July 21, 2017

Shared Ownership and Joint Tenancy

When doing estate planning people often consider sharing ownership of financial assets with adult family members or friends. There are a number of different reasons for sharing ownership of these assets, which may include assistance with financial management or the desire to give the other party a gift of survivorship rights to the assets. While shared ownership can apply to such things as bank accounts, houses or motor vehicles, it is important to understand the legal implications of the various forms of shared ownership before making a decision as to how you want to share the assets or have them managed. Two of the most common forms of shared ownership of houses are tenancy in common and joint tenancy.

Tenancy in Common

If you transfer ownership in your house to another person as a tenant in common, each person holds a separate interest in the property, which may not necessarily be in equal shares. You may, for instance, give a gift of a 1/3 share in the house to one of your children. When you die, your share of the tenancy in common then gets transferred to your estate and distributed to your beneficiaries, and if the other tenant in common dies before you do, their share gets transferred to their own estate.

Joint Tenancy

If, on the other hand, you are the owner of the house and you add one person as a joint tenant the result is that you transfer ownership in an equal portion to that other person, who then becomes a ½ owner of the property. In this situation, the other joint tenant is presumed to have the same legal rights to the house as you do. If you die before the other joint tenant, then your legal interests may be automatically transferred to the other joint tenant by right of survivorship. As such, the ½ interest you had in your house may not pass to your estate and, if that occurs, your beneficiaries will not receive a share of the value of house.

Legal Issues in Joint Tenancies

In my experience, two of the most common problems in joint ownership arise from severing title in joint tenancies and challenges to the “beneficial interest” in the property.

Severing Title in a Joint Tenancy

After you create a joint tenancy with one or more people, the joint title can be broken or severed in a number of ways, including mutual consent of the parties or by the unilateral action of a joint tenant. Indeed, they can sever the joint tenancy without your knowledge or consent. They can do this by transferring their share of the joint tenancy to themselves or another person, without even notifying you beforehand. When this is done they in effect create a tenancy in common with you and you lose the right of survivorship in their share of the property. As such, if they die before you do then their interest in the property would pass to their estate and would be divided among their beneficiaries.

Legal Title vs. Beneficial Interest

It is important to keep in mind that even after a joint tenancy is created, there is a difference between beneficial interest and legal title in the property. People who have a beneficial interest in property may claim ownership to some or all of the property because it was properly given to them as a gift, or because of contributions they made to the property at the time of its purchase or afterwards. People who make such contributions and claim beneficial ownership may not be registered as having legal title to the property.

On the other hand, in some situations people who have legal title to property may only hold title for other people who have beneficial interest in the property. This type of situation can arise when the owner of property transfers legal title to another person, thereby creating a joint tenancy, only for the purpose of avoiding probate or to manage an estate, but with no intention to give the other person any beneficial or “real” ownership in the property. This is illustrated in a trial I conducted in which I successfully argued that a mother’s transfer of title to her Vancouver house into a joint tenancy with one of her daughters was only done for estate planning purposes, with no intention to give the daughter a survivorship right to ownership of the house. The trial judge found that after the mother’s death the daughter did not have a survivorship right to the house, but held title to it in trust for the mother’s estate and therefore, the proceeds of the sale of the house were distributed among all of her children as beneficiaries of her estate. You can read the judgment here and the Court of Appeal’s decision upholding the judgment here.

Ways of Avoiding Legal Problems in Joint Tenancies

In order to avoid costly legal problems, it is important to have properly prepared documents confirming the owner’s intention in creating shared property arrangements. For example, if the owner of a house creates a joint tenancy with another person only for the purpose of managing the house or avoiding probate then this should be confirmed in a document that both parties sign. This document may then be used to reverse the severance of a joint title if the new joint tenant attempts to do that unilaterally.

If the owner of a house intends to give another person both legal and beneficial ownership of the house it would be prudent to sign a deed of gift that clearly sets out the owner’s purpose for the transfer. This deed of gift could then be used as evidence against claims that the new joint tenant is only holding legal title in trust for other parties.


Gene Fraser is a lawyer with CBM Lawyers. To learn more about estate planning or to schedule a consult with Gene or someone else from our team, please contact us at 604-533-3821.