Is Joint Ownership Good or Bad for Estate Planning?

Case shows using joint ownership as an estate planning tool to avoid the payment of probate when one owner dies is risky, writes Bob Aaron.

A decision of the Superior Court earlier this year provides a cautionary tale for people who might be tempted to use joint ownership as an estate-planning tool. This is often done to avoid the payment of Ontario’s 1.5-per-cent probate fee when one owner dies.

When a house is owned by two joint tenants, which is what the law calls joint owners, and one of them dies, title automatically transfers to the survivor without the obtaining of a certificate of probate from the court. As average house values continue to soar, this is becoming an increasingly popular tool for Ontario homeowners … but it is not without significant risks.

Nigel Jackson and Bernie Taube had been domestic partners since 1963. Together, they owned an antique business, which they operated from rented premises. (It was never profitable.)

In November, 2005, they executed mirror wills leaving everything to the survivor. They named Lori Rosenberg, who was Taube’s great niece, as the alternate beneficiary.

Taube died in July 2010.

At the time of his death, the couple jointly owned a condominium in Yorkville, which was automatically inherited by Jackson.

As well, Jackson owned a home on Potts Lane in Port Hope. In 2012, Jackson transferred ownership to himself and Rosenberg as joint owners, meaning she would inherit his share when Jackson died. He said his intention was that, although she would be the owner eventually, she would not acquire any ownership interest during Jackson’s lifetime.

In August, 2020, Jackson became worried that Rosenberg would take steps to force him out of his home. The next month, he instructed his lawyer to revoke the joint tenancy, and transfer ownership to himself and Rosenberg as tenants in common, meaning each would have a 50 per cent ownership with no rights of survivorship.

Jackson and Rosenberg then sued each other, with Rosenberg claiming that the 2012 transfer was a gift of a half interest to her, and Jackson claiming that he was the beneficial owner of the half interest registered in Rosenberg’s name — meaning that he was the owner of all of the house.

The dispute came before Justice Robert Charney last June. In his 10,000-word decision, he ruled that Jackson’s transfer of the title to the Port Hope home to himself and Rosenberg, each as to a 50 per cent ownership, was valid. Rosenberg holds her share in trust for Jackson during his lifetime, and he is free to mortgage or sell the entire property.

When he dies, his 50 per cent share in the house becomes part of his estate and passes under his will. Rosenberg’s 50 per cent share in the house, if it hasn’t been sold, passes to her by right of survivorship as Jackson could not revoke the gift of survivorship.

Justice Charney wrote in his decision: “As Mr. Jackson has now discovered, joint tenancy is a risky way to minimize probate fees. The legal fees that both parties will have to pay to resolve this dispute will far exceed any probate fees that Ms. Rosenberg would have had to pay.”

Image credit: iStock/Getty Image

Bob Aaron is Toronto real estate lawyer. His column appears on this blog, Move Smartlyand in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website 

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