I recently valued a property that was the center of a law suit. The problem arose when the owners of the property decided that adding their son to the title as a joint tenant was a simple way of ensuring, that upon the parents' death, the property would transfer to the son without any probate fees. While this does work, it is problematic and a potentially dangerous practice.

The intention of the parents is that they will continue to use and benefit from the property and the children will take over once they die. The creation of a joint tenancy gives ownership of the property now and therefore is a current asset of the child on title. There are a number of potential problems that arise from this. If the child were sued, their creditors could place a charge against their share of the property. Outstanding taxes owed by the child could be secured by the property.

If the parents decided they would like to sell or mortgage the property, then the child would also have to sign, perhaps the child wants to retain the property, thereby stalling the parents' plans.

The creation of the new joint tenancy may lead to capital gains for the child’s share from the date of transfer.

If the parents have more than one child and only one child is put on title, the child on title may exclude their siblings from the benefits of the property, which may not have been the intention of the deceased parents.

Often parents will put more than one child on title as joint tenants, if one of the children dies before the parents, that child’s children (the grandchildren) have no legal rights to the estate; this may not have been the original intention.

In BC, the probate fees are 1.4% on the estate value over $50,000. A $300,000 property would have a probate tax of approximately $4,200. While it may be tempting to avoid this tax by using a joint tenancy, the risks in doing so are, in my opinion, excessive. It is advisable to consult with a lawyer who is familiar with estate planning - they may suggest a safer alternative than joint tenancy.

Rob Ironmonger