Should you add your grandkids as joint tenants on stocks? - MoneySense

Should you add your grandkids as joint tenants on stocks?

Avoiding probate is one advantage.


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Q. What are the tax implications of adding grandchildren as joint tenants on stocks?

A. Before I answer your question, S.J., let me say that I think this is an excellent way to introduce the next generation to equities and to business ownership. In a joint tenancy, each “tenant”—or grandchild, in your case—has an equal share of the stock. Upon your death, each child receives full rights in their share.

Couples will often opt for joint tenancy, not only of investments, but also bank accounts, their matrimonial home and other property. The arrangement ensures that if one of them dies, the other will have immediate access to those assets. Without joint tenancy, the assets may need to go through a process called probate before they can be transferred to the intended beneficiary.

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You don’t mention how old your grandchildren are; however, this is important, as minors are treated differently from those who have reached the age of majority, which is 18 in Ontario, Alberta, Manitoba, Prince Edward Island, Quebec and Saskatchewan; and 19 in the remaining Canadian provinces and territories.

Minor children cannot own stocks in their own names so, instead, you could purchase stocks in a custodial account or a guardian account. You are in control of both these accounts but the child owns the custodial account and pays tax on the dividends, while you own the guardian account and the dividend’s are taxed at your rate.

Grandchildren who are of the age of majority will receive half of the dividends and pay tax at their rate of tax.

Upon your death, the full value of the stock reverts to each child without the requirement of probate.

Theresa Morley, CAP, CA is a partner with Morley Chartered Accountants in Barrie, Ont. Check out her blog.