What is Joint Tenancy?
When one joint tenant dies, their interest passes outside the Will to the surviving tenants, thus not forming part of the deceased’s estate; this is referred to as “right of survivorship”. A house can be owned with other persons in joint tenancy. Each owner is called a joint tenant.
Uses of Joint Tenancy
Avoid probate fees:
Probate fees are assessed on the value of a person’s property within BC that passes to the personal representative.
Such property must be disclosed in the probate application as passing under the Will, and is usually considered part of the estate
Probate fees are approximately 1.4% of the value of the probateable assets
Probate fees can be avoided by planning your estate so that certain properties pass outside your will upon your death
The right of survivorship aspect when registering a property under joint tenancy lets you avoid probate fees
Avoid the Wills Variation Act
Under the BC Wills Variation Act (WVA), a person who is not satisfied with his or her gift under the Will of a deceased spouse or parent can ask the court to give them a greater share in the estate.
Usually only the estate that passes under a will is vulnerable to a WVA claim.
Since properties registered in joint tenancy passes outside the Will, such properties will not be exposed to the WVA.
Avoid costs and delays associated with obtaining probate
The process associated with obtaining probate of a Will may take between 3-6 months, and costs between $1,500 and $3,500, not including probate fees.
The transferring of a real property to a beneficiary also requires filing with the Land Title Office and, in some cases, property taxes must be paid.
Transmitting property in joint tenancy requires only one meeting and a simple filing with the Land Title office; costing between $200 and $300, and avoids the additional cost of probate fees and property transfer tax.
Problems with Joint Tenancy
1.Loss of control
Under a property registered in joint tenancy, joint tenants lose the ability to individually act and make certain decisions regarding property.
E.g. loss of the ability to sell or mortgage the property without the agreement of the co-owners.
2.Exposure to creditors of co-owners
If one of the joint tenants falls experiences financial difficulties, their creditors may try to seize their share of the interest in the property.
The transfer of a home into joint tenancy with a person who does not live there may mean the loss of “principal residence” status for part of the property
The loss of principal residence status results in tax payable if there is a capital gain when the property is sold
Any transfer of property into the names of j0int co-owners may trigger tax consequences
4.Child inappropriately dealing with property
If a parents has more than one child and is registered jointly with only one of them, the child taking the property might not deal with it in accordance with the wishes of the deceased parent.
5.Child predeceasing parent
If several children are named as joint tenants with a parent and one predeceases the parent, the children of the deceased child will not inherit any share in the property because of the right of survivorship.
This may be inconsistent with the wishes of the deceased.
This may be avoided by letting the property pass under a Will.
6.Mortgaged property transferred into joint tenancy may void any mortgage insurance
7.The spouse of a co-owner may make a claim against the property
8.The court may set aside a transfer into joint tenancy
If a transfer into joint tenancy is an invalid “testamentary gift” not signed in accordance with the Wills Act, the court may set it aside.
In this unusual case, the property would fall back into the estate and probate fees may be payable and could be subject to claim under the Wills Variation Act.