Should I avoid the Probate fee by adding my child on the title?
While Joint tenancy works great in a marriage situation, when adding a child on title – it can create various complications:
- Capital Gain & Income Tax Burden (The 50% interest in the property transferred to a child is deemed to have been sold at its fair market value and unless the asset is the parent’s principal residence, a portion of any capital gains will be added to the parent’s income as well.)
- Loss of Control (The “added” child assumes partial control of the estate and he/she might use their position to abuse their parent and misuse the property.)
- Exposure to Creditors (Your “joint tenant” child can expose your property to his/her potential creditors or divorced spouse.)
- Resulting Trust (In the absence of evidence that the gift was intended, common law presumes that the added joint tenant who has not contributed anything towards acquiring the share in the property is essentially just a trustee with no right to use the asset or benefit from its income.
The moral: Please talk to your Notary about joint tenancy before making any of these decisions, so you can avoid any headaches in the future!