Why piece meal planning is dangerous!
I have recently been asked to prepare wills for an older couple who have several properties, various investments and two adult children. The real properties include both the matrimonial home, cottages and investment properties. I always ask the client how title is held and then I ask them to provide me with a copy of the deed so I can cross reference what the client believes to be the case with what the provincial records show.
How title is held is important because of the manner in which ownership interests pass on death. There are several different ways in which people can own title to real property.
First, as joint tenants – two or more people may own property as joint tenants – when one joint tenant dies the other joint tenant is entitled to register a survivorship application and remove the deceased joint tenant’s name from title. This process happens outside of the terms of any will and without the need of filing for a certificate of appointment of estate trustee and paying probate fees. The refernce to joint tenants must be reflected on the deed.
Second, two or more people may own real property as tenants in common – when one tenant in common dies their interest does not pass to the other tenant in common. The deceased tenant in common’s will dictates to whom the interest in the property will pass. In all but the rarest of cases title held by one person alone, or as a tenant in common, will require the estate trustee of the estate of the deceased to file a court application to obtain a certificate of appointment of estate trustee in order to deal with the deceased’s interest in the real property. This means the estate will need to pay the application fees and legal fees to obtain the certificate. The certificate will be required before the estate trustee may sell or transfer the property, even to a beneficiary in the deceased’s will.
Each of my clients believed they respectively held title to an investment property with each of their children as joint tenants so that the ownership would pass to the adult child when the parent died. When I researched the title records I discovered that the property that Dad owned with his daughter was held as joint tenants but the deed the Mother held with her son was as tenants in common. As a result on Mom’s death there would be needless delay and extra expense that she would not have anticipated.
Finding out how title was held at the drafting state allowed us to suggest a solution to the problem. It is a relatively simple fix while both parties are still living and competent. We prepared and registered a deed from Mom and Son to Mom and Son, as JOINT TENANTS. This is done for estate planning purposes and is exempt from land transfer tax. If this situation had not been corrected and if Mom died believing the property was held as joint tenants then the Court application and filing and legal fees would have needed to be paid and there would have been unnecessary delay in transferring title.
Lesson learned – when you decide to make your will, check ownership of assets.