A recent case decided by the Supreme Court of British Columbia, Eng (Re), demonstrates the risk parents take when adding their children to title to their property in joint tenancy.  Adding a child as a joint tenant on title to property is often seen as a way of avoiding probate fees upon death, as property held in joint tenancy falls outside of the estate.  This means that the property is not disposed of in accordance of the terms of a will, but instead goes directly to the survivor of the joint tenancy.

There have been many cases where the beneficiaries of a will have found that the major assets of an estate were held in joint tenancy, therefore falling outside of the estate and going to the survivor (i.e. such as a child of the deceased).  Depending on the facts, the courts have sometimes found that property held in joint tenancy is not beneficially owned by the survivor and that the survivor is holding the property on a resulting trust where the property reverts back to the owner (i.e. the estate).

The case of Eng (Re), does not directly relate to estate litigation,  it relates to Mrs. Ng, an 85 year old women whose son, David Eng was on title to two assets as a joint tenant with her. Mrs. Ng and David were joint owners of a term deposit in the amount of $183,000 and real property in Beatrice Street in Vancouver.  David filed for bankruptcy in October, 2010 and did not declare his ownership in those assets to his Trustee.  This hearing was to hear Mrs. Ng’s proof of claim that she had full beneficial title to those assets and David, although he was on title, was not a beneficial owner.

On the facts of the case, Mrs. Ng was able to prove that David did not contribute to the purchase of the Beatrice Street property, and she was also able to prove that the term deposit funds came from the sale of another property that David had no interest in.  The Bankruptcy Trustee advanced an argument that Mrs. Ng’s intention was to equalize her estate between her children and having David on title to the assets was to allow for them to go to David, by right of survivorship, upon her death. Therefore, half of the assets would form part of David’s bankrupt estate and would be seized to satisfy creditors.

The interesting aspect of this case is that Mrs. Ng was able to testify in person and strongly rebutted that her intention was for those assets to go to David upon her death.  She insisted that they should eventually be distributed in accordance with her will and divided amongst  all of her children.  In light of her testimony, the Judge was unable to conclude that Mrs. Ng intended to give David a beneficial interest in either the term deposit or the Beatrice Street property.  Therefore those assets were not to form part of David’s estate upon bankruptcy.

This case highlights one of the risks in holding assets in joint tenancy with your children.  There was a real risk that if the court had decided differently Mrs. Ng would have lost half of those two assets to the bankruptcy proceedings.  Sometimes a simple estate planning tool of holding assets in joint tenancy to avoid probate fees can open the door to wider issues and risks that may outweigh the benefit of having the asset fall outside of an estate.