According to the sort of estate planning advice that gets dispensed over back yard fences and in gym locker rooms, transferring property into joint tenancy with children is the easy way to accomplish a number of things – often avoiding probate fees, and sometimes a desire to leave a particular property to a child outside of the will.
Unfortunately joint transfers are also an easy way to set up your estate for a nasty public fight that will destroy relationships over a period of months or years. The recent case of Harshenin v. Khadikin is only one example in a long line of cases that involve essentially similar facts. In short:
- The parent goes to a broker, investment manager or banker (for bank or investment accounts) or to a lawyer or notary (for real estate) and gives instructions for a transfer to joint tenancy with a child.
- The parent does not prepare a clear document stating their intention in making the transfer.
Why is the statement of intention crucial when making a joint transfer? Because the way the law has developed in this area, a transfer of property to joint tenancy is an inherently ambiguous act. In making such a transfer your intention might be one of three things: (a) to immediately gift of a part of the property, making the recipient an equal owner with you, (b) to transfer title only, leaving you as the beneficial owner and making the recipient a mere nominee for you and your estate, or (c) to pass no beneficial interest now but to allow the recipient to take the property as survivor on your death. Each of these three possibilities will lead to different consequences on your death in terms of the passing of the property and income tax considerations. Without a statement saying which one of those you intend, you leave it to your surviving family members and the courts to resolve.