Page 11 - Sept 2023 News On 7

WHAT ARE THE PROS AND CONS OF JOINT OWNERSHIP WITH ADULT CHILDREN?
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Submitted by Scott Foster, Financial Advisor, Edward Jones
317 DECLAIR ROAD, MADOC, ON K0K 2K0

Harry is a 68-year-old widower who is exploring strategies to make his estate plan more efficient. One way to do this, he has
heard, is to hold investment accounts and real estate jointly with his two adult children, Josh and Kristin.
Harry is right that joint ownership can simplify the transfer of assets. When properly structured, a jointly held asset stays in
the surviving owners’ hands after one owner dies. That means the asset doesn’t have to pass through the estate, so it isn’t
subject to probate fees (where applicable).
However, there are also risks associated with joint ownership – and Harry should carefully consider them before proceeding.
Legal questions about beneficial ownership
When Harry’s wife Adèle passed away, all the assets they held jointly became Harry’s alone without additional instructions.
However, the law treats assets held jointly between spouses differently than it treats assets held jointly by a parent and adult
children.
If Harry jointly owns an investment account with Josh and Kristin, the children will remain legal owners after his death.
However, they won’t necessarily be considered beneficial owners – owners who get to use, enjoy or personally benefit from
the account.
Unless Harry has documented his intentions for the account, joint assets won’t be immediately available to Josh and Kristin
and will instead be held in trust for Harry’s estate and distributed according to his will. That means those assets will pass
through the estate and be subject to probate fees.
Immediate tax consequences
Creating a joint investment account with Josh and Kristin may trigger tax right away. If the Canada Revenue Agency
determines Harry has gifted a third of the account to each child, two-thirds of the account will be subject to a deemed
disposition and Harry will be responsible for paying any capital gains taxes.
Reduced control and certainty
As joint owners, Josh and Kristin can add to or withdraw from the investment account without Harry’s approval, unless the
account is set up to require that all owners agree to transactions. It may also be possible for either child to unilaterally change
the nature of the joint ownership from “joint tenants with right of survivorship” to “joint tenants in common.” This would allow
that child to leave his or her interest in the account to someone who is not a surviving joint owner.

Vulnerability to creditor and family law
claims
If Harry makes his children joint owners
of an investment account and then
Kristin runs into financial difficulties, the
account may be vulnerable to claims by
Kristin’s creditors. Alternatively, if Josh
gets divorced, the account may be
vulnerable to claims related to the
division of matrimonial assets.

Get specialized professional advice
Before changing the ownership of any
asset, speak with tax and legal advisors.
Joint ownership can be an effective tax
and estate planning strategy – but it isn’t
the only one and it’s critical to fully
understand the benefits and risks.