There can be a variety of reasons why someone might choose to transfer a solely-held asset into joint names. For example, a child might be assisting a parent to manage their finances — the child is added to bank accounts or investment accounts or a parent thinks that since they will be giving their home to their child through their will, they might as well add them to title so the house can pass by right of survivorship and probate fees can be avoided.
There are legal implications of transferring assets into joint names, and it is essential to obtain legal advice before taking such a step. Consider, for example, the following scenarios:
- A parent owns a secondary property that they plan to pass on to your child. The child is added to title (as joint tenants) so that if the parent dies, the house will pass to the child by right of survivorship. The child moves into the home and a few years later their significant other moves in too. They get married. The parent can no longer sell the home without the consent of the child’s spouse, as the home has become the couple’s marital home. Sadly, after some time, the child and their spouse decide to separate. The child’s spouse has a claim against the equity in the home as a result of the breakdown of the marriage.
- A parent requires assistance in managing their financial affairs, so they add their child to their investment account to make it easier to undertake transactions. The account is worth a substantial amount. Upon the parent’s death, the account passes to the child, by right of survivorship. The child claims it was the parent’s intention that the account be passed on to him/her while the siblings argue there was never an intention that the child would inherit the account to the exclusion of the other siblings. They become involved in expensive and divisive litigation over the matter.
Both of these scenarios could have been avoided with legal advice and proper planning. While it might be desirable to try and avoid probate fees, or convenient to have someone assist in the managing of an account, the benefits do not always outweigh the drawbacks. While there are some cases in which transferring title into joint names may be appropriate, exercise caution and seek legal advice before making changes to title.