Joint Tenancy: A Real Estate Planning Tool
Joint tenancy is a commonly used strategy that helps individuals improve their estate management processes. Joint tendency refers to a property that is owned by more than one person. The right of survivorship as well as several other financial and personal considerations impact joint tendency agreements. Utilising a joint tendency can be very effective in purchasing and maintain a home, though may not be the ideal choice for some prospective homeowners. These are some of the key considerations to assess when deciding if and how to utilise joint tendency in your estate planning efforts.
Right Of Survivorship
The Right of Survivorship means that if one spouse in a joint tendency agreement passes away, the property and all its contained assets are immediately passed to the surviving spouse. Many married couples utilise this strategy to minimise estate probate fees and to simplify the estate administration efforts. In a joint tendency agreement The Right of survivorship also supersedes the requests of a personal will as well as the Estate Administration Act, if there is no will established.
Loss Of Estate Control
Joint tenancy agreements do offer some distinct advantages in regards to home ownership and estate planning, though they do require a sacrifice of control. For example, a joint tendency can be between spouses as well as parents and children. In either case, the agreements cannot be dissolved without a mutual agreement, nor can the home or land be sold with both party’s signatures. Furthermore, if a child marries and then utilises the property for family purposes, the child’s spouse could be entitled to some of the property and or it’s value, if the marriage later ends.
Joint tendencies create several tax implications for both parties involved.
- Income Tax – If the property is transferred and the joint tendency is between parent and child, 50% interest will be transferred to the child. If the home was the parent’s primary residence, a portion of capital gains can be added provided as an addition to the parents. A parent may have to pay increased income tax, though they received no payment from the child.
- Property Tax – If the property is transferred to a single owner, property transfer taxes will payable at the moment of transfer. If the property is a primary residence of either party involved, a tax exemption may be available.
Importance Of Tangible Agreements
Make sure that every party involved understands the tax implications of the joint tendency and that all terms of the ownership are in writing. This is very effective for future ownership or expense disputes. As blended families can be involved, as well as several different personal relationships, the interworking through survivorship, taxation, property transfers and other related considerations could become quite difficult to manage. These issues can also create a strain on families. Make sure that your joint tendency agreements are always in writing to ensure organised, fair and transparent ownership and estate management processes.
Contact Sidhu Lawyer if you have any questions regarding joint tenancy or other questions regarding renting in Surrey or real estate law in BC.