Joint Ownership as a Way of Estate Planning

One of the goals of proper estate planning is to minimize tax consequences and other costs of transferring property to a spouse or to the next generation, another is to make the transfer as smooth as possible. Holding property in joint ownership might be a good way to achieve such goals in certain circumstances.

Common law allows two or more people to own property in joint ownership, meaning they all have equal ownership of the property and same rights when it comes to dealing with the property. Joint ownership is very significant for estate planning purposes because it generally creates a right of survivorship, meaning that the ownership of the property is automatically transferred to the surviving owner without becoming a part of the deceased’s estate. Very often, holding majority of one’s property in joint ownership disposes with the need for probate. In the instances when probate is required, the jointly held property is generally not included in the probate and therefore the probate fees are lower than it would be if such property was included in probate. Joint ownership also makes a formal process of transferring property to the surviving joint owner easier and less cumbersome when dealing with various institutions, such as banks and the land registry office. For example having a joint bank account makes it lot easier for the surviving joint owner to pay the funeral expenses and all other immediate costs associated with someone’s death or it might allow the joint owner to sell the jointly owned house without waiting for the probate.

However, not all jointly owned property passes to the surviving co-owner.

It is important to know that the courts, over the decades, have limited the right of survivorship to certain situations and that in many instances, the surviving joint owner must prove that the deceased co-owner intended for the property to pass to him or her by way of survivorship. The courts have categorized a joint ownership into two groups. One group is the joint ownership of property by spouses or by a parent and a minor child. In those circumstances there is a presumption that the property was intended to pass by way of survivorship. The second group is the joint ownership involving all other people, whether related or not. In such situations there is a presumption that the joint property was held in trust for the joint owner who transferred the assets into joint-ownership and the surviving joint owner must show that the deceased intended to give the property to the surviving joint owner. The courts acknowledge that often a joint ownership is created as a convenient way to deal with property, such as adult child having a joint account with an elderly parent in order for an adult child to help with banking or two friends having sharing a condo in Florida and having a joint US account to pay the bills associated with the condo. In those circumstances, there is a presumption that the non-contributing joint owner holds the property in trust for the contributing joint owner or if both contribute to the account, that they each hold in trust the portion that the other joint owner contributed.

Joint ownership for estate planning purposes is therefore very common between spouses, where they intend to pass all or most of their property to each other at the time of death or in a situation where there is only one parent and one adult child, who is also the only beneficiary under the will. But there are also circumstances where even in those situations joint ownership might not be appropriate. For example, if one of the spouses is a business owner and is exposed to potential liability from creditors or exposed to potential professional liability. The property that is jointly owned is exposed to such liability. Any benefit of potential savings on probate fees might out-weight the risk of loosing the property to the creditors. Further, holding a property in joint ownership with an adult child that has a spouse exposes such property to a potential spousal claim in the event of a relationship break-down. Another issue of holding a property in joint ownership is the ability to having full control over the property or being able to sell the property in case of disagreement between joint owners. This is particularly seen in the case when two unmarried persons decide to buy a property as joint owners and subsequently there is a relationship breakdown. In the expressed situations it is advisable that there is an agreement in place at the time of acquiring of property explaining what should happen in case of relationship breakdown.

Joint ownership is certainly an efficient way of succession planning. However, due to its pitfalls, it is always advisable to discuss those issues with an experienced wills and estate Lawyer.

Frequently Asked Questions

Dementia - What to do with regards to her will and powers of attorney?

My elderly mother was diagnosed with dementia a few months ago. She is rapidly deteriorating. She does not have signed powers of attorney documents. I have three other siblings. We need to sell her house and get access to her finances to pay her bills. What do we have to do?

Lawyer under power of attorney

‍Depending on your mother’s current mental capacity she might still be able to appoint an Lawyer under power of attorney for property or personal care. In order to determine whether you mother still has a mental capacity to execute power of attorney documents she will have to undergo a capacity assessment performed by a specially trained health care professional. If the capacity assessment finds that your mother has capacity to appoint an Lawyer under powers of attorney, she can visit a Lawyer to help her prepare and sign powers of attorney documents.

‍Guardianship

‍If your mother does not have the mental capacity to appoint an Lawyer, you and your siblings can apply to be appointed Guardians of Property for your mother. There are two ways this can be achieved: by applying to the Office of the Public Guardian and Trustee or making an application to the Court. The less costly and simpler way is to apply to the Office of the Public Guardian and Trustee. The process of applying and the application forms can be found on their website. In order to be able to apply to the Office of the Public Guardian and Trustee, you and your siblings would have to agree on whom to appoint as Guardian. In the event you and your siblings cannot agree on the appointment, someone will have to apply to the Court to be appointed Guardian for your mother.

I'm married without children, do I need a will?

We have been married for the last 25 years but don’t have any children. Do we need a will, or would everything just go to the surviving spouse anyway?

‍Yes, you do need a will. Whenever you don’t have any children, under the statutory distribution scheme for individuals that die without a will, your spouse would receive your entire estate. However, you should still have a will for at least two reasons:

Appointing an executor of your estate; and
Making instructions for the distribution of your estate in the event that you’re predeceased by your spouse.

Appointment of an executor of your estate.‍

The executor named in a will has the legal authority to take possession of all your assets, do your final income tax returns, and deal with banks and government institutions. If you don’t have a will, a court would have to appoint an executor of your estate to deal with any assets that were not jointly owned, as well as any registered investments that did not have a named beneficiary. The process of appointing an executor usually takes few months, so in addition to incurring unnecessary costs, there will be an extended delay during which your spouse will not have access to the assets in your estate. In my experience, some financial institutions will waive a probate requirement if your spouse is the named executor and the only beneficiary of your estate, which could provide your spouse with ready access to some assets shortly after your death.

‍Distribution of your estate if you survive your spouse.

‍By having a will in place, you will make sure that your estate is distributed the way you want it to be in the event that your spouse passes away shortly before you, or in the event that you are unable to make a will after your spouse’s death. Under the statutory distribution scheme, if you don’t have a spouse nor children, your estate would go to your parents. Alternatively, if your parents are deceased, your estate would go to your siblings. This may not be your wish. For example you might want to leave part of your estate to your spouse’s family, or you may wish to skip your parents and siblings and distribute the estate among your and your spouse’s nieces and nephews, or make gifts to a charity or charities. No matter which option you choose, having a will can provide the peace of mind of knowing that your estate will be distributed according to your wishes.

Do I need a will?

We have been married for the last 25 years but don’t have any children. Do we need a will, or would everything just go to the surviving spouse anyway?

Appointing an executor of your estate; and
Making instructions for the distribution of your estate in the event that you’re predeceased by your spouse.

Appointment of an executor of your estate.

‍The executor named in a will has the legal authority to take possession of all your assets, do your final income tax returns, and deal with banks and government institutions. If you don’t have a will, a court would have to appoint an executor of your estate to deal with any assets that were not jointly owned, as well as any registered investments that did not have a named beneficiary. The process of appointing an executor usually takes few months, so in addition to incurring unnecessary costs, there will be an extended delay during which your spouse will not have access to the assets in your estate. In my experience, some financial institutions will waive a probate requirement if your spouse is the named executor and the only beneficiary of your estate, which could provide your spouse with ready access to some assets shortly after your death.

‍Distribution of your estate if you survive your spouse.