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joint assets estate planning

My spouse has died, should I make my assets joint with my daughter? That makes things easier, doesn’t it?

joint assets estate planningI regularly get asked questions like this. Many of my clients who meet with me at my law office in the Kanata-Stittsville area of Ottawa have been given this advice by a well-meaning friend or family member or sometimes another professional.  They are often told that holding some or all of their assets jointly with one or more of their adult children will make managing theirs affairs easier for their family and will save probate fees.

I almost always recommend that assets not be held jointly with adult children for a number of reasons.Besides potential capital gains tax problems, one of the reasons for not owning assets jointly with your children is that opportunities to reduce tax and to provide creditor protection via a trust are lost.  If an asset passes outside your estate, whatever provisions you have in your Will do not include that asset.  For example, if your Will includes a testamentary trust for the benefit of your child and his or her spouse and children, your child could pay less tax by income-splitting trust proceeds with lower-income family members.  However, assets that pass directly to your child by means of joint ownership will not be part of the trust and the tax benefits are lost.

Clients sometimes raise the concern that this strategy means that probate fees will be payable.  Probate fees (properly called ‘estate administration tax’) are 1 ½ % of the estate value (with a slight reduction in the tax for the first $50,000 of estate value which is taxed at ½ %).  In my view, this is a small price to pay for the significant benefits of having the assets flow through the estate.  Even more importantly, in my view, is that during a parent’s lifetime, the assets remain under the control of the parent and are not subject to unwanted and unexpected claims of your child’s creditors or of your child’s spouse who is leaving the marriage.  How many marriages last these days?  Common law spouses can also bring claims although not usually on the same grounds as a married spouse.

If your child is a joint owner with you of your home, any mortgage refinancing of your home or sale of your home will require the signature of every owner.  How comfortable are you with asking your child to sign off on a mortgage or refinancing of your house or agreeing to a sale transaction if you decide it is time to sell?   Will your child hesitate to sign or will he or she expect to have some say in your decision to refinance or to sell?

If you have been advised to transfer your assets into joint names with your children, make an appointment to meet with me and explore the pros and cons of such planning. We will review your unique situation and discuss your estate planning goals. You can then make an informed decision which protects your interests and which best provides for your family while giving you peace of mind.

Reproduction of this blog is permitted if the author is credited.  If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information.  Please consult a lawyer or other professional to determine how the information in this blog might apply to you.

Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.

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