Where an asset is owned by a testator with another person as joint tenants with a right of survivorship, then upon the testator’s death his or her interest in the asset will pass automatically and immediately to the surviving owner. Contrastingly, where a testator owns an asset solely, or with another person as tenants-in-common, then upon the testator’s death his or her interest in the asset will pass to his or her estate and will be dealt with in accordance with the testator’s Will.
One exception to the above-noted principles is provided by the Family Law Act, R.S.O. 1990, c. F.3, and has to do with ownership of a matrimonial home. Where a spouse dies owning an interest in a matrimonial home as a joint tenant with a right of survivorship with a third person (i.e., not his or her spouse), then the joint tenancy is deemed to have been severed immediately before the time of death. The consequence of this provision is that ownership of the matrimonial home will be treated as being one of tenants-in-common (rather than joint tenancy), and the spouse’s interest in the home will pass to his or her estate. Accordingly, such interest will be dealt with in accordance with the testator’s Will or, if the spouse dies intestate, in accordance with the laws of succession contained in the Succession Law Reform Act, R.S.O. 1990, c.26.
It goes without saying that the distinction between the types of ownership and the consequences thereof is critical for estate planning purposes. In short, a deceased’s person’s interest in assets he or she held solely, or as tenants-in-common with another person, will pass through his or her estate and will generally be subject to probate tax. Interest in assets held by a deceased person jointly with a right of survivorship, however, will not pass through his or her estate and will not be subject to probate tax. For this reason, one of the simplest estate planning techniques employed by the vast majority of couples is to own or hold key assets such as real property and bank accounts jointly and with a right of survivorship.
Thanks for reading “The Estates Nutshell” – questions and comments are very welcome at estates@cklegal.ca.