The interpretation of joint ownership as a way to defer capital gains taxation and avoid probate fees, with respect to investments, can be quite opaque.
I’ve been asked about this subject many times and each time I’ve asked that the question be posed to a tax or legal specialist as the risk of giving the wrong advice is too great.
Some parents have the idea that if they move their assets from individual ownership to joint ownership with a son or daughter, capital gains taxes and probate can be avoided at the time of their death. This is not necessarily so and each case requires careful consideration and proper documentation.
This piece from Manulife helped me understand the complexities.
If probate avoidance is the driver for such a move from individual ownership to joint ownership, then that’s when segregated funds shine. Consider a scenario where an elderly person has decided to downsize their home and has a large amount of non-registered money after they purchase a new smaller dwelling. By investing this money in a segregated fund and naming a beneficiary, the money will avoid probate at the time of their death.
Canada Life has a product “Estate Protection” that is available right up to the day before the client’s 91st birthday with a 100% death benefit guarantee. It’s a great solution in this situation – 100% death benefit guarantee and probate avoidance. Assumption Life and La Capitale also have solutions for clients beyond age 91.
Caution is the key word when we’re approached about with questions about joint ownership. I’d prefer to use segregated funds and not get involved in discussing the ins-and-outs of joint ownership.
Canada Life will be joining us on June 26th at the Markham office to discuss tax planning and investments. I hope you can join us in person or via webinar.
I look forward to your thoughts on this subject.
Director of Wealth
Qualified Financial Services