Joint Tenancy and Farmland
Updated: Jan 26
Clients owing farm property ask whether it is advisable to add adult children as joint tenants to farmlands. There are several important considerations that are useful to look at if you are reviewing this strategy.
Right of Survivorship
In Alberta, joint tenancy creates a “right of survivorship” such that if an individual passes with their lands in joint tenancy, the title passes to the survivor automatically without having to obtain probate. This type of ownership is to be contrasted with a tenancy-in-common, where the right of survivorship does not exist, and each co-owner can deal with their interest independently of the other co-owners.
If you transfer lands to adult children in joint tenancy, it is possible that a resulting trust can arise. If documentation is not completed to show the lands were a gift, it’s possible that non-farm estate heirs can argue that the lands are held in trust for them pursuant to a “resulting trust”. This can undermine your intention in transferring the property and it is recommended to document the gift to ensure that your wishes are met.
Reversing Joint Tenancy and Control
It can be difficult to reverse joint tenancy planning if circumstances change. For example, a child holding a joint tenancy interest would need to sign a transfer back to the parents and may not wish to do so. Further, if a co-owner were to attempt to mortgage the property, they would need the consent of the other co-owners which may be difficult to obtain.
If beneficial ownership is transferred on a family farm rollover basis to avoid capital gains tax, adverse tax consequences can be triggered for the child if they transfer the asset back to their parents (children are generally precluded from relying on the family farm rollover to back to parents unless they predecease them).
The other possible complication of joint tenancy is the arrangement for payment of taxes and expenses by the other co-owners. Further, co-ownership of property can make it subject to claim by creditors or matrimonial dispute.
In many cases, the costs of adding adult children to farmland as joint tenants may outweigh the benefits. It is recommended to consider all options in completing your estate plan and a well-crafted Will and capacity documents can often be a better alternative with fewer risks.
Our team at Dalke Law Office are here to assist you with your farm transition journey. We're passionate about agriculture and ready to lend a hand where we can. For assistance, please call 403-398-2496 or email email@example.com for an initial consultation.
This blog post is not intended to be relied upon or taken as legal advice or opinion but is of a general nature to highlight matters of interest in this area of law. If you have questions or comments, please contact our office.