Thinking of choosing a joint ownership strategy for estate planning? Here’s what you need to know.
In our previous blog articles on Wills law, we have shared the essentials of a decent estate plan, the rules of gifting in estate planning, the required testamentary capacity, and how estate planning tax can be calculated. Now that we have covered the nitty gritty of estate planning, we will now move on to the concept of joint ownership in estate planning.
Estate Planning has always been effective in sorting out the disputes of transfer and distribution of assets. Making sure that the beneficiaries and heirs receive assets and money with the greatest amount of tax exemptions is the main objective of an estate plan.
In this blog article, we will highlight a few pros and cons of pursuing joint ownership in estate planning strategy.
Joint Ownership: Pros And Cons
Before jumping into the pros and pitfalls of joint ownership in estate management strategy, it is better to understand the meaning of joint ownership. Joint ownership means when two or more individuals are owning the property jointly and equally.
In Canada, this form is usually pursued by validly wedded spouses. Not only couples, but many individuals opt for joint ownership as it can significantly abate a great deal of hassle with regard to the management of assets. Oftentimes, parents add their children as joint owners so that property passes to them without going to probate courts.
Finer Points Of Joint Ownership
Joint ownership is beneficial when one of the owners loses their capability to administer the estate and the capable owner can take over the matters as both of them are equally entitled to the property.
If one owner dies, the sole ownership of the property is transferred to the surviving owner by means of the right of survivorship. That also means the deceased’s will have no authority in front of the surviving owner’s preferences pertaining to the distribution of the estate.
As observed in Pecore v. Pecore, where the father registered his daughter to his financial accounts as a joint tenant before passing away. As stipulated in the father’s will, the daughter and her husband were to get equal shares of the inheritance. The courts debated whether the financial accounts should pass to the father’s estate upon the daughter and husband’s divorce or to the daughter solely by registered joint tenancy (of the bank account) and right of survivorship. The Supreme Court of Canada concluded that the father meant to give the daughter ownership of the account. If the father’s purpose had not been present, a trust would be presumed to have formed as a result. It is to be noted that, it was held that a substantial likelihood of a resultant trust might be triggered in the context of a transfer between a parent and an adult child.
A Provincial probate fee is required to be paid when estate planning is done following the death of an individual. One of the common reasons people opt for the joint ownership technique is to avoid the liability of probate fees. This not only excludes the probate fee but also ensures a hassle-free administration of assets.
Cons Of Joint Ownership
When two joint owners own a property or asset, that means any owner can utilize the funds or property for their benefit and there is no such requirement that the property needs to be utilized for mutual benefit. Another common issue that joint owners may face is when couples separate and property claims may arise by the partners.
It is also pertinent to note that joint ownership cannot be ended at once. From every legal presumption, joint owners cannot be removed from the joint estate plan without their consent.
Similarly, upon the death of one owner in joint ownership, the right of survivorship automatically comes into the picture. This implies that the surviving owner becomes the sole owner of the property.
The surviving owner can distribute the property according to his/her exclusive choice, even though the distribution mechanism is mentioned in the will regarding the property held jointly. This could lead to complex court battles as it can be quite difficult for the designated beneficiaries to prove their interest in the property.
In cases where children are listed as joint owners of the property, there could likewise be an impact on that joint property. What if that child is incompetent or becomes incapable to execute that property? Therefore, children held as joint owners can pose various risks to their financial positions and joint assets.
Contact The lawyers At Ayaz Mehdi Professional Corporation
Needless to say, there are countless factors to contemplate for having a decent estate plan and oftentimes tricky situations may appear when you pursue joint ownership as a tool for estate management. The attorneys at Ayaz Mehdi Professional Corporation are available to provide up-to-date legal assistance in estate planning matters within the parameters of governing laws.
Disclaimer: Kindly note that sending or receiving information through this site does not establish a solicitor-client relationship. Legal matters are fact-specific, and the law is variably changing. The views expressed and the content provided on this blog are general guidelines and cannot substitute for proper legal advice. Schedule your legal consultation by clicking here: Let’s meet!