown.
  • Finally, if a parent has more than one child but only passes their interest on to one child this could create a potential dispute amongst the siblings upon the parent’s death. If the parent’s intention to transfer only to one child was not made explicitly clear while alive, upon death the other surviving children might ultimately challenge the validity of that transfer, arguing that the joint tenancy was set up merely as a way for the child to hold the property in trust for all the deceased’s children and not ensure a right of survivorship for just one.

With these consequences in mind, if a parent still opts to take the joint tenancy route they would be strongly advised to make these intentions as apparent and unequivocal as possible. As well, the children as joint tenants should also be made aware of the procedural requirements after the parent dies.

Most important is the survivorship application, which formally removes the name of the deceased parent from the property title record and ensures that title to the home is properly transferred to the surviving child or children. Preparation of this application will necessitate that certain documentation be in order, including proof of death of deceased parent and a formal declaration made by the surviving child that the property is not subject to any spousal rights under the Family Law Act.