The Pitfalls of Using Joint Ownership as an Estate Management Strategy

One of the goals of estate planning is the management of assets while an individual is still alive but has lost the ability to manage their assets on their own (commonly referred to as losing capacity). We recommend coming up with a plan as to who will manage your assets, and how, long before capacity becomes an issue.

Commonly, an individual getting close to this stage and wanting help managing their assets will simply add a child, or another trusted individual, as a joint owner of their assets. While this may seem like a simple solution, this strategy is rife with issues.

This article will address some of the issues with using joint ownership as a strategy for managing assets, both during the original owner’s life and upon their passing. It will then discuss an alternate asset management tool: the Enduring Power of Attorney or “EPA”, a specialized legal document designed for precisely this situation.


Joint Ownership

    Issues during the original owner’s life

What do we mean by joint ownership? Joint ownership occurs when assets are held jointly in two or more individuals’ names. For example, if a senior individual has a bank account and adds their child to that bank account, they will become joint owners.

While the intent of this might simply be to allow the child to pay bills on their behalf or make deposits or withdrawals, the reality is much more complicated. Once both names are listed as “owners” of the account, the legal assumption is that the account is equally owned by the two individuals. The child then has equal authority to deal with those funds. There is no automatic requirement that the child must use the funds solely for the benefit of the parent.

This means that the child could theoretically remove all funds from the bank account and it would be very difficult or impossible for the parent, or another interested party, to reverse these transactions.

Joint ownership also opens the asset to potential claims of third parties as against the additional owner. For example, if the joint owner declares bankruptcy, creditors may be able to realize against the asset held jointly. Or, more commonly, if the joint owner goes through a divorce (or a separation from an adult interdependent partner), their partner may have a family property claim against the asset.

It is also extremely difficult to undo the joint ownership as a whole. Once you have added someone to your bank account, or title of your house, you cannot simply elect to remove them without their consent. For all intents and purposes, they are an equal owner of the property.

Finally, it can take significant time to transition all of one’s assets into joint ownership. There is no one call to make or form to submit to add another individual as a joint owner on all of one’s assets. Each bank account, house, vehicle, or other investment or physical asset would need to be dealt with individually.

    Issues following the original owner’s death

The other point to consider is what will happen to the assets held jointly upon the original owner’s passing.

Once the original owner passes away, the “right of survivorship” applies to make the other named individual the sole owner of the asset. This means that the funds in the account will not form part of the deceased’s “estate” and will not be distributed in accordance with the Will. Instead, the property will become entirely the property of the joint owner.

This means that an individual using the joint ownership strategy can unintentionally cut a beneficiary out of a very substantial part of their estate.

It may be possible for the remaining beneficiary(ies) to argue before the Court that the deceased’s intent was not to leave the asset entirely to the named individual but rather that the funds are held in trust by that individual for the estate. However, without some written documentation of the testator’s intent, this can be an extremely challenging argument to make. Even if the spurned beneficiaries are ultimately successful, this would mean a lengthy and expensive court battle and unnecessary conflict between beneficiaries.

As the old saying goes, only two things in life are certain, death and taxes. But what does death mean for taxes when property is held as joint owners?

Let’s use the example of an individual with two children whose substantial assets are a house and a bank account, both of which are worth roughly the same value. The individual decides to put the house in both his and his daughter’s names so that the daughter can help with management of the house. To compensate for this, the individual is leaving the entirety of the contents of the bank account to the son in his Will.

Upon the individual’s passing, Canada’s tax rules deem the testator to have sold the house at its current fair market value. There will likely be a large capital gain on the house, assuming it has gone up in value since its purchase. These tax consequences will belong to the deceased’s estate; they do not attach to the house.

This means that there will likely be a substantial tax burden that must be paid out the estate’s remaining property, i.e. the bank account. The end result is that the daughter gets the full value of the house without paying any of the tax consequences, while the son is left only with the funds in the bank account after the taxes have been paid. The tax consequences could erode a substantial portion of the value left for the son.

This leads to the unintentional result of a very unequal division of assets.

The Enduring Power of Attorney

An EPA is a legal document under which an individual appoints an attorney to manage all their assets. The EPA is drafted by a lawyer and is signed by an individual either to immediately take effect or to take effect at some later date, once the individual has lost capacity.

We typically recommend drafting these documents well in advance of loss of capacity with a future “triggering event” which will bring the EPA into effect. This “triggering event” can be a statement in writing of the testator intentionally bringing the document into effect, or it can be a statement from one or more doctors that the testator no longer has capacity to deal with their assets.

Following the coming into effect of the EPA, the attorney is able to manage all of the owner’s assets. The most important benefit is that the EPA will not affect the underlying ownership of the assets. While the attorney has the ability to manage the estates, dispose of them, buy new investments, etc., everything remains the property of the original owner.

Further, the attorney owes a fiduciary duty to the original owner meaning that the assets must be managed solely for the benefit of the original owner.

There are also clear mechanisms for the individual, or other family members or interested parties, to bring forward an application to the Court if they believe that the attorney is mismanaging the funds. The attorney is statutorily obligated to maintain records of how they have dealt with the assets and the EPA can even build in reporting requirements whereby the attorney has to keep other family members appraised of his or her decisions. There is therefore much clearer and more substantial protection for the original owner.

It is also possible to undo the coming into force of an EPA. For example, if an individual temporarily loses capacity due to a car accident, the EPA could come into effect. However, once that individual regains capacity, if a medical professional declares that individual competent, that individual can regain control over their assets.

Finally, the EPA will not impact the distribution of property on the individual’s passing. As the assets never become the attorney’s property, the assets will entirely be dealt with under the deceased’s Will. This avoids unintentional unfairness between beneficiaries.


In conclusion, there are many potential issues when it comes to using joint ownership as a tool for asset management. The joint ownership strategy puts the original owner at the mercy of the joint owner, is almost impossible to unwind, and can lead to unintended consequences for the ultimate beneficiaries of the individual’s estate.

We therefore strongly recommend using an EPA as an estate management tool instead of relying on joint ownership. While there is some up front cost to preparing an EPA, it gives the individual much more control over how their assets will ultimately be managed. Importantly, there are significant built in protections which require the attorney to manage the assets for the benefit of the individual. Finally, the EPA does not impact the underlying ownership of the assets avoiding any unintended consequences upon the individual’s passing.

Our Wills & Estates team would be happy to prepare an EPA for you and to answer any questions you may have. Remember, it is never too early to start thinking about estate planning.