In Prince Edward Island, holding property in “joint tenancy with right of survivorship” means that when one owner passes away, the property automatically transfers to the surviving owner. This skips the lengthy and expensive probate process at the Supreme Court of Prince Edward Island.
When planning your estate in Prince Edward Island, one of the most effective ways to ensure a smooth transition of your assets is through joint tenancy. Many Islanders use this ownership structure for their family homes, cottages, and bank accounts. It provides peace of mind knowing that your loved ones will not be locked out of crucial assets during a difficult time.
However, adding someone’s name to your deed is not a decision to make lightly. While bypassing the probate system sounds appealing, it can trigger unexpected tax consequences with the CRA or expose your property to a co-owner’s creditors. Understanding the specific rules of joint tenancy in PEI is essential before making changes to your property titles.
Step-by-Step Process in Prince Edward Island
Whether you own a waterfront cottage in Cavendish, a family home in Stratford, or a downtown condo in Charlottetown, the process of setting up joint tenancy generally follows these steps. It is highly recommended to work with a local PEI real estate law firm to ensure the paperwork is flawless.
Step 1: Determine Your Current Ownership Status
First, review your current property deed. If you already own the home with your spouse, it might be registered as “tenants in common” rather than “joint tenants.” In a tenancy in common, your share does not automatically go to the other owner; it goes into your estate. You must confirm that the “right of survivorship” is explicitly stated on the document.
Step 2: Consult a Lawyer Regarding Tax Implications
Before changing a title, you must consider taxes. If you add an adult child to the deed of a property that is not their primary residence, the CRA may view this as a “deemed disposition.” This could trigger an immediate capital gains tax bill, even though no money changed hands. Always consult a legal professional to weigh the probate savings against potential tax penalties.
Step 3: Draft and Sign the New Deed
Your lawyer will draft a new deed transferring the property from your sole name into joint names. Both you and the new joint tenant must sign the documentation. The wording must legally reflect the intention to create a joint tenancy with the right of survivorship under the PEI Real Property Act.
Step 4: Register the Deed at the Land Titles Office
The final step is officially recording the new deed. Your law firm will submit the documents to the Prince Edward Island Land Titles Office. Once registered, the provincial government recognizes both of you as equal owners. If one owner passes away, the survivor simply files an affidavit of death and a death certificate to clear the title.
How Much Does it Cost in Prince Edward Island?
Setting up joint tenancy requires paying legal fees and provincial registration costs. However, it often saves thousands of dollars in future probate fees.
- PEI Probate Fees Saved: Currently, PEI charges $400 for the first $100,000 of estate value, plus $4 for every additional $1,000. Property held in joint tenancy avoids this fee entirely.
- Legal Fees: Hiring a local PEI lawyer to draft and register a new deed usually costs between $500 and $1,200 CAD, depending on the complexity of the transfer.
- Land Titles Registration Fee: The provincial government charges a standard registration fee, usually around $50 CAD, plus potential property transfer taxes if exemptions do not apply.
- Capital Gains Tax: Varies heavily. If you add someone other than a spouse to your property, you might owe the CRA thousands in taxes based on the property’s increased value.
How Long Does the Process Take?
Drafting a new deed and setting up joint ownership is a relatively quick process. Most PEI law firms can prepare the documents within 1 to 2 weeks. Registration at the Land Titles Office usually takes just a few days. In contrast, if the property goes through your estate, securing a Grant of Probate from the Supreme Court can take anywhere from 4 to 12 months.
Frequently Asked Questions (FAQ)
What is the difference between joint tenancy and tenants in common?
In joint tenancy, the surviving owner automatically inherits the deceased person’s share. In a tenancy in common, each owner holds a distinct share (e.g., 50%). When a tenant in common dies, their share goes into their estate and is distributed according to their Will.
Can a joint owner sell the property without my permission?
No. Both joint tenants must agree and sign the paperwork to sell or mortgage the property. This means you lose independent control over the home once you add someone else to the deed.
Does joint tenancy protect the house from creditors?
Generally, no. If you add an adult child to your deed and they go bankrupt, get a divorce, or are sued, their creditors might attempt to place a lien on their share of your property. This is a significant risk to consider.
Can I just write in my Will that the house goes to my child?
Yes, but the property will then have to go through the PEI probate process. Joint tenancy bypasses the Will and the probate process entirely, meaning the transfer happens almost instantly upon death.
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