The Pro’s and Con’s of Joint Ownership: Part 2 of the Estate Administration Tax Series

In case you missed our last article, we covered the essentials of the estate administration tax (estate tax): who applies for it, how is it calculated and who pays for it. Now that we have covered the fundamentals, we can discuss strategic tax planning. When tax planning for estates is done correctly, estate tax can be reduced or avoided.

In this six-part series, we will be discussing five different methods to consider in order to reduce or avoid the estate tax. These are: joint ownership for property, naming a beneficiary for your assets, gifting assets, holding assets in trusts and making primary and secondary wills.

In this article, we will be explaining how to reduce or avoid estate taxes through joint ownership of property. To understand how to do this correctly, we will first need to explain the basics: what it means to be a joint owner vs. tenant-in-common, the right of survivorship and how property can evade the probate process through this designation.

Joint ownership and right of survivorship

Joint tenancy allows for two or more people to own property together, equally and indivisibly. It is the most common form of homeownership for legally married spouses in Ontario.


There are many benefits to jointly owned property, for example, if one owner loses mental capacity, the other owner(s) may proceed to make decisions about the property.

Another benefit is when one owner dies, their interest in the property automatically transfers to the surviving owner. This is called the right of survivorship. This means that the deceased’s will does not determine how the ownership in the property will be dealt with. It is the surviving owner who owns the whole property.

No probate tax

 As mentioned above, assets held by the testator and another joint owner with a right of survivorship do not form part of the estate. Because jointly held property passes on right of survivorship, it passes to the surviving owner outside the deceased’s estate. If there is only one name on title, the property must be included in the probate process along with all other assets of the estate. This would significantly increase the amount of estate tax that must be paid before the assets of the estate can be distributed to beneficiaries.

There are two exceptions to this general rule:

  1. When two joint owners die at the same time, or in situations where it is unclear who predeceased the other, they are deemed to have held the property as tenants-in-common.
  2. If the property is designated as a matrimonial home for the child, 26(1) of the Family Law Act (FLA) states that the joint tenancy will sever if the child predeceases the parent.

The Supreme Court of Canada decision in Pecore v. Pecore, 2007 SCC 17 held that there is a rebuttable presumption of a resulting trust in the case of a transfer between a parent and adult child. In this case, a father added his daughter as a joint tenant to his financial accounts before his death. In the father’s will, the estate was to be split between the daughter and her husband. When the daughter and the husband divorced, the courts considered whether the financial accounts were to fall back to the father’s estate or pass to his daughter outside the estate by joint tenancy (of the bank account), through the right of survivorship. The Supreme Court determined that the father intended to gift ownership of the account to the daughter. If the father’s intent had been missing, there would be presumption of a resulting trust. The onus would be on the adult child to rebut the presumption. Make sure to distinguish between transfers to a minor child, where a rebuttable presumption of advancement would apply.


 If you decide to pursue a joint ownership to avoid/reduce the estate tax, be careful — there are possible adverse consequences for joint ownership. The following risks typically arise with parent to child joint ownership transfers with right of survivorship:

  1. Real estate: remember that the testator will lose exclusive control over the property. The consent of the child will be required to sell, encumber or transfer the interest of the Be mindful of who you are adding as a joint owner — all owners are registered on title. The actions and debts of one owner may compromise title that will inevitably impact the other joint owner(s) as well.
  2. Bankruptcy/creditors: Creditors of the child, if any, may have an interest in the property should the child have financial
  3. Family Law Act: As mentioned above, if the property is designated as the matrimonial home for the child under Part II of the FLA, the joint tenancy will sever if the child predeceases the
  4. Income Tax Act: Adding a new joint owner may trigger adverse or unexpected tax consequences where beneficial ownership is transferred. For example, if the transferred property is the parent’s principal residence (and not the principal residence of the child) the transfer will likely result in a loss of a portion of the principal residence exemption for future taxation You should determine whether the potential savings (1.5 per cent) are worth the risks.


Tenants-in-common is a type of joint ownership where two or more individuals own a divided interest or share of the property where no rights of survivorship exist. This type of legal relationship is beneficial for individuals who may wish to leave their respective share of property to specific beneficiaries, for example, business partners who would like to leave their share to their families, or those involved in a second marriage who would like to distribute their share to children in a previous marriage. If one owner dies, their share of the property passes on to their estate and will be distributed in accordance with their will or the laws of intestacy. The surviving owner retains their percentage interest in the property.

A tenancy-in-common will generally be subject to a probate process and associated estate taxes because the deceased’s interest in the property forms part of the estate upon death. As part of the estate, the value of the interest must be ascertained in the probate process and estate tax must be paid upon the total value of the estate.

Plan wisely

Thinking ahead about how to designate your property between joint-ownership and a tenancy-in-common will help you strategically avoid or reduce taxes in estate planning. Next up in our series, we will discuss strategies in naming beneficiaries for assets to pass outside the estate to reduce or avoid estate taxes.

This is the second of a six-part series. Read the first article: What is estate administration tax, part one.

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