Joint tenancy vs. tenants in common

You can jointly own assets in two ways. Remember, each has different estate planning and tax implications

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Q: What is the difference between “joint tenancy” and “joint ownership”?

Some years ago my husband and I chose to put all of our possessions, including all our investments, into “joint tenancy.” I recently read that this is different from “joint ownership.” At present, our bank and investment accounts seem to under “joint ownership,” but when we looked at the original letter from our lawyer, he uses the term “joint tenancy.” Should this be changed?

 —Janine M.

A: Most property can be owned either personally or jointly. Whether or not you should own property jointly with a spouse or other person depends on your intention.

Jointly held property can also be held in two different ways: as joint tenants or as tenants in common. Joint tenancy invokes the right of survivorship, so that on the death of one of the owners, the ownership of an asset passes in equal shares to the surviving owners. Tenants in common, on the other hand, have their share of an asset become part of their estate, with the asset distributed on their death based on their will.

Your lawyer’s advice to own property jointly may therefore be a bit unclear. Joint ownership could mean either joint tenancy or tenancy in common.

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Most spouses own property as joint tenants, so that their respective shares go directly to their surviving spouse on their death. In some situations—like a second marriage—tenancy in common may be more appropriate. This can allow a house, for example, to be willed to the children of the deceased spouse. That said, a situation like this may be complicated, because you may not want your surviving spouse to be mourning your death, but now half their house is owned by your children. So always walk through the estate implications of the ownership structure of your assets.

There are tax issues related to joint ownership. Even though you may want to own assets jointly with your spouse for estate planning purposes, simply adding a spouse’s name to an account doesn’t make the account joint for tax purposes. An account should, in theory, be taxed based on the proportionate contributions made by each spouse. So a true joint account for tax purposes should involve equal contributions by each spouse. If an account is fully funded by one spouse, it can still be held jointly, but the contributor spouse should be reporting the income on their tax return. The tax concept of attribution is what causes income from a joint account to be attributed back to the contributing spouse.

Adding a spouse as a joint owner on most assets like bank accounts, investment accounts or real estate won’t generally create any immediate tax issues like capital gains. Adding them to other assets, like a private corporation, may however. Regardless, tax advice is always advisable when considering or changing the ownership of assets.

In summary, I think you need to clarify your lawyer’s intention for recommending joint ownership of assets and furthermore, whether that should be joint tenancy or tenancy in common. Also, consider the tax implications if you are changing the ownership of any assets to ensure that you are staying compliant for tax purposes.

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Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.


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