JOINT TENANCY WITH A SPOUSE
It has become fashionable for couples to visit their family lawyer and request that old titles to land be transferred from one of the spouses (usually the husband) into the names of both spouses as joint tenants. The reason most frequently given is that they have heard it is much cheaper and easier to administer an estate when titles are registered jointly.
While the latter statement is usually true, it is certainly not a black and white issue. There are valid reasons why a couple ought to hesitate before they go to the expense of conveying their titles.
First, there is the immediate cost to convey titles into the joint tenancy, both Land Titles Office fees and solicitors' fees.
Second, although an application by a joint tenant is easier and cheaper - it is not free! Some people seem to think that upon the death of one of the title holders, the other joint tenant must simply send their title to the Land Titles Office and a new one would be issued in their name. Unfortunately, a formal application must be prepared together with an affidavit exhibiting a death certificate, all at some cost.
Third, the underlying assumption to the transferring of titles seems to be that the spouse who is acquiring the interest will outlive her (or his) spouse. What if a husband transfers title into joint names with his spouse, only to have his spouse die first? First he incurred the cost of placing titles in joint names, and now he has the additional cost of making an application as surviving joint tenant to obtain the title back. I can just imagine a client berating his lawyer for all the inconvenience and expense he has incurred to get the title back into his own name when it was in his name alone in the first place. If only one could know for certain who would outlive whom. If one could foresee the future, the best answer would be to have the first to die (before he dies) convey title into the survivor's name alone!
Fourth, most people die without owning any land because they sell prior to the death of either spouse. It may be a sale to a son or daughter or a sale simply to raise some extra cash to keep them in their senior years. But if one plans on selling the land before one dies - and manages to do so - the cost of conveying into joint names is obviously wasted.
Fifth, there is the Goods and Services Tax. Canadian Customs & Revenue Agency has indicated it would not insist upon registration or payment of the Goods and Services Tax upon registration of title into joint names where the transferee is a spouse of the transferor. But the latter is only an administrative decision that could change without much warning, and certain other conditions must first be met. Accordingly, caution in this area must be exercised.
Sixth, when titles are in joint names it creates an additional complexity when drawing the couple's Wills. The complexity arises because one can no longer say with certainty who will own the land at the time of death except that it will be the last to die. Accordingly, if a specific bequest is desired of the land, it would be necessary to deal with the bequest in both Wills. If the parties died at the same time, the yet-to-be proclaimed Survivorship Act would require the probating of both estates!
Seventh, although the cost of administering most estates is more than an application by surviving joint tenant, there is no guarantee that in an ever changing world that will be the case ten years from now.
Eighth, a very important consideration in estate planning has always been the role of income tax. Although the administration of an estate may cost 2 1/2% of the value of the estate, Revenue Canada can take as much as 48% of a person's earnings year after year in income tax. It was not that many years ago when many couples were transferring titles out of joint names into the name of one spouse so that the other could establish and pay into a Registered Home Ownership Savings Plan. Now, some title holders are considering a transfer of their land into the name of their spouse to trigger a taxable disposition in order to utilize the Capital Gains Exemption. Many people anticipate the repeal of the Capital Gains Exemption - especially as it relates to farm land.
Most couples purchasing homes, and occasionally business property, would take title in their joint names. Whether one incurs the expense of conveying titles into joint names when it is already in the name of one of the spouses depends upon the individual's circumstances. There is no doubt that for some senior couples who plan to hold onto their land at least until the death of one of them, transferring title into joint names is a good idea.
However, before a decision is made in this regard, one ought to consider all the factors and would be well advised to consult with one of our experienced and knowledgeable lawyers.
If the property placed in joint names is a principal residence, and one of the title holders does not reside there, there is a question as to whether or not the principal residence exemption will be available for capital gain for the years after the transfer.
In addition to income tax, by placing property in joint names one may incur goods and services tax. This can result in tax being payable immediately upon conveyance into joint names.
Joint tenancy complicates and adds to the cost of the drafting of Wills. Unless sufficient time and thought is expended, a Will may consequently have unintended and undesirable results and may have to be rewritten.
There is a presumption at law that when assets are in joint names with a spouse, the deceased intended the spouse to retain the entire benefit upon death. When property is placed in joint names with children, the presumption is just the opposite, the child holds title as trustee for estate beneficiaries. Because documents are rarely signed indicating the intention of the parent and child, there has been much litigation among surviving children as to what intent the parent might have had when the parent transferred property into joint names with a child. This is especially true in relation to interests other than land, such as bank accounts and investments.
Joint tenancy with children can be a good idea, but it can also be a recipe for disaster. Before such a decision is made, one ought to carefully consider all the factors. One would be well-advised to consult with a lawyer before transferring an asset into joint names with a child. As in much of life, the issue of joint tenancy is not black and white.