Joint tenancy is a type of ownership in property that involves two or more persons. The individuals have joint ownership, or equal rights to the whole of the property; if one of the joint tenants dies, the remainder of the property automatically transfers to the surviving joint tenant(s), and not to the estate of the deceased. This is referred to as the right of survivorship. (This is opposite to a tenancy in common where the deceased’s share forms part of the deaceased’s estate).
When a parent registers his or her assets in the joint names of his or her adult child (or puts assets into a joint bank account) the question becomes whether the parent intended to have the assets or funds to go to that child upon his or her death, or to have the adult child hold the funds in trust for the benefit of the parent’s estate to be distributed according to the terms of his or her Will.
JOINT TENANCY REBUTTABLE PRESUMPTIONS
Generally, there are two types of rebuttable presumptions (an assumption made by a court that is taken to be a fact unless it is contested and proven otherwise) that apply to these cases:- Presumption of resulting trust – where the holder of legal title does not hold the property personally but, rather, holds the property as a trustee for the benefit of the entire Estate.
- Presumption of advancement – suggests that the property transferred from parent to child, or spouse-to-spouse, is a gift to that person in its entirety.
- applies equally to fathers and mothers;
- is the general rule for gratuitous transfers (transfers where there was no consideration for the transfer);
- the onus is placed on the transferee (adult child) to demonstrate that a gift was intended.
- written documents;
- who contributed to the initial purchase or funding
- who maintained the asset;
- wording of bank account documents;
- control and use of funds in the account or the asset;
- granting of a power of attorney;
- tax treatment of the interest from a joint bank account.
ENSURE INTENTIONS OF JOINT TENANCY
If you are an adult child who holds a joint asset or a joint bank account with your parent, it does not mean that you will automatically be entitled to the asset or funds upon his or her death (the right of survivorship). You may have to prove that it was your parent’s intent that the property was a gift. If you are a parent that is considering placing assets in joint tenancy with adult children, consider the following:- Is your intent to gift the property to your child or do you wish that the child take the interest in the property in trust for the benefit of your estate?
- If it is a gift, ensure that your intent is clear, i.e. a deed of gift signed by the parent.
- If it is a trust, contemplate the terms of the trust and have your adult child acknowledge the terms in writing.