by Harry E. Thorsteinson
Harry E. Thorsteinson examines the advantages and drawbacks of joint ownership of assets.
Most people misunderstand the concept of “joint ownership” of a house, a cottage, an investment property or other assets such as bank accounts or investment portfolios. Many consider that if they own an asset with another person they own that asset “jointly”. From a legal perspective, this is not necessarily so. The expression “joint ownership” applies only to situations where an asset is owned by more than one person with rights of survivorship, meaning that the ownership passes directly to the surviving owner(s) upon the death of one of the owners. In some situations this is “good”, in others it is “bad” and in some cases it is downright “ugly”!
The “good” situation, and the most common use of this type of ownership, is when it is used within a marriage. Most spouses own the majority of their assets in this way – houses, cottages, investment portfolios, bank accounts and the like. The advantage is that when one spouse dies the surviving spouse becomes the owner of the assets immediately and with little or no legal hassles.
The “bad” situation arises when two or more people, who are not spouses, purchase an asset (usually land) together and place the ownership in their names “jointly”. Frequently, there is a close relationship between these people – brothers and sisters or business partners for example, but not always, and in these circumstances owning an asset “jointly” is probably inappropriate. Unless the owners are spouses the interest of the deceased owner should likely pass to that person’s estate upon death rather than to the surviving owner. Therefore, if one purchases property with someone else, other than a spouse, ensure that the property is not held “jointly” unless there is a very good and unique reason to hold title in this fashion. Seek legal advice!
The situation can turn downright “ugly” when people use this type of property ownership as an estate planning tool. A typical example is a widowed spouse who decides to own property “jointly” with one child so that the property will pass to that child upon death without hassle and without “probate fees”. This will be the result, and when used in appropriate situations, this is an effective and efficient way to pass property upon death. But unfortunately, holding title to assets in this fashion frequently thwarts an entire estate plan. If the same widowed spouse, for example, has four children and leaves her estate equally to all four, but then holds major asset jointly” with one child, that asset is removed from the estate and belongs to that one child alone upon death. When these circumstances arise, and they frequently do, the family is left trying to figure out the intention of the deceased – was that child supposed to have that asset to the exclusion of the others or was it to be treated as an estate asset and be divided four ways among all of the children? This often leads to painful, “ugly” and expensive family fights. The lesson to be learned is not to hold title to assets in a “joint” fashion without clearly setting forth your intentions in writing and without getting legal advice to ensure that such ownership fits into one’s overall estate plan.
Yes, Joint Ownership can wear all of the hats – the good, the bad and the ugly! Beware, and seek proper legal advice to ensure that you are wearing the hat that fits!