Joint Tenancy With Rights of Succession (JTWROS) and Joint Tenancy-in-Common are becoming more and more popular. On the surface, they offer a fast-track of inheritance, avoidance of probate, and opportunity to provide asset management help. The fact is they are complex. JTWROS, for example, has complex tax and inheritance issues that require careful attention.
As the population ages, succession to and inheritance of assets is becoming a more important issue. As Estates take a long time to clear for distribution, and as probate fees may be high, a quick alternative fix may seem attractive. JTWROS offers that, as well as an opportunity to ‘help mom or dad out with managing their finances in their golden years’.
There are two main problems with JTWROS. One is that there is an immediate capital gains issue. If I have $100,000 in stock in my name, and I put my friend’s name as JTWROS on Nov 1, the Canada Revenue Agency (CRA) deems me to have sold the stock the moment before on Nov1. Technically I sold 50% of the stock or $50,000 on Nov 1. I must calculate my capital gains and pay tax on that $50,000 of stock.
JTWROS may also lead to inheritance issues. I’ll cover that next blog.