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Using joint accounts and joint ownership of assets with family members

Sometimes it can make sense to name another person on an account as a joint owner. This used to be recommended frequently by bank employees to older customers as a way to make it easier for a family member to sign cheques, pay bills, and do things for you on your bank account.

However, it usually is best to keep your assets all in your name where they are clearly yours. If you have a valid Continuing Power of Attorney for Property, the attorney for property will be able to look after everything for you, just as easily as you have been able to do for yourself. Unless you want a particular person to directly inherit that asset for themselves immediately after you die, and not to have to share that asset with anyone else, there is usually best not to list anyone as a joint owner of an asset, whether it’s a bank account or title to real property.

Consequences of Joint Ownership

If you do name someone to own property or accounts with you, you cannot change that without their consent. If you have a falling out with that person, or want to sell what you own and do other things with it, that person may not agree to sign the necessary paperwork.

Separation of other Joint Owner from spouse

If that person separates from his or her spouse, the spouse has a right to claim against the financial value of the property or of the monies in the account on the date of separation.

Creditor problems of other Joint Owner

If the person you placed into joint ownership of an asset with you runs into problems with his or her creditors, those creditors also can claim against the asset, whether it is real property or a bank account.

Loss of protection of future inheritance

By placing a family member into joint ownership of an asset with you, you may be destroying the protection their future possible inheritance from you enjoyed while it was safely owned only by you, and while their spouse and creditors could not claim against it.

Loss of your personal control over the asset

Also, a true joint ownership of a bank account or an investment account, can sometimes be set up in a way that would legally entitle the family member to make decisions without you, and that would legally entitle the family member to take all of the money in that account for himself or herself. This would not usually be a good thing for you.

If you want to give money or an asset directly to a family member, you can do that as a direct gift, without making him or her a joint owner of an asset with you.

Income tax consequences of changing ownership

Sometimes there are tax consequences when you give ownership of something, even only of one half of an asset, to someone else. For tax purposes, it often doesn’t matter whether you sold an asset or gave it away, you may be treated as though you sold it for its full value. This can cause problems for you in the year you change the ownership of the asset; it can cause further problems later also, for example with real estate, if the asset is your home, and if the other owner doesn’t live in the home with you.

Please note that no decision to transfer ownership of assets to another person, even just adding them as a joint owner with you, should be taken without the professional advice of a chartered or certified tax accountant.