In a previous blog, I wrote about going on title to a property for the purpose of assisting an adult child or family member qualify for mortgage financing. To add to the discussion, there are two ways in which multiple owners of a property can hold title – as joint tenants or as tenants in common. As between joint tenants, each owner will hold an undivided and equal ownership interest in the property, as well as a right of survivorship. That means that if three people own a property as joint tenants, and one dies, the remaining owners then become entitled to be noted as the only owners of the property by right of survivorship. Where the owners hold title as tenants in common, each person’s percentage ownership must be indicated, and if one owner dies, that deceased owner’s interests are dealt with through his or her estate. There is no right of survivorship held by the other owners.
If a parent goes on title as a tenant in common for the purpose of assisting with obtaining mortgage financing, and if that parent dies before title is transferred to the real owners, it may be necessary to obtain probate in the estate of the deceased parent in order to deal with that parent’s ownership interest in the property. This could mean payment of thousands of dollars in probate fees, depending on the value of the parent’s estate, in some cases unnecessarily.
Holding title as joint tenants allows for the removal the deceased parent’s name from title, by right of survivorship, thereby avoiding the need to deal with the parent’s estate. It is important, however, when taking title as joint tenants that there be adequate documentation at the time title is taken to support the trustee – beneficial owner relationship between the parent and the adult child. This documentation is important not only for the purposes of avoiding payment of further land transfer taxes if the property is later transferred to just the adult child, but also with respect to contesting any future claim by a creditor of the parent to an interest in the property arising out of the parent being on title as well.