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The traditional manner of distribution looks like this – a couple owns their home together as joint tenants, such that when one parent dies it goes to the other spouse by right of survivorship. When the remaining parent dies, all that wealth goes to the kids.
Entering into a second marriage can put this natural progression of ownership into question. With second marriages becoming more main-stream, one of the most contentious types of cases I see involves children from the first marriage battling with step-parents over this asset. The Financial Post’s recent article on estate planning speaks to how your home gets treated on death, and the author notes the following about joint ownership and second marriages:
* Owning property as joint tenants to avoid probate fees (such fees are not significant in the grand scheme of things) is not always worth the consequences. Learn about the risks before you do it.
* A better option may be tenancy-in-common ownership, where the couple chooses the ownership split on a property. Each parent can then have their share of the property go to whoever they want, including children from a previous marriage. This can also protect the children in situations where the surviving step-parent changes his/her will so as to disinherit them from their natural father or mother’s assets.
* If you take care of your spouse, you can avoid other problems – in Ontario, there is legislation that allows your spouse to elect to make an equalization claim instead of accept what was given to him/her under the will.
* Allowing the surviving partner a right for a finite period of time (e.g. two years) to find replacement living arrangements is usually best for everyone. Read Toronto Estate Law Blog
* Consider such things as maintenance, taxes and other costs associated with a home to avoid problems that may otherwise be unavoidable if the deceased partner did not plan well and left enough liquid assets to allow the surviving partner to pay the regular upkeep and real estate taxes.