We recently came across an individual asking whether he could avoid the cost of preparing a Will by simply ‘joining’ all his assets with his children. Perhaps you may also have someone give you such an idea in order to skip the preparation of a Will because it’s “easier and cheaper to just join your accounts” than to visit the lawyer’s office.
Interesting but misinformed.
While joint ownership is often used as an estate planning tool in order to have assets transferred to the surviving owner (or simply for the sake of convenience) and avoiding the dreaded probate tax upon death, it has to be thought through to avoid unintended results.
Some questions that should be crossing your mind are:
- Who is this account to be shared with?
- Is the co-owner of the account one of your adult children?
- What type of account is it (registered, non-registered etc.)?
- Are there rollovers available so that there isn’t unnecessary tax burden on the estate?
- Do you know the tax consequences that arise as a result of transferring a capital asset into joint ownership?
- Is the underlying intention to avoid probate tax?
- Is avoiding probate tax worth the loss of control?
- Is the true legal and beneficial ownership being transferred?
Some additional considerations may include the following:
In the event of your death, are you certain that Johnny will share equally with your other son, Bobby? Maybe he will, maybe he won’t. Johnny may be in a financial strife and decide to use the proceeds out of this account thereby cutting Bobby short. What if Johnny’s facing creditor issues? Will creditors now be able to access the account? Do either of them have dependants (children, spouse) and how does all that factor in?
Along with continuous changes in the law, the above are some of the questions one must seek answers to in relation to joining accounts. Other items that require attention when preparing Wills are registered plans, insurance proceeds payable upon death, joint ownership designations, assets owned under tenancy in common etc.
It is always a good idea to speak to a professional and have your situation reviewed. Contact Rabideau Law today and speak to one of our professional Wills and Estates Lawyers.