Joint Ownership in Estate Planning: Helpful Tool or Hidden Risk?

Joint ownership is often discussed as a simple way to make estate administration easier. In some cases, it can be useful. In other cases, it can create more problems than it solves.

The basic idea is that an asset, such as a home, bank account, or investment account, is owned by more than one person. Where the asset is held as joint tenants with a right of survivorship, the surviving joint owner may receive the asset automatically when the other owner dies. This can mean that the asset does not pass through the deceased person's estate and may not require probate.

For that reason, joint ownership is sometimes used as part of an estate planning strategy. However, it should not be treated as a shortcut or a substitute for a properly prepared estate plan.

The key question is always intention. When someone is added as a joint owner, is that person meant to receive the asset personally after death, or are they being added only for convenience? For example, a parent may add an adult child to a bank account to help with bill payments, but may still intend for the account to be divided among all children after death. If that intention is not documented clearly, disputes can arise.

Joint ownership between spouses is often appropriate where the intention is for the surviving spouse to receive the asset directly. This is common with a matrimonial home or joint bank accounts. Even then, the ownership structure should be reviewed in the context of the overall estate plan, especially where there are children from a prior relationship, unequal family circumstances, or assets that are intended to pass to other beneficiaries.

Adding an adult child or another family member as a joint owner requires greater caution. It may expose the asset to that person's personal circumstances, including creditor issues, family law claims, separation, divorce, or their own estate issues. It may also give that person practical control over the asset during your lifetime. For real estate, this can mean their signature may be required to sell, refinance, mortgage, or otherwise deal with the property.

There may also be tax consequences. Transferring an interest in an asset during your lifetime may trigger tax issues depending on the nature of the property and the relationship between the parties. On death, capital gains tax may still be payable by the estate even if the asset itself passes outside the estate by right of survivorship. This can create an imbalance where one beneficiary receives the asset directly, while the estate remains responsible for tax or other liabilities.

Another important concern is fairness among beneficiaries. A joint ownership arrangement may unintentionally favour one person over others. For example, if one child is named as joint owner of a property or investment account and other children are to receive what remains in the estate, the overall distribution may not reflect the parent's true intentions. This is especially problematic where the jointly held asset is the most valuable asset.

Where joint ownership is used only for probate planning, the arrangement should be carefully documented. In some circumstances, the joint owner may be intended to hold legal title only, while the beneficial ownership remains with the original owner or their estate. This type of planning may require a Declaration of Trust and should be coordinated with the client's Will, and in some cases, with a Secondary Will.

The Supreme Court of Canada's decision in Pecore v. Pecore is an important reminder that joint ownership does not always mean an outright gift. Where a parent places an asset into joint ownership with an adult child, the law may presume that the child holds the asset for the parent's estate unless there is evidence of a contrary intention. Clear written records can help reduce uncertainty and avoid disputes after death.

Joint ownership can be effective when it reflects the client's actual intentions, is properly documented, and is consistent with the rest of the estate plan. It can be risky when it is done informally, without legal advice, or without considering the effect on taxes, family dynamics, probate, and beneficiary fairness.

Before adding someone to the title or changing ownership of an account, it is important to ask several practical questions. Who should ultimately receive the asset? Should the asset pass outside the estate or form part of the estate distribution? Will the arrangement affect other beneficiaries? Could the joint owner's personal circumstances create risk? Will the estate have enough funds to pay debts, taxes, and expenses? Does the Will say the same thing as the ownership structure?

At Aziz Law, we assist clients with estate planning in Ontario, including Wills, Powers of Attorney, probate planning, multiple Will planning, and the review of jointly held assets as part of a broader estate plan.