Placing non-registered assets into joint ownership with right of survivorship is one of the most common methods of avoiding probate. It can be effective in the right situation. Yet, there are some significant disadvantages with joint ownership that may outweigh the benefits. 1 (Manulife Investment Management Sep.’23)
Disadvantages of joint ownership
Before transferring any assets into joint ownership, there are a few important issues you should consider:
- The addition of a joint owner other than your spouse will be considered a taxable disposition, triggering a potential tax liability if capital gains are realized. If the joint owner is your spouse, all income and capital gains will be attributed back to you. Also, if the joint owner is a minor child, all income, but not capital gains, will be attributed back to you.
- A transfer into joint ownership will also result in a loss of control of the asset. Any decisions will now require the consent of the joint owner.
- As a result of a transfer, you’ll expose the asset to the creditors of the new owner if they get sued or file for bankruptcy. If the new joint owner is married, the asset could be subject to an equalization claim in the event of a marriage breakdown
- If a home is involved, a portion of the principal residence exemption and eligibility under the Home Buyers Plan may be jeopardized
- Any tax liability triggered on the automatic transfer at death will become the responsibility of the estate. This should be considered when determining how to distribute your other assets. Beneficiaries under the will may have their entitlements unfairly reduced.
Before transferring any assets into joint ownership, there are a few important issues that you should consider that may change your mind. Please let us know if you require further information.
Sincerely,
Mike Busby (1-Nov-23)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANACIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH INVESTIA FINANCIAL SERVICES INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF INVESTIA. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILTY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NOT CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS OFFERED THROUGH INVESTIA FINANCIAL SERVICES INC.
