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When you think of estate planning, joint tenancy often seems like the simplest, smoothest way to handle property. The idea is enticing: name a coowner, and when one owner dies, the other inherits automatically. No probate, no fuss.
Yet, beneath that simplicity lies a maze of pitfalls. In many situations, joint tenancy may create greater risk than reward.
A Cautionary Tale
Consider a retiree, Sarah to designate her adult daughter, Emma, as a joint tenant to her family home. It seems helpful. Emma can help with bills. In case of the death of Sarah, Emma will inherit the house without probate.
- But then
Emma falls into debt.
Creditors claim against her assets.
The home, which is Sarahs refuge is threatened.
Sarah loses control. Her purposes vanish.
This isn’t hypothetical. Adding someone as joint tenant can expose property to that person’s creditors, and even marital disputes or divorces (Baker Tilly)
1. Loss of Control
Once you include someone as a joint tenant, decisions must be mutual. Want to sell? Renovate? Refinance? You need their consent.
That may seem trivial until the other owner disagrees, is ill, or refuses.
Imagine being locked into shared ownership with a coowner who won’t collaborate when you need funds, medical care, or flexibility. Relationships shift, and with them, your freedom.
2. Exposure to Creditors
This is one of the most tangible risks. If Emma (in our story) is sued, divorced, or bankrupt, her interest in the property becomes fair game for outside claims.
What was meant to protect Sarah now jeopardizes her home. The threat isn’t abstract; it’s real, and often sudden.
3. Tax Consequences: Capital Gains and Deemed Dispositions
Transfer ownership? The Canada Revenue Agency (CRA) may treat it as a deemed disposition, a notional sale, for half the asset’s fair market value. If the property isn’t your principal residence, you could owe substantial capital gains tax (one80law.ca).
A transfer meant to simplify things becomes a tax trap. The cost may exceed any probate savings.
4. Probate Avoidance? Not Always
Yes, joint tenancy avoids probate on the first death. But this advantage can be deceptive:
- Probate is pushed to the survivor's death anyway.
- In a double fatality (like a car accident), two separate probates may be required (parkercompany.ca)
- And if adding someone defeats the structure of your estate plan, like undermining a testamentary trust, your carefully crafted intentions vanish (Baker Tilly)
So, what seemed like a shortcut may derail your whole strategy.
5. Undermining Trusts and Complex Arrangements
Sophisticated estate plans often use trusts to protect assets and distribute them properly over time. Joint tenancy can override these arrangements.
For instance, if your will sets up a spousal trust but property is held jointly with that spouse, the property passes outright to them, ignoring the trust entirely (Ryder-Burbidge Hurley Foster). Your estate planning goals collapse.
6. The Presumption of Resulting Trust
Courts in Canada can presume that the property is not a gift, but a trust unless one can prove that clear intent was present (McDougall Gauley). Heirs or the CRA can treat such without a gift or letter of intent as part of an estate, so legal difficulties are created and possibly, probate charges incurred.
7. Family Dynamics and Unexpected Fallout
Estate planning must consider human emotions and evolving relationships. Joint tenancy treats ownership like a title deed, not family.
Adding one child as a joint tenant can exclude others, sparking hurt feelings, disputes, and legal battles.
Imagine siblings arguing: “Why isn’t my name on the house? Didn’t I care for the parent, too?” Silent resentment can ignite into costly conflict.
8. Tenants in Common: A Flexible Alternative
In contrast, tenants-in-common gives each person a defined share. You retain control. You can sell or transfer your share. You can bequeath it by will.
Yes, your share might go through probate. But you control who gets it, and you avoid many of the dangers of joint tenancy.
9. Blended Families, Multiple Heirs, and Strategic Planning
Joint tenancy may suit married couples where estate outcomes are straightforward. But for parents, blended families, or those with intended beneficiaries, it’s often inappropriate (WealthTrack).
Tenants in common, trusts, or wills offer more precision. They let you specify outcomes per heir, safeguard assets, and adapt to changing circumstances.
10. Story Vignette: Second Marriages and Hidden Consequences
Mark and Linda remarry. Linda has a child, Sarah. Mark intends the estate to go to Sarah, not Linda’s stepchild from a previous marriage. But he adds Linda as joint tenant on his cottage “for convenience.”
After Mark dies, the cottage, but not the proceeds, passes outright to Linda. Sarah gets nothing. Probate may be avoided for that asset, but Linda may remarry. Years later, the cottage ends up outside of the original intent.
This illustrates how joint tenancy can unravel even thoughtfully designed estate plans.
Final Thoughts
Joint tenancy’s allure is real:
- simplicity
- no probate on first death
- seemingly helpful to loved ones
But it carries these shadows:
- loss of control
- creditor exposure
- tax traps
- legal presumption issues
- conflict risk
- unintended beneficiaries
- trust erosion
At Forum Estates, estate planning must be both clear enough and flexible enough and also as legal as well as heartfelt. Joint tenancy is a tool, but not always the right one.
If you’re considering joint ownership, consider:
- having a trusted lawyer prepare a deed of gift or letter of intent;
- exploring tenants in common or trust structures;
- thinking ahead to family dynamics and future control.
Let your estate reflect your legacy, not unintended complications.
This article is for informational purposes only. Consult a qualified legal and tax professional before implementing any estate plan.
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