Parent Child Joint Ownership of House in Alberta

Risks and Benefits of Adding a Child as a Joint Owner

Anna Dunaeva DLegal Anna Dunaeva June 6, 2023
DLegal Law Office - bench

Sharing joint ownership of a house between parent and child can be a strategic financial move that benefits both parties, especially when it comes to estate planning. Parents can ensure that their child will have a secured stake in the property, while the child can establish a credit history and potentially reduce their tax liabilities.

However, like most things, parent child joint ownership of a house can also open parties up to certain risks and complications. Ensure you seek proper legal guidance and planning to set up your joint ownership in a practical way for your family’s future.

Benefits of Joint Ownership Between Parent and Child

When it comes to joint ownership, most families choose a joint tenancy agreement. This allows two or more individuals to own property together, each having an equal 100% share. The primary benefit of joint tenancy is that when one owner passes away, their share may automatically pass to the surviving owner(s) without needing to go through the legal process of probate. A joint tenants agreement may also offer a unique advantage when it comes to capital gains tax.

Further, joint tenancy may offer an extra layer of security to property owners as well by safeguarding them against the claims of creditors. With a joint tenants agreement, even if a creditor’s claim targets one owner, they may still have some protection. The property may be exempt from seizure because it is owned jointly with the other joint owner.

From an interpersonal standpoint, this type of agreement allows families to build strong bonds and foster a sense of unity. In addition, it provides an excellent opportunity for intergenerational wealth transfer, yielding long-term stability for you and your child.

However, there are also some potential disadvantages to consider regarding joint tenancy, especially when entering into this agreement for the sake of estate planning in Canada.

2007 Supreme Court of Canada Decision

One of the main reasons parents have traditionally chosen to add their adult children to their family home is so that they can benefit from the right of survivorship in a joint tenancy agreement. This is meant to help their children avoid probate which is often mistakenly characterized as lengthy and costly.

However, this notion is not as black and white as it once was.

In 2007, the Supreme Court of Canada stated that adult, independent children would not inherit a jointly owned house with the right of survivorship. Instead, the court would presume that the parent did not intend true joint tenancy with the independent child. Instead, they would view the adult child as simply holding the property in trust so that they could easily manage their parent’s affairs for them.

Once the parents passed, the property would become part of their parent’s estate unless the child in question could prove that their parent intended to gift the property to them. Otherwise, it would be distributed as part of the will or according to interstate rules of succession.

This undermines the notion that you do not need to write a will if you share ownership of a property with your child. A will should clearly outline your intentions to ensure your wishes are respected even after you are gone. Unfortunately, there is no shortcut for skipping probate fees. However, the good news is that they are often not as hefty as some think.

Risks of Joint Ownership for Estate Planning

It is essential to weigh the pros and cons of joint ownership between parent and child before entering into an agreement. With any type of shared ownership, the parties involved may open themselves up to disputes or potential relationship breakdowns. This could stem from different opinions on how the house should be used, managed, or maintained, as each joint owner has an equal say in the property and will have unlimited access to the assets jointly owned.

Parents should also be aware that if their children go through a divorce, the jointly owned property could be considered part of their matrimonial property and potentially be distributed to the ex spouse.

Another risk is someone opening up a lawsuit against a joint owner, after one owner passes, if they feel they have a stake in the property. A judge might be called on to determine who is the rightful owner of jointly held assets; for example, if a parent only owned the property with one child, their other adult children or family members might feel they have a stake in it after their parent’s death even if the parents intended it that way.

Entering into a Joint Tenancy Agreement

To initiate the process, both the parent and adult child must agree on the terms of the joint tenant agreement, including the rights and responsibilities of each party. It is advisable to hire a real estate lawyer to discuss the joint tenancy arrangement to ensure that it meets your goals.

The joint tenancy agreement should outline the terms of ownership, including the rights of survivorship. It will dictate how the property is to be divided if either owner passes away.

Joint ownership of a home can be an ideal solution for families looking to keep their assets in the family while still allowing each individual to benefit from them. With careful planning and professional advice, parents and children can ensure they are properly protected throughout the process.

If you are considering transferring partial ownership of your home to an adult child, then get in touch with the lawyers at DLegal. We will help find the right solution for you.


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