What happens when there are five owners of a property and one dies?

What happens when there are five owners of a property and one dies? The answer is more complicated than you might realize. A reader asked me about this recently. Here are his question and my answer:

"My four brothers and I own property. One died without a will. Do his children inherit the money if we sell property?"

The answer to this depends on how the title to the property was held. There are two possibilities.

If you and your brothers owned the property as joint tenants, this carries with it a right of survivorship for each owner. Each owner owns the whole thing. When one owner dies, the others still own it, so the deceased person's name simply comes off the title. Whereas before there were five people who owned it, now there are four.  That means the children of the deceased brother would get nothing.

If the property is never sold,  eventually there will be only one owner left. That last owner will own 100% of the property and there is nothing legally to go to the families of those owners who were deceased.

The other possibility is that the five of you owned the property as tenants-in-common. This arrangement would have quite a different effect when an owner died. With this arrangement, the 1/5 share owned by the deceased brother would go to his estate (and without a will, that probably means his spouse).

Most people think that the fact that there are five names on a title automatically means that there is joint ownership, but that is not true. Whether you are joint owners or tenants-in-common would have been decided at the time the property was put into your names (I assume on the death of your parents). To know for sure which arrangement applies to you, get an updated copy of the title from the Land Titles Registry and read it.

It might be a good idea for you to use a lawyer for this transaction, whether you are selling the property or changing the title to add your brother's heirs. Most likely the transfer into your five names was done without one (and for sure the advice to leave a house to five kids didn't come from a lawyer, or I certainly hope it did not). 

There may well be surprising tax consequences to a sale of the property. I assume that all five of you do not live in the property, and that at least one of you owns his or her own home that is not the property in question. Therefore, the sale proceeds of those who have a principal residence that is not this property may well be taxable. You'll want to sort out whether the tax burden is to be shared by all of you, or more likely, attributed only to the one(s) who attracted the tax in the first place. It's pretty complicated to figure out without help.

There may also be family law issues if any one or more of you five ever lived in the property with their spouse even for a very brief time, as there may be rights arising for those spouses under matrimonial law. These rights could prevent you from selling the property, or at least cause you to need some extra paperwork to deal with them.

Parents who are thinking of leaving their house to all of the kids, please take note of this latest example of why this is a bad idea. Stop causing these problems for your kids!