Entering joint tenancy with a child is a common estate planning strategy, but many parents come to regret it long before they die.
There are certainly good reasons for owning property jointly with a beneficiary. It is an undeniably effective 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 also potential downsides to consider, as an elderly Toronto woman discovered when she tried to remove her son from title and take back full ownership.
According to a court decision in the matter, the woman originally executed a transfer to joint tenancy with her son in 2022, shortly after the death of her husband.
In the following years, the parent-child relationship deteriorated, with the police called on more than one occasion as a result of intra-family clashes. The mother eventually asked the court to restore her as the sole owner, claiming that she had signed the transfer in a fog of grief and that her son was only holding the property in trust for her benefit.
However, the judge sided with son, finding that at the time of the transfer, his mother intended to gift him an interest in the property, with a right of survivorship.
“Vesting orders are not a mechanism to withdraw a gift that one regrets giving. Gifts are not revocable,” the judge wrote, dismissing the mother’s application.
There was a silver lining for the mother in the ruling, where the judge expressed concerned about the son’s presence in the home and his lack of contribution to its upkeep and said she would be open to hearing an application for his removal from the property “on a basis other than his alleged lack of ownership interest in the Property.”
Homeowners who want to reduce their probate fees 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. Adding a party as joint account holder can be more damaging as the other party will have access to your account and can withdraw the funds unbeknownst to you.
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.
