A joint tenancy can be a helpful part of your estate plan but must be used with caution. There are two ways property can be owned by multiple parties, joint tenancy or tenancy in common. The key difference between the two is the right of survivorship.

If you own property with another person or multiple people as tenants in common, at the time of your death your interest in the property becomes part of your estate and will be handled according to your Will or the provincial intestate laws if you have no Will. If you own property with another person or group of people as joint tenants, at the time of your death your interest in the property will be transferred to the surviving joint tenants.

The law presumes that any asset, other than land, which is owned by two or more people, is owned as joint tenancy unless there is an indication that the owners actually own shares of the asset. This common law presumption in regards to land has been altered by statute and presumes that if the title does not specify the owners as joint tenants then it is held by the owners as tenants in common.

A joint tenancy does not have to be between two spouses. It is possible to create a joint tenancy between others such as a parent and child. Because of the right of survivorship, a joint tenancy can simplify estate administration and even avoid probate. You must however use this estate planning tool cautiously.

Although joint tenancies can be useful there are consequences to be aware, such as:

• Loss of Control: If a parent creates a joint tenancy with a child, the parent cannot cancel the transfer if the parent changes his or her mind. The parent would also not be able to sell or mortgage the land unless the child also agrees and signs.
  
• Income Tax: The transfer may also have tax implications. When interest in the property is transferred to the child it is considered sold at fair market value and, unless the property is the parents principal residence, a portion of any capital gains will be added to the parents income. This means that the parent would end up paying tax even though they have not been paid for the property.
  
• Property Transfer Tax: Property Transfer Tax, in the case of land, will be payable upon transfer although exemptions may be available if the property was the principal residence of the parent or child for the appropriate length of time.
  
• Exposure to Creditors: Once the transfer is made and the child has interest in the property it can become subject to any creditors of the child. This can also mean if the child is married and the property is used for a family purpose, it can be subject to any claims made by the spouse if the child's marriage was to dissolve.
  
• Death: In the case of the child dying before the parent. If there were other children on the title as joint tenants, on the death of the parent, the property would pass only to the surviving joint tenants and not to the family of the deceased child.
  
• Incapacity of the Child: If the child becomes ill or incapable or for any other reason was unable to deal with the child's interest in the property then significant delays and expense could be incurred. A power of attorney granted by the child to the parent or some other person may assist in minimizing these problems.

If a parent creates a joint tenancy with a child it is a good idea to put the parents' intentions in writing (ie: is it the parents' intention to make an outright gift, or is the arrangement one of convenience where the child is merely a trustee holding the property in trust for the parent and subsequently the parents' estate). This will avoid the possibility of a dispute between the child involved in the tenancy agreement and the other surviving children of the deceased.

If you would like more information regarding the use of a Joint Tenancy agreement, please contact us.