While joint tenancy and tenancy in common both allow co-ownership on a single parcel of land, the impact of each drastically differs when it comes to estate planning.
Therefore, it is important to consider the different ownership structures and their implications when choosing how to register title when there is more than one owner.
Joint tenancy
Joint tenancy is an ownership structure whereby two or more people individually hold an undivided interest in an equal amount.
For example, if two individuals hold a property as joint tenants, they will each receive an undivided half interest in the property. Similarly, if there are three individuals, each will hold an undivided one-third interest.
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If a person dies owning real property, probate of their estate may be required. In Saskatchewan, probate fees are generally calculated at 0.7 per cent of the total value of the estate.
If land is owned in joint tenancy, probate may be avoided because joint tenancy automatically comes with a right of survivorship, meaning where two or more people own a property together, and one dies, the surviving person(s) or a joint tenant(s) will automatically receive the legal and beneficial ownership interest from the deceased tenant.
A disadvantage to a joint tenancy is that as long as the co-owners are joint tenants, none of them will be able to direct in their will where their share of the property will go upon their death.
This may conflict with the co-owners’ intentions for their estate plan.
For example, if co-owners have children from a previous relationship, they may wish for their half of the property to go to their respective children upon their death.
Tenancy in common
Tenants in common do not have a right of survivorship, meaning the share of a deceased tenant’s property will be distributed upon death according to the wishes of the will. As such, this will trigger probate fees. The upside is that estate planning with the use of intergenerational transfer can be considered again.
Similar to joint tenancy, tenancy in common allows two or more persons to hold an individual undivided interest. However, tenants in common can own disproportionate shares between each other.
For example, in a blended family scenario, where a husband and wife own a property through tenants in common, the husband (“John”) owns 48 per cent of the share in a property, while the wife (“Carla”) can own 52 per cent.
Each of the spouse’s share can then be given to their children through their estate upon death. This type of unequal ownership structure is not allowed in joint tenancy.
Shared owners in tenants in common ownership can also create a joint tenancy relationship.
For example, following our above scenario, if Carla only has one daughter (“Suzie”), who is not blood-related to John but is the only person Carla wants to benefit in her will, Carla can create a joint tenancy ownership with Suzie where an undivided half interest (26 per cent share each) will be created between Carla and Suzie.
Upon Carla’s death, Carla’s 26 per cent share in the property will go to Suzie by right of survivorship, and probate fees will also be avoided.
Meanwhile, John will still hold a 48 per cent share in the property, but now it is with Suzie in tenants in common.
To complicate things further, vice versa in a joint tenancy ownership, the shared tenants can also unanimously agree to change their ownership into a tenancy in common with equal or unequal shares.
Probate fees will apply because there will be no right of survivorship.
The land can be gifted elsewhere as directed by each of the tenants’ wills, and intergenerational transfer planning can also be considered.
In scenarios where a joint tenancy arrangement may be more suited to meet the parties’ estate plan, further planning can also be done to ensure all aspects of the estate plan are considered.
For example, if Carla passes away, how does that impact John’s home if Suzie now owns 52 per cent and wants to sell her interest? Details can be included in Carla’s estate plan to address this.
Other things to consider
One should be cognizant of possible consequences when transferring title into a joint tenancy ownership with a right of survivorship. While it avoids probate fees, there are tax implications, creditor concerns and other issues that may arise.
If spouses are co-owning property, there are also family law considerations that may need to be considered to ensure the parties’ intentions are protected and not contrary to the Saskatchewan family property laws.
Every person’s situation is different, which is why it is important to consult with your lawyer before considering transferring title into a co-ownership structure.
