Joint Ownership: Is it worth the headache?

Two CRUCIAL factors you need to understand before considering this estate planning strategy.

Have you been helping with your aging parents finances and considering adding yourself to the title on their home?

Or maybe you have been thinking about adding an adult child to that cabin property you want to ensure stays in the family.

Well... I'm here to tell you that you may want to think again.

It seems like a simple enough "fix" to help streamline your estate plan or that of your aging parent. Heck, it may even help minimize the impact of probate fees...

What is probate you ask?

Well in Saskatchewan, when one passes, some assets may need to flow through the estate. The assets that do, are subject to a probate fee of $7 per $1000 of value passing through the estate.

The common goal of adding another person to title is to avoid probate that will take place on land / property.

However, there are two distinct forms of joint ownership you need to understand before considering this strategy.


Because adding your adult child as a joint owner to property could have unintended tax and legal consequences that out weigh the perceived benefit of avoiding probate.

So, if you’re a Canadian living outside Québec, and are considering sharing ownership of an asset with a child or aging parent during your lifetime, be careful.

There are two distinct forms of joint ownership. You’ll need to specify which type you’re choosing, but also be very clear about when both legal and beneficial ownership will be received.

If you’re not careful, unintended tax burdens, estate complications, and family conflicts can result.

Alright, so let's break it down.

1) Presumption of resulting trust - the default ruling.

In 2007, the Supreme Court of Canada ruled that when a parent gratuitously adds an adult child as a joint tenant to an asset, the court presumes the child is holding the property in trust for the parents estate.

The child in turn does not receive beneficial interest in the property when he or she was added - only a "legal" interest.

In this case:

  • There is no change in beneficial ownership when the parent adds the adult child, so no capital gains or losses are realized.

  • During the parent’s lifetime, the parent must report all the future income and capital gains from the property.

  • During the parent’s lifetime, the child will not have any rights to any part of the asset.

  • If the parent dies first,

  • a. The parent will realize all the accrued capital gains on his or her tax return in the year of death.

  • b. The asset will be considered part of the deceased parent’s estate.

  • c. The child should transfer the asset to the parent’s executor, to be distributed in accordance with the parent’s will – i.e., the child will not necessarily be the only one who will enjoy the asset.

  • d. If the deceased parent’s executor is required to apply for probate, and the application for probate requires full disclosure of all estate assets, then the executor should include the value of the jointly held asset. This means that probate fees may be payable in respect of the asset.

2) Rebut the presumption of resulting trust - Strong evidence needed.

The presumption of resulting trust can be rebutted with evidence of the parent’s intent to “gift” an interest to the child (the wording of the application for a joint account with a financial institution is generally insufficient evidence of intention).

Proving the property is a gift requires strong evidence in order to be held up in court. Often requiring proper legal documentation of the intent of the transferor.

If evidence of gift is produced, then:

  • There is a change in beneficial ownership when the parent adds the adult child, potentially resulting in a partial disposition of the asset. If there is an unrealized capital gain accrued, part of this gain would have to be reported at the time the joint owner is added, potentially resulting in a tax liability for the parent.

  • During the parent’s lifetime, the parent and children should report an equal share in the future income and capital gains on the asset.

  • During the parent’s lifetime, the child will be a part owner of the assets, meaning that the child’s interest could be exposed to claims made by the child’s creditors (including the child’s spouse).

  • If the parent dies first,

  • a. The parent will realize the accrued capital gains with respect to his or her remaining share in the asset on his or her tax return in the year of death.

  • b. The asset will not be considered part of the deceased parent’s estate.

  • c. The child will inherit by right of survivorship, free and clear of any claims made by other estate beneficiaries.

  • d. Probate fees will not apply to the asset.

Ok, so enough of the legal jargon.

We can look at an example of a ruling from 2012 where there was inadequate evidence to rebut the trust, which intern resulted in the deceased's wishes not being met, family turmoil and and costly legal fees.

There are a MANY other issues that can arise from adding a child to title. From loss of the primary residence exemption, risk from creditors, assets being included in a divorce and more.

At the end of the day, you want to be sure you are asking yourself the right questions - and reflecting back on your Will to ensure your estate will be settled inline with your wishes.

Here are some questions to help you reflect on your current estate planning documents...

Which end result do you want to apply – a resulting trust, or true joint tenancy?

If you hold an asset in joint ownership with an adult child, what end result do you want?

Do you want that child to have to share the asset with the other beneficiaries in your will like other children and relatives, friends, or favourite charities?

Or do you want your child to inherit the asset free and clear upon your death, with no obligation to share with the other beneficiaries of your estate?

In the absence of a clearly worded contract or trust agreement between you and your child, the end result may well be that your child and your other estate beneficiaries will spend all their time and money fighting about your intentions, and very few of the assets will remain to be enjoyed.

Consider going to a lawyer to write a contract and update your Will so they clearly explain your intentions and expectations, and have your child agree to them.

The contract will hopefully prevent possible fights after your death and ensure your final wishes are addressed.

If you are in the early stages of creating an estate plan, check out our free resources to help you start putting the pieces of the puzzle together.

Step One: Create a family tree

Step Two: Download these estate planning toolkits

Step Three: Seek out a Certified Financial Planner and proper Legal Advice

Happy planning!

Written and published by Michael Isbister, IG Private Wealth Management as a general source of information only, believed to be accurate as of the date of publishing. Michael Isbister is a CERTIFIED FINANICAL PLANNER professional in Saskatchewan. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on up to date withholding rules and rates and on your specific circumstances. Trademarks, including IG Wealth Management and IG Private Wealth Management are owned by IGM Financial Inc. and licensed to its subsidiary corporations.


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