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Joint tenancy: it sounds simple, but is often a double-edged sword

By Timothy N. Sullivan

Generally speaking, property can be owned either personally or jointly. Joint tenancy is when people own a property together and the right to an individual’s share of the property passes, in equal shares, to the surviving owners. (Tenants in common, on the other hand, see their share of the asset become part of their estate, which is then distributed as any other part of their estate upon their death.)

Joint tenancy is most commonly seen in regard to homes owned and occupied by married couples: upon the death of one spouse, their share passes to the surviving spouse. In ‘typical’ marriages, this is a suitable arrangement, since the intent of both parties was to ensure that the surviving spouse should continue to own the marital home.

However, in other marital situations, such as a second marriage or when an adult child has been residing with a sole parent for an extended period of time, joint tenancy can become more complicated. An older person who brings a large, owned home to a late marriage may not realize that their new spouse, not their adult children from a previous relationship via the estate, will inherit the rights to that home should they pre-decease that new spouse.

Legal disputes can arise when wishes aren’t made clear in advance

In a recent case, the Court of Appeal for Ontario ruled that a woman’s interest in her house did pass to her daughter-in-law pursuant to a ‘joint tenancy established by gift’ after one of her children claimed the house should have been or became part of her estate that was to be shared among her children.

In the appeal court case, the testator’s will split her estate equally among her three children. She initially purchased a house with one of her sons as a joint tenant, but he later agreed to transfer his interest to his wife following the mother’s death.

Following her diagnosis of cancer, the mother called her lawyer’s office and received assurances that her property would go to her son and his wife after her death.

However, after her death, her daughter, who did not have a good relationship with the deceased, applied to have the home declared part of the estate.

The application judge found it was clear that the presumption of resulting trust was rebutted in this case because it was clear that the mother had capacity and intended to gift the property.

At appeal, a three-judge panel unanimously dismissed the daughter’s argument that the lower court judge had erred in concluding the gift was valid.

Homeowners are attracted by the ease with which joint tenancy can be used to make an inter vivos gift to a family member. But it’s also easy to challenge the gift once the original owner dies and the property flows automatically to the joint tenant due to the right of survivorship. Because trust is such a key component of joint tenancy, it’s often unclear to the parties involved exactly how the joint tenancy came about, how it was established, and how ‘legitimate’ it really is if it’s challenged. In other words, because it kind of works for everybody, it kind of works for nobody.

How can you make joint tenancy work for you?

As we’ve said before, making a proper will is the first step in ensuring that whatever your wishes, they’re carried out upon your demise.

When it comes to joint tenancy, however, it’s the communication of the reasoning behind your wishes, prior to your death, that can make the biggest difference in whether your will is challenged – and whether your surviving inheritors end up being surprised and angry. A joint tenancy may be the best solution for your situation – but it’s crucial that you tell your family (or whoever else may have an interest in your estate) both what you intend and why you’ve come to that decision. You don’t have to show anyone else your will or get into specifics about whether Aunt Josephine is getting the sterling flatware, but letting everyone know about how the residential property is to be disbursed can go a long way to ensuring family harmony even after you’ve gone.

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