Property Ownership Assumptions That Can Derail Your Estate Plan
When couples purchase property they must grapple with a multitude of decisions including how to register ownership on title.
To make an informed decision they must become knowledgeable on the different types of co-ownership title registrations. Two common designations are joint tenancy and tenants in common.
Typically the real estate lawyer registers the property title ensuring their client is the official legal owner in the provincial land records. But what if the client simply advises they want to own the property jointly and the lawyer assumes joint tenancy without clarifying the real intent of their clients? The consequences of a wrong title registration can be significant.
One of our clients encountered this circumstance. In this month’s article, we explore how Arlene’s (name has been changed) expectations of ownership were challenged by the reality of how the property’s title was registered.
We’ll share:
It’s surprising how many individuals we speak with are unaware of how their property is registered with their province’s land registry.
Let’s explore two common joint ownership title designations used by couples.
The Difference Between Joint Tenancy and Tenants-in-Common
How you and your spouse choose to register ownership for your property depends on your unique circumstances and each choice has legal and estate implications. While it’s clear what sole ownership means, joint ownership designations are not as well understood.
Joint Tenancy
Under joint tenancy you and your spouse or joint owner(s) have:
- Equal, Undivided Interest: Each owner has an identical (equal) share in the whole property; there are no fractional shares.
- Right of Survivorship: If one owner dies, their interest automatically transfers to the remaining owner(s), outside of their will or estate. The last surviving owner takes full ownership.
- Four Unities: Valid joint tenancies must have unity of Title, Time, Possession, and Interest—meaning owners acquire their interests at the same time, from the same document, and with equal rights.
Upon your death joint tenancy registered property passes outside your will and is not subject to probate and the required estate administration tax.
Tenants-in-Common
Under tenants-in common you and your spouse or joint owner(s) have:
- Divided/Fractional Ownership: Each owner can own a defined percentage (e.g., 40% and 60%), which can be equal or unequal.
- No Right of Survivorship: When one owner dies, their share forms part of their estate and passes to their heirs or as directed in their will. It does not transfer automatically to the co-owners.
- Flexible Ownership: Owners can acquire their shares at different times and from different sources. Each share can be sold, transferred, or bequeathed independently.
For tenants-in-common registered property, upon death your share is subject to probate and applicable estate administration tax.
It’s very important that you consult with a real estate lawyer and understand the implications of your selected ownership structure to ensure it fits your circumstances and intentions.
Arlene’s Story - When Ownership Assumptions Meet Reality
Meet Arlene, a single mom, busy medical professional and executor of her mom’s estate. Arlene engaged our services to act as agent of the executor to help with her executor duties.
Her mom Cathy, jointly owned property with Arlene’s step-dad. When Cathy married her spouse they drafted a marriage contract that outlined the joint ownership of their Ontario property.
Cathy’s will also outlined the terms of their joint ownership – 60% ownership for Cathy and 40% for her spouse. The will also directed that in the event of Cathy’s death, her share of the property would be distributed amongst her children, however, her spouse could remain living in the home until he moved or died.
When we did the title search with the land registry office, the ownership designation was not as it was described in the will or the marriage contract. The title was categorized as joint tenancy, not tenants in common. This means that Cathy’s spouse has the right of survivorship and now fully owns the property.
Arlene and her brother are no longer deemed the beneficiaries of their mom’s share of the property because her mom’s share passes to her step-dad and does not form part of the estate. Since her mom was ill for a couple of years prior to her death, her other assets were mostly depleted to pay for her care.
We found the lawyer who drafted the will and inquired if he checked how the property title was registered with the provincial land registry to ensure alignment with his client’s intentions. He advised that the matter was past the statute of limitations and there is no record of this file.
Arlene will explore whether her step dad is open to engaging legal counsel to update the land registry title so that she and her brother can receive the 60% share that was originally intended.
If this is not possible, she may pursue a legal claim to correct the registration, relying on the two documents that reflect her mother and step dad’s intentions for property ownership—though this would be costly with an uncertain outcome.
We’ll see how this all unfolds. It is a powerful reminder of how important it is to follow key steps to ensure your property is registered exactly how you intend it.
Six Steps to Ensure Your Property’s Distribution Goes as Planned
- Review the Title Registration
- Carefully check your property’s title deed to see how ownership is registered.
- Look for the phrases “as joint tenants/joint tenancy” (right of survivorship) or “as tenants in common” (distinct shares, no survivorship).
- Consult a Real Estate Lawyer
- Engage a real estate lawyer when buying or transferring property.
- Make sure you understand the different terms about joint ownership.
- The lawyer should confirm the correct terms are used in all legal documents and they align with your intentions.
- Clearly State Ownership Preference at Purchase
- At the time of purchase, explicitly tell your lawyer and realtor how you wish to own the property (joint tenancy or tenants in common).
- Instruct them to include your chosen ownership form in the transfer documentation.
- Correcting/Changing Ownership Type
- If you discover a mistake, or if your intentions change, you can convert from joint tenancy to tenants in common (or vice versa).
- This means preparing a new deed and registering it with the land registry; your lawyer can handle this process for you.
- Regularly Review Ownership Status
- Life changes (marriage, separation, estate planning) may prompt you to revisit property ownership. Regularly review the title registration to ensure it reflects your intentions.
- Document Your Estate Intentions
- For tenants in common, clearly state in your will how your share of property should be distributed on your death.
- For joint tenancy, understand that your share passes automatically to your spouse or surviving co-owner, regardless of what your will may stipulate.
Conclusion
Understanding the different types of joint ownership registration is critical to ensuring your estate plan actually goes according to plan. The difference between joint tenancy and tenants in common is significant and has serious implications on how your property is distributed upon death.
Working with a real estate lawyer and ensuring your title registration syncs with your legal documents will give you peace of mind knowing that your beneficiaries will not suffer the same consequences faced by our client Arlene.
Did this article raise awareness about the different title registrations for joint ownership and how they impact the distribution of your property’s shares upon death?
We’d love to hear from you! Let us know if this article prompted you to look up how your property title is registered with your provincial land registry.
Financial Concierge™ offers Professional Executor and Power of Attorney services to assist with executor, attorney duties or help with managing daily financial activities. Learn more about Financial Concierge™ here.
Author: Janet Jackson, Contributor: Jill Chambers
DISCLAIMER: This blog is not intended to be legal or financial advice and should not be construed as anything other than for information purposes.
