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Not All Property is Governed By Your Will

Contrary to what you may think, your Will does not govern all of your property when you die.

For the sake of estate planning, there are three types of property:

  1. Jointly owned property;

  2. Beneficially designated property; and

  3. Everything else (also known as Estate Assets).

Jointly owned property (sometimes called joint tenancy) is property that you own jointly with one or more other persons. The most common example of joint property is a husband and wife owning a joint bank account or a house together. In law, each joint owner owns 100% of the entire property. In other words, each owner has an undivided interest in the whole property. This differs from Tenancy in Common, where two or more persons own property in shares or portions. Under tenancy in common, each owner owns their portion of the divided interest in the property. For example, Jane owns 50% or a 1/2 interest in a property and John owns the other 50% or 1/2 interest in a property.

Joint tenancy is special in law, in that it contains the "right of survivorship". What is the "right of survivorship"? Well, the right of survivorship kicks in by operation of law when one of the joint owners dies. The right of survivorship acts to automatically vest the ownership of the entire property in the surviving joint owner or owners if there is more than one surviving. What does this mean? If a husband and wife owned a home jointly together, upon the husband's death, the entire ownership in the home would automatically vest in the wife via the right of survivorship. As one can see then, because the right of survivorship operates automatically upon death, jointly owned assets are not governed by the terms of your Will and are not classified as estate assets. You cannot gift away jointly owned assets.

Many times joint ownership is used by people to estate plan: that is, one may add a child as a joint owner to a bank account or a piece of property to avoid the requirement to Probate a Will and thus facilitate the transfer property to a beneficiary. If you are thinking of adding another person as a joint owner to your property, you must consider doing so carefully as the property could then become subject to that person's creditors or that person's matrimonial property proceedings.

The second type of property is beneficially designated property. Beneficially designated property is property in which you can designate an owner in the event of your death. The most common examples of this type of property are life insurance policies, Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs). These are financial instruments wherein you can name a beneficiary to become the owner or receive the benefits when you die. This type of property is transferred directly to the named beneficiary upon your death and is not governed by the terms of your Will.

Again, designating beneficiaries is another estate planning tool in addition to creating a Will and adding joint owners to your property.

The third and final type of property is everything else that you own: assets that you own in your name only (not jointly with someone else) and are assets in which you have not designated a beneficiary or owner upon your death. This is the accumulated, residual "stuff" in your life. These assets are what your Will governs.

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