Joint Tenancy in Estate Planning

Posted by on Thursday, February 12th, 2015
in Real Estate & Property Law, Uncategorized, Wills & Estate Planning

Earlier this month I was contacted by an adult child wondering about getting themselves registered as a joint tenant on their surviving parent’s property to “make the estate easier to deal with”.  For property owners hoping to save their children the cost of probate, and children looking to find a simple way to transfer a parent’s estate to the children this is a common question.  Joint tenancy transfers a property to the survivor with much greater ease than a typical estate transfer so it seems to make sense.

Unfortunately is it not the panacea many hope it will be and often won’t actually accomplish things in such an easy manner.  We all know there are two guarantees in life and since we are already talking about estates you have probably already concluded that taxes are the other factor.  In BC we are lucky to have two different tax concerns for immediate consideration on transfers made while living.

Firstly of course is the property transfer tax (PTT) which is payable on transfers of property in BC.  While exclusions do apply where PTT is not payable, in many instances, such as properties larger than 0.5 hectares, where PTT can apply.  As with all things tax, there is also the Canada Revenue Agency (CRA) to consider.  Upon learning of the transfer, the CRA may hold that the property was transferred at its market value.  If this occurs, the transfer may be taxed and, in a wonderful twist of fate for those trying to save a little on the transaction, after the parent passes away the child may again be taxed on the share received.

Sometimes a child actually does live with the parent in the home and as the home is their principal residence there are broader exceptions on taxes payable.  Of course you can’t have more than one principal residence so if the adult child is not living with the parent that plan quickly falls apart.

What’s more, when there are multiple children involved, using joint ownership as an estate planning tool may result in disputes between the children after the parent passes.  A joint owner is just that, an owner, and as an owner has no requirement to distribute their share of the home to the other children which can lead to claims of unfairness, especially where the home is the only significant asset of the parent.

So there may be a use for putting a property into joint tenancy between parent and child but it is certainly not cut and dried. If you are thinking about how best to handle your estate planning and ensure property and other assets transfer properly, we would be happy to discuss the matter with you and make sure you have a solution that won’t create more problems than it solves.