The Pitfalls of Joint Ownership

April 15, 2019 | Craig Dale, CPA, CA, CFP, TEP


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Considering if joint ownership is good estate planning or problematic tax planning.

Welcome back to the blog!

In addition to working with clients on wealth planning goals and objectives, I write a quarterly blog on tax tips and tidbits. In this edition, I’ll review some of the finer points and potential pitfalls of joint tenancy.

So what’s joint tenancy about?

Well, it isn’t as simple as it might seem.

It is common practice for estate planners to advise clients to transfer assets into joint tenancy ownership with loved ones. The rationale behind this is pretty clear, the surviving owner automatically becomes the sole owner of the property at the time of death of the testator.

Okay, so what’s the benefit of doing this?

Well, the asset does not fall into the estate of the deceased, instead passing directly to the joint owner, thereby avoiding probate fees, potential legal costs, and the time associated with administering the estate and transfer.1

So, at this point, it might sound like a no brainer, right? Well, unfortunately, in practice, it is rarely if ever quite this simple.

A joint tenancy ownership can give rise to a host of unintended consequences, often outweighing the potential savings in legal costs and probate fees and creating family tension and conflict in the process.2

The three joint tenancy options

In order to explore the options, let’s consider a relatively common scenario where an elderly parent transfers an investment account into joint tenancy with one of her adult children.

Inevitably, the intent of the elderly parent at the time of transfer is rarely documented or accompanied by appropriate legal advice.

Thus, the questions left to answer include:

  • Was the intent to gift the account outright to the child at the time of transfer?
  • Alternatively, was that child to hold the account in trust for the estate on the elderly parent’s death?
  • Finally, maybe there was the intent to gift a beneficial interest in the account at death.

So let’s explore the possible options…

A “true” joint tenancy

A first option is to create a true joint tenancy where the intent is to make an outright gift, thereby giving the child immediate joint legal and beneficial ownership interest.

The implications of this are as follows:

  • The elderly parent and child now have equal right to make investment decisions, access capital, or receive income.
  • The elderly parent must report a deposition of one half of the account in the year in which the transfer is made, giving rise a potential tax liability.
  • The elderly parent and child are now equally responsible and liable for income tax on future income or capital gains.
  • The account is subject to creditor or family law claims against the child in the event of a lawsuit or marital breakdown.
  • The child becomes the sole owner of the account as a result of the right of survivorship at the death of the elderly parent, successfully avoiding probate.
  • The child has no legal obligation to share the value of the account with a sibling after the passing of the elderly parent.

I would bet a nickel that ALL of the above issues are rarely fully contemplated.

A “resulting trust” joint tenancy

A second option entails the elderly parent gifting the child a legal interest in the account while retaining beneficial ownership throughout her lifetime.

The implications of this are as follows:

  • The elderly parent retains beneficial ownership and therefore there is no disposition, immediate tax liability, loss of control, or exposure to the child’s creditors or family law claims.
  • All income received or capital gains realized in the future are taxable solely to the elderly parent throughout her lifetime.
  • It is unlikely that probate will be avoided as the asset does not bypass the estate.

In this scenario, the child essentially holds their interest in the account in a resulting trust for the elderly parent to be distributed in accordance by the terms of her will. Therefore, the elderly parent remains the real or equitable owner, and as such, very little has likely been achieved.

If the elderly parent’s intention is not documented at the time of a gratuitous transfer, the assumption is that a resulting trust arises – the child must rebut this if this is not the case, a difficult task to prove!

Not likely what was intended…

A gift of “right of survivorship”

A third and final option is to give a child a “right of survivorship”, a concept introduced by a famous Supreme Court of Canada case.

The implications in this scenario are very similar to those described in the “resulting trust” joint tenancy. However, one key difference is that at the time of the elderly parent’s death, the child receives full beneficial ownership of the account without the application of probate.

In most cases, I think this is the type of joint tenancy that is often desired, however, it is rarely property implemented.3

So is joint tenancy worth it?

Well, although joint tenancy can be an effective estate planning strategy, I hope that you can see there are some pitfalls too.

It is unfortunately all too common for there to be a lack of appropriate documentation to accompany the planning, often resulting in disagreements between family members, leaving the courts with the difficult task of determining intent, often many years later.

Therefore, it is integral to ensure that care is taken to appropriately document intent to obtain the desired joint tenancy option. Otherwise, the resulting uncertainty, the related court costs, potential tax issues and creditor exposure may outweigh the benefits.

If you take a couple things from this blog, seek legal advice first and put it in writing.

Well, that and probate is only a 1.4%!

I can be reached at craig.dale@rbc.com or 604.981.6681.


The blog may contain several strategies, not all of which will apply to your particular financial circumstances. The information in this blog is not intended to provide legal, tax or insurance advice. To ensure that your own circumstances have been property considered and that action is taken based on the latest information available, you should obtain specific professional advice before acting on any information in this blog.


This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under license. © 2019 RBC Dominion Securities Inc. All rights reserved.


1 In BC, probate fees are 1.4 percent of the value of the estate assets.

2 The recent case of Gully v. Gully BSSC 1590 is a case in point.

3 If this type of joint tenancy is desired, ask me about RBC Dominion Securities Joint Gift of Beneficial Right of Survivorship (JGBRS) account. The terms of the client account agreement expressly state the intention of the account holder to ensure the desired result is effectively achieved.