Joint Tenancies and the Right of Survivorship
The goals of estate planning include simplifying the administration of the estate, minimizing probate fees and to ensuring that the deceased’s assets pass to the intended beneficiaries. Owning assets jointly is a planning strategy that is often considered to achieve these goals.
Assets, including real estate, may be owned in one of two ways: if held as tenants in common, when one owner dies, that deceased owner’s interest passes to his or her estate. If property is held as joint tenants and all joint owners are intended to own the beneficial interest, when one owner dies, the property passes automatically to the surviving joint owner(s) by the ‘right of survivorship’, and will not be included as part of the deceased owner’s estate.
Spouses regularly own their assets as joint tenants. Joint tenancies are increasingly being used between parents and children. An elderly parent may place assets in a joint tenancy with one of his or her adult children to permit that child to assist in administering his or her affairs, but with no intention that that child alone is to receive the entire asset on the parent’s death. Alternatively, a parent may actually wish to transfer an interest in an asset to a child with the intention that the child will receive the entire asset on the parent’s death. Unfortunately, intentions are often unclear if there is nothing in writing.
The impact of transfers creating joint ownership must be carefully examined: the transfer can result in tax liabilities; parents must keep in mind that they cannot later cancel the transfer; a parent will be unable to sell or mortgage the property without the cooperation of the child co-owner; property held by each joint owner may be subject to claims in divorce proceedings or creditor actions.
The laws relating to creating joint tenancies include certain legal presumptions. If a person transfers an interest in an asset to his or her spouse for no consideration, the law presumes that the transfer was a gift. Where a parent transfers an interest to an adult child, the law presumes that the child holds the asset on a trust. A transfer should be supported by appropriate documentation as evidence of the transferor’s intentions to avoid conflicts after the transferor’s death. We can assist in doing just that.
For more information on joint tenancies and other estate planning matters, please contact Kim Karras at Brawn Karras & Sanderson 604-259-1620 or toll free at 877-470-7535.