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Be Aware - Real Estate Ownership Registration & Estate Planning

October 10, 2020 | Posted by: Danny Duong

When determining a suitable mortgage for my clients - depending on the situation and the mortgage lender’s policy, we will discuss how ownership of their new property could be registered.  Registration could be as Joint Tenancy or Tenants in Common.  In layman's terms, with Joint Tenancy all registered individuals own the property equally and there is no division of ownership in terms of percentages (everyone owns the property together 100%).  When one party passes away, the other remaining registered owner(s) automatically assume full ownership of the property.  For example, this is the common way to register ownership when spouses buy a home together.  When one spouse passes away, full ownership of the home automatically goes to the surviving spouse.  The deceased person’s interest in the property does not get passed to their estate for probate.   On the other hand, with the Tenants in Common form of registration, each party owns a specific percentage of the property (ie. 25% John, 75% Mary or even 50%/50%) and there is a difference in Right of Survivorship.  When one owner passes away, their specific interest in the property first goes to their estate and probate before it can be distributed according to their will.  

So, which form of ownership is best when you’re buying real estate with your spouse, parents, friends, joint-investors, etc?  My advice is to talk to a real estate lawyer, Accountant, Certified Financial Planner - hard stop!  Do not rely on your banker, mortgage broker, realtor, or your Uncle Bob who apparently knows a lot about real estate!  There are numerous implications on estate planning, taxation, exposure to creditors, etc. that I will not even attempt to discuss as it’s beyond my scope of expertise which is mortgages.  Instead, here are a few links to articles written by law and accounting firms that explain the different consequences.  Bottom line again is consult with a real estate lawyer on this topic.  My blog here is simply to highlight the fact that there are different methods to register ownership and you must be informed before choosing one over the other.  In fact, there are additional agreements that could be installed which breaks down ownership further and a good real estate lawyer could explain including use of Bare Trusts and determining Beneficial Owners, etc.

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