After witnessing parents putting their children on title to their home as joint tenants for over 40 years, I have emphatically concluded that in almost every instance is a bad idea.
While it sounds so simple that the parents simply add a child as a joint tenant to their title, this type of simple do-it-yourself estate planning remedy is typically very misunderstood and often abused.
The parent is often under the illusion that doing so is a cost-effective and simple remedy of avoiding probate fees, and given that probate fees are only 1.4% of the value of an estate over $25,000, it is a high price to pay in terms of risk given the minimal reward.
More worrisome to the estate litigator is the tendency of parents to see their children through rose-colored glasses.
They seem to want to believe that if they put the house in joint tenancy with one child, that the child will do the right thing and share the proceeds equally with siblings.
In my experience this rarely happens.
The other siblings will in such circumstances attack the gratuitous transfer of the title between the parent and a sibling, on the basis that it was not a true gift, and that the child owns the house in trust for the estate.(see Pecore v Pecore SCC 17) .
One of the biggest risks in areas such as Vancouver where there has been dramatic increases in property values, is that at the time of the transfer there is a deemed tax disposition and a loss of the principal residence exemption on the portion of the property subsequently held by the child. The child could find themselves owing a significant capital gains tax after the passing of the parent who share will remain his or her principal residence and be tax-free.
Other downside risks is that each owner on title has a right to possession of the property and this can result in stress and possible litigation such as a forced sale of the property under the partition act.
Another major concern these days is that the child spouse could have a strong claim for an interest in the property on separation or divorce if it was used for a family purpose.
Summary the child could be attacked by creditors or bankruptcy or encumber their at half of the property and thus put the parents household at risk.
My advice would be to have any practitioner who upon being requested to put children on title to delve very deeply into the family history and motivations of the client. It is necessary to point out the risk such as the possible loss of control, wrists of potential income tax consequences, please note that the probate fees saving is minimal, and that there are a number of risks that far outweigh any such simplistic estate planning tool.