Joint Tenancy Part 2 of 4: Joint Tenancy VS Tenancy In Common

Part 2 of a 4 part series: The importance of Joint Tenancy in the Estate Planning & Real Estate matters – Joint Tenancy,Tenancy In Common and preparing your will.

Last month, our topic was the three types of property ownership and how each of them have their own specific features. This time we will discuss how Joint Tenancy and Tenancy in Common can impact your estate planning decisions when you are preparing your will.

In Estate planning, Joint Tenancy and Tenancy in Common both have a purpose. When you are doing estate planning and making a making a will the Right of Survivorship is the most important factor but it’s a good idea to investigate both means of property ownership. By making an informed decision you can avoid a large tax burden or a hefty probate fee. The following scenarios will show how each form of property ownership comes into play when you are estate planning and preparing a will.

As we discussed earlier, Joint tenancy includes the Right of Survivorship and is the most common form of property ownership by a married couple. But Joint Tenancy can also include other combinations. For example three adult children could be holding a property as Joint Tenants. Their parents made their will and left an equal share to each child. In this case the adult children are Joint Tenants and are governed by the ‘last man standing’ rule.

As each child dies, the property passes to the other two on title. When the next one passes away the estate is left to the ‘last child standing.’ In this case there is no Right of Survivorship for the grandchildren so they would get nothing of their grandparent’s estate. Establishing a Tenancy in Common could be a solution. Then, each of the adult children could bequeath their share of the property to their children.

In another case when making their wills two elderly parents are concerned about high probate fees their heirs may incur. If there is only one heir it’s quite straightforward and simple. The parents are advised to remain as joint tenants or maintain a Tenancy in Entirety and then once the last surviving parent dies, the property automatically goes to the child. No probate fees, no tax burden just an easy property transfer. Things change however if there are two or more children. Then, when preparing their will, the parents must decide what percentage each child will receive or if each child gets an equal share.

But what happens when a spouse has passed away and has already gifted one of the children a piece of property. In addition he may have also added another child on title and has left off the third child due to an estrangement. Once he dies, his wife could be left in a precarious situation and be at risk to be abused both financially and emotionally. The child on title could use their position to mistreat their parent and take their money. Community Response Networks or CRN’s across Canada report this is not an uncommon or unknown occurrence.

Also it could be that the surviving parent has reconciled with the estranged child and wants him or her to be a beneficiary. In both of the above cases the best solution is to sever the Joint Tenancy and create a Tenancy in Common. This way the surviving parent retains their independence and if they wish they could bequeath their share of the property to the third child.

These fairly common scenarios show that when preparing a will and doing estate planning, you will be faced with making difficult decisions about your property ownership. I can help you make these decisions because as a Notary Public I’m not a product seller but a problem solver. I can offer you solutions that include saving taxes, money and relationships.

‍