You Probably Don’t Know these 5 Dangers of Joint Ownership
Joint ownership, even with family, can create legal problems.
Here are five dangers you must be aware of. Review this list before you consider holding property in joint ownership with anyone, including children.
Joint owners can refuse to cooperate when you need to deal with the property.
Your child could die first or at the same time. You still must plan for this and other contingencies.
Divorced spouses of a child can make a claim to the property.
Transfers of some assets can create a capital gain and other expenses.
Read related posts on joint accounts:
Owning assets jointly with spouses reduces probate costs. It is a valuable estate planning technique. But if you own all your assets jointly with anyone other than your spouse, look out. It may be impossible to treat your beneficiaries equally. Make sure your will accounts for all joint assets.
For example, Mark owns a ski chalet jointly with his daughter. Mark wants to be fair and treat his two children equally so he registers his home with his son, as joint owners.
Mark figures the two pieces of real estate have the same current value and that this is a fair division of his estate.
If Mark got professional advice, he would be aware of certain issues. His home and personal residence could appreciate more quickly than the chalet, a recreational property. These properties also receive different tax treatment on Mark’s death.
The result can be an unequal split between the two children and a legacy of bitterness.
Always discuss the advantages and disadvantages of having jointly owned assets with your lawyer.
Consider the risks carefully before you give up control of your assets. Once someone is a joint owner, you often can’t remove him or her as a joint owner without their consent. If consent is not forthcoming, you could end up in a court fight.
Remember, you can’t give away jointly owned property in your will unless the other joint owner dies first.
Legal and Beneficial Ownership Distinguished
Finally, make you intentions clear. Otherwise a judge may have to decide who the true owner of the property is. Judges now draw a distinction between legal and beneficial ownership of joint assets. This is because of the Supreme Court’s Pecore decision.
This is a bit tricky to understand but this example will help:
Imagine you and John have a joint account. John gives you a cheque for $50,000. You deposit it into the joint account. John suddenly dies.
Is the money in the account yours? Legally, you are the surviving joint owner.
However, did you receive the money gratuitously (meaning you did not earn it)? If so, you are not entitled to the funds. The beneficial owner is entitled to the money. This is regardless of whose name is on the bank records.
Need to defend or contest ownership of a joint bank account?
Read my related posts and call a lawyer.
About Ed Olkovich
I am Toronto estate lawyer, author and editor of Carswell’s legal guide Compensation and Duties of Estate Trustees, Guardians and Attorneys. I am a Certified Specialist in Estates and Trusts law. I have handled estate disputes and probate problems since 1978. © 201Posted In: Contesting a Will, Estates On: July 24th, 2014