Joint Tenants or Tenants in Common

Dear Rebecca
My husband and I live outside the Fredericton area in our own home. We have two children soon to graduate from high school- one after the other and at this point our son will be attending university in the fall and his sister will follow next year. We have decided to purchase a home as an investment instead of dumping potentially 40000+ into rent over the next 5 years. We were wondering whether we should put the home in our name and in our son’s name (later adding our daughter) and whether we should be as “joint tenants” or “tenants in common”. We would like them to participate in property ownership but perhaps with a smaller percentage.
Mark and Annie

Dear Mark and Annie

There are some property tax advantages to having your children’s names on the deed as owners however there are a number of things to consider with regards to both how the title ownership should be held and the decision of whether or not to include your children on the title.
“Joint tenants” is the most commonly seen ownership in residential property particularly for spouses, as it means that if one “joint tenant” were to pass away ownership of property automatically passes to the other “joint tenant” or tenants. This automatic transfer on the death of “joint tenants” is known as the “right of survivorship”. Ownership as “joint tenants” must be specified at the time of title transfer. In order to be “joint tenants” and include your daughter she would also have to be included at the time of the purchase not later added. One of the unities for joint tenancy is that the ownership interest for all “joint tenants” must occur at the same time. Also, you mentioned designating a smaller percentage of ownership to the children this is not an option for holding ownership as “joint tenants” as the interest must be equal and undivided. In the case of the four of you owning the property as “joint tenants” each of you would have a ¼ undivided interest in the property. Ownership as joint tenants has definite tax advantages with regards to probate fees and estate taxes as a property held as “joint tenants” is not subject to these taxes with the death of one of the “joint tenants”.
The advantage or disadvantage depending on your perspective of ownership as “tenants in common” ” is that you can hold interest in unequal shares and you have the freedom to transact i.e. sell, rent or will it to your dog, if you like, without the other tenant’s permission. In the case of ownership of as “tenants in common”, in order to limit rights or use of a property, separate agreements are often written. However, unlike ownership as “joint tenants” property held as “tenants in common”, in the event of the death one of “tenants in common”, passes to the estate of the deceased tenant and this property is subject to probate and taxes.
There are cautions that should be noted with regards to putting your children on the title, your lawyer can explain about creditors, lack of control and capital gains tax issues that could arise when putting children on the title. For example if the child has an interest in the property it could make the property subject to any creditors’ claims against the child. If the child marries and the property is used as the marital home, it could be subject to claims by the child’s spouse if there is a breakdown of the child’s marriage. In the case of property held as “joint tenants” The undivided interest in the property means that in order to sell or mortgage the property you must have the permission of the other joint tenants.
Whether to put your children on the deed and what type of ownership would suit your needs best should be discussed with your lawyer to fully understand the legal consequences and options. As well you may want to discuss it with your financial advisor for any tax issues or options regarding this investment.
Happy house hunting
Rebecca