When planning your estate, you may consider adding a beneficiary as a co-owner of your real property to make it easier for them to inherit it after your passing. This arrangement, known as joint tenancy, allows ownership to transfer automatically when one owner passes away. While this might seem like a simple solution, it can come with unexpected legal risks and may not always achieve the intended outcome.
Joint Tenancy Is Not a Legally Binding Gift
While the intention behind adding a joint tenant may be to “gift” a real property to the recipient joint tenant co-owner, the joint tenancy does not automatically mean full title of that real estate is transferred. The original owner can revoke the joint tenancy at any time before their death, meaning the intended recipient does not have a guaranteed right to full title to the property.
Adding a joint tenant has been interpreted by the Ontario Courts to merely demonstrate an intention to gift, while no gift was actually made. Although a gift may still be found based on other factors within the specific circumstances, the transferring of a joint tenancy in and of itself is generally insufficient to demonstrate a true gift.
While estate plans may utilize joint tenancy to bypass Court fees and other associated fees and taxes, there still are risks to this approach:
- Estate Litigation – If the intention behind the joint tenancy is unclear, disputes can arise, and Court intervention may be required to determine whether there was truly a gift or not.
- Owners’ change in plans – Once a joint tenant is added, that joint tenant holds legal rights to the property, which may create complications if either owner wants to sell or change plans.
- Liability – the real property becomes an asset of a newly added joint tenant, and their liabilities could attract claims on the real estate. For instance, claims may be made against the property in family law disputes or by other creditors.
Before using joint tenancy as an estate planning tool, consult an estate lawyer to ensure it aligns with your long-term goals and does not create unintended legal complications that may lead to unwanted litigation.
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This WARDS LAWYERS PC publication is for general information only. It is not legal advice, nor is it intended to be. Specific or more information may be necessary before advice could be provided for your particular circumstances.
