Severing joint tenancy

Even though I'm a wills lawyer, not a real estate lawyer, I receive questions from readers almost on a daily basis about joint tenancy and tenancy-in-common. This topic is important from an estate planning perspective, because anyone making a will obviously needs to understand exactly what he owns and how the method of holding the title affects him.

One of my favourite blogs to read, http://www.allaboutestates.ca/, has a new posting that gives quite a bit of detail about how joint tenancies can become tenancies-in-common, a process that is called 'severing' the joint title. The post covers a recent decision of the Ontario court of appeal which summarized the three ways in which joint tenancies can be severed. Those of you looking for more information on this topic should definitely check out the blog post by clicking here.

I should also point out that in some provinces, the land titles office or registry procedures manual is available online. Some of those links are available here on my site. I know the idea of reading a procedures manual is daunting, and it doesn't sound like the most exciting reading, but it can be a really good source of straightforward information that answers those "how do I do this?" questions.

Passing the title to the family home to the kids

A reader and his siblings recently inherited the family home from their mother, and asked me the following question about the title. As so many parents are going to pass their homes to you readers together with your siblings (despite my constantly suggesting that they don't), I thought the question would be of interest to many of you.

Here is the question:

"Our mother left the family home to my 3 siblings and myself. Each of us is listed "as to an undivided 1/4 interest". Can I conclude that this is "tenants in common", as the title certificate does not specifically say that? If this is correct, am I able to "give up" my share as I see fit? ie: sell to an outside party, give to another already on title, etc.?"

This reader is correct that the four of them are tenants in common. Whenever a title specifically says that each person on the title owns an "undivided interest" such as in this case, each owner is a tenant in common. In this case the four shares are equal, but that is not always the case with tenants in common.

Each of them owns 1/4 of the property to do with as he or she wishes.

The type of ownership is significant, as it determines an owner's ability to deal with his or her share. As the reader has correctly mentioned, a tenant in common can sell his share (assuming someone wants to buy 1/4 of a house) or pass it to another title holder. Tenancies in common are usually mentioned in wills, as any ownership of this type would fall into the estate on the death of the owner.

By way of contrast, if these four people were joint tenants rather than tenants in common, they would not be able to do any of these things. A joint tenant cannot sell or transfer a part of the joint title, and cannot leave the title to anyone in his will. The surviving joint tenants will still own the title should one of them die, which is why I always refer to joint tenancy as "last man standing".

As regular readers of this blog know, I'm not at all in favour of a parent leaving one house to four people who each have their own wishes, finances, families, and agendas. However if a parent is determined to punish the children by doing this, it's better to do as this reader's mother did and leave it to them in the will, rather than put it in joint names during the parent's lifetime.

If my name is on my Dad's account when he dies, do I own it?

I notice that in the majority of questions I'm asked about parents and adult children owning assets together, the question contains the words "my name is on it".  I'm not surprised that so many people are uncertain about the ownership and ultimate destination of assets when this is the full extent of the information available to them. Your name can be "on" an asset in more than one way, and even then, there are other circumstances that may affect whether or not you will own that asset after your parent passes away.

The first fact that you must clarify is whether an asset is held jointly with a right of survivorship, or whether it's held as tenants-in-common ("TIC"). You are likely to find the TIC situation only with real estate, including mines and minerals titles, and not on bank accounts. The fact that there are two names on a land title does not necessarily mean that the title is jointly held.

To know for sure whether land is held jointly or as TIC, you must read the title itself (or a search of title, which can be done through a lawyer's office or a registry). If the title is TIC, you will see wording such as "each as to an undivided one-half interest" or some variation on that.

If you are a TIC on a title, you will own only your share of the title when the other person dies. The other person can dispose of his share in his Will, or if there is no Will it will be divided on intestacy.

If an asset is jointly held, this usually gives rise to a right to survivorship. This means that when one of the owners dies, the other owner continues to own the whole asset. This is commonly seen in bank accounts and investment accounts, as well as real estate.

Once you have established whether you own something jointly or as TIC, you have taken the first step. As mentioned above, if you are a TIC, you have your answer. But if you are a joint owner, the question is not yet fully answered.

The complication arises whenever an asset is owned inter-generationally. The usual situation is between a parent and a child, though it could also be between an aging relative and his or her niece, nephew, grandchild, etc. In these situations, our highest court has said that when there is an account held intergenerationally, and the parent is the one who actually put the money in, on the death of the parent the money is deemed to be held in trust for the parent's estate. This is drastically different from what used to happen automatically with joint accounts.

What must happen next is that there must be some written record of whether the parent intended for the money to go to the child by right of ownership. The record must have been made around the time the child's name was put on the account. If no such record exists (and in the vast majority of cases, it doesn't) then the child has to give back the money into the parent's estate.

One of the ways parents are creating written records of their intentions is by making statements in their Wills. This could be a simple statement in the Will confirming that they do or do not want the account or investment or property to go to the child as a true joint owner.

Note that the question of joint owner with right of survivorship does NOT affect husband and wife ownership. The comments I've made in this post are restricted to inter-generational ownership that is usually set up by the parent who mistakenly thinks he or she is simplifying the estate, or just wants help with the banking.

You can see how this area of estate administration is rife with disputes, misunderstandings and hard feelings between siblings. I've said repeatedly that joint assets between parent and child are rarely a good idea, and that is largely because people almost always fail to confirm their full intentions. If a parent just wants help dealing with the banking, then he or she should use a Power of Attorney and leave the joint titles for those who truly want that child to inherit that full asset.

How do I sell my half of a jointly owned house?

The fact that I'm asked this question so frequently hammers home a couple of points for me. One is that people don't understand the nature of joint ownership. The second is that parents should stop leaving their house to all of their children jointly.

When two (or more) people own a property as joint tenants, there is a right of survivorship. This means that each of them owns the entire property, just as both would own every dollar in a joint bank account. There is no "half" in a jointly owned property. Each owns 100%. Therefore, there is no "half" to sell.

This seems to be a really tough concept for people. I'm constantly asked about this issue on my blog and at pretty much every seminar I present. One person argued with me for about ten minutes about the fact that if two people owned a house it HAD to be half and half. He had no legal reason to believe this, but that didn't stop him from being absolutely sure that he'd know this better than I would.

The whole idea behind a joint ownership is to leave the entire property to the other person when one dies. For example, if a husband and wife own their home jointly and one of them dies, the other still has the house. It's a "last man standing" concept. It doesn't really work for a number of siblings owning a house.

If two or more people want to own "halves" or "parts" of a house, they should hold that property as tenants in common. In that arrangement, each has a piece of the house that he or she can sell or leave to someone in their Will.

This brings me to the second point.

About 90% of the questions I get about how to get out of a joint tenancy come from people who own something with their siblings and the arrangement isn't working. It's almost always because a parent left the house to ALL of the children equally. Parents need to be realistic about the million or so ways this arrangement can go wrong. More than one child wants to live there, and nobody can agree. One moves in but won't move out and won't pay rent or expenses. The roof needs repairs but each wants the others to pay for it. One rents it out without the permission of the others. One causes damage and won't pay for repairs. Two want to sell but the third won't sign. And on and on and on.

Why wouldn't the parents choose one child to take the house as part of his share? Or direct that the house be sold and the proceeds split? This is truly something done without thought that leads to so many fights and headaches, I can't believe anyone does this anymore. Parents - please stop doing this to your kids!

What happens when a tenant-in-common dies?

In this blog, I've mentioned a few times (and will mention many more times, I'm sure) what happens when a joint owner of property dies. However, I was recently asked what happens when a tenant-in-common dies.

A major difference between joint owners and tenants-in-common is that joint owners automatically have a right of survivorship to the entire property. Even though there are two or more joint owners, they are all considered owners of the entire property, as opposed to a half or a third. There are no halves or thirds with joint owners.

With tenants-in-common there ARE halves and thirds (and other portions). Each person owns only a portion of the property, according to the Transfer of Land document that was filed with the Land Titles Office when they acquired the property. There is no right of survivorship with tenants-in-common because each owner owns his or her section only.

It's possible for two people to be joint tenants of one portion of a tenancy-in-common.

When a tenant-in-common dies, his or her portion of the land is dealt with like any other asset that is in that person's name alone. Hopefully the person has a Will which sets out who will get his or her property. If not, there will be an administrator appointed by the court. Whoever is the beneficiary of the estate will become the new owner of the deceased's portion of the property. The portions of the property owned by the other tenants-in-common are not directly affected.

When deciding whether you want to own property as joint owners or tenants-in-common, or whether you want to own real estate together with other people at all, you really do have to think through the likely scenarios you might encounter. For example, if you own 1/3 of a house as a tenant-in-common and you want to sell your share, how do you get out of the arrangement? How do you sell 1/3 of a house? Are the other tenants-in-common in a position to buy you out?

If a new owner does join the tenancy-in-common because he or she has inherited someone's portion, how will the other owners interact with that person? Will they be able to agree on issues such as whether it should be sold, who should live in the house, etc?

There are pluses and minuses for different possible arrangements, and each comes with its own set of owner's rights. When I ask clients about their ownership arrangements, the vast majority say that they don't know whether they are joint owners or tenants-in-common. You should make sure that you thoroughly understand your own situation.

Answering more questions about joint property

I really do try to answer readers' questions as quickly as possible but I'm the first to admit that sometimes it takes me a while to get to them all.

I continue to get tons of questions about joint tenancy of homes, and about tenancy-in-common. I'll answer a few of them briefly here (let me know if you need more expanded answers):

Q: My spouse, who is also the joint tenant of our home, has died. How do I change the title into my name only?
A: Take an original Death Certificate (not Funeral Director's Statement of Death) to the Land Titles Office. You will fill in a document called a Declaration of Surviving Joint Tenant, or variations on that in other provinces. You then hand in the document to the Land Titles Clerk, who will amend the title for you. You do not need probate for this.

Q: Two people own a house as joint tenants. What happens if one dies and the surviving joint tenant has Alzheimer's disease?
A: The surviving joint tenant still gets to own the house, with or without Alzheimer's disease, as that is the legal right given by joint tenancy. The question may really be about the logistics of the paperwork, since a person with advanced dementia is not able to understand and sign legal documents. Who can act for this person? If the person with Alzheimer's disease has an Enduring (Continuing) Power of Attorney, it may be used to deal with the land. If there is no Power of Attorney, it may be necessary for someone to be appointed as a trustee by the court.

Q: What happens if both joint tenants die at the same time and there is no Will?
A: If it is impossible to tell which of the joint tenants died first, the law says that the one who is younger is deemed to have outlived the older one. This means the joint title first transfers to that joint tenant, leaving the land in his or her name only. If there is no Will, all of the assets of that person, including the land that used to be in joint tenancy, will be distributed according to the provincial intestacy laws. In Alberta, that would mean children of the second joint tenant first. If there are no children, then his or her parents. If there are no surviving parents, then siblings. Nothing will go to the family of the older joint tenant who died first. See my earlier post here about survivorship of the younger person.

Q: Does a joint title change to tenancy-in-common if one of the joint owners remarries?
A: Nothing is going to happen automatically if one remarries. The title will stay the same until the joint owners both sign documents to bring about a change. One can't do it on his or her own. Remarriage on its own won't change anything. If this question refers to a house that was the matrimonial home and now the couple is splitting up, I assume that the house will be dealt with in the subsequent property division. In other words, you'll divide everything up and one of you will get the house. As part of that agreement, you'll both sign a Transfer of Land document that transfers the house to one owner only.

Joint tenants vs. tenants-in-common

When talking to clients about estate planning, I always ask them about the title to their homes, cottages and revenue properties. The majority of people will respond with the names of the people who are "on title". However, when I ask whether the people on title are on as joint tenants or as tenants-in-common, they usually don't know. I'm often then asked, "does it make a difference?"

The short answer is yes, it makes a difference.

When a property is held in joint tenancy, the situation is what I refer to as "the last man standing". When one joint tenant dies, the entire property belongs to the remaining, surviving joint tenant(s). Whoever is the last joint tenant to die owns the property. Only that last person can use his or her Will to give the property to someone else.

For example, let's sayy Robert, Dean and Chris are joint tenants of a house. Dean passes away. Even though Dean would like to leave his share to his wife, he can't because he's a joint tenant. Robert and Chris then own the property. Robert dies. Chris now owns the whole property. Because Chris is the only name on title now, he can leave the property to his wife and children. There is nothing for Dean or Robert's families.

Tenants-in-common is a different story. In this arrangement, each person owns a half, or third, or some other portion that belongs only to them. They can leave their share to someone in their Will or sell it (never mind the logistical problems of trying to sell one third of a house).

To adapt our example above, let's say Robert, Dean and Chris are tenants-in-common of the property and each owns and equal 1/3. When Dean passes away, he leaves his share to his wife, Deana. Now the owners are Robert, Deana and Chris. Then Robert passes away and leaves his shares to his wife, Roberta. Now the owners are Deana, Roberta and Chris. In this way, each of the individual owners retains control of his or her share.

Between a husband and wife, a title is almost always held as joint tenants. This is so that when the first spouse dies, the other one will automatically own the family home without having to go through probate. Note that this is not always done in second marriages, depending on the situation.

The subject of names on title comes up at estate planning time because the type of ownership might affect your estate plan.

Note to readers: Please don't leave comments or questions on this thread. Because this thread has more than 200 comments, I can no longer see or respond to the comments at the end. This appears to be the maximum that this blog allows. I still want to reply to your comments though, so please feel free to ask your question on another thread. Thanks! Lynne