Joint tenancy vs tenancy in common in Canada: Changing ownership of assets for married and common-law partners

The tax implications of changing land owned jointly as tenants in common to joint tenancy with right of survivorship and how to do it. The post Joint tenancy vs tenancy in common in Canada: Changing ownership of assets for married and common-law partners appeared first on MoneySense.

Joint tenancy vs tenancy in common in Canada: Changing ownership of assets for married and common-law partners

My common-law partner and I purchased a vacant lot last year, and we registered it as tenants in common.

We are starting to build a home on the lot this year and we would like to change it to joint tenancy. Would you be able to explain how we would go about doing this?

— Sheila

What’s the difference between tenants in common and joint tenancy?

Tenancy in common is a type of joint ownership often used by common-law spouses, couples in second marriages, or family or friends who own real estate together. Tenants in common can own different percentages of a property, and they own a divided interest or share of a property, rather than jointly owning the entire property together.

Joint tenancy with right of survivorship is commonly used by married couples to own real estate, whereby spouses simultaneously own 100% of a property. When a joint tenant dies, their ownership interest passes directly to the survivor—the so-called right of survivorship—who then owns the whole property.

The death of a property owner who owns a share of real estate as a tenant in common will cause the share to pass through their estate and be dealt with, based on the terms of their will. It may be left to someone other than the other co-owner, like children from a first marriage, for example. If a property is owned as tenants in common and your estate wish is to have it go to the co-owner, as may be the case for you, Sheila, owning as joint tenants with right of survivorship may be advisable.

Spouses who separate or divorce may do the opposite—changing ownership from joint tenants with right of survivorship to tenants in common.

A real estate lawyer can help change the ownership of real estate, Sheila. There will be legal fees to do so and may be municipal or provincial fees as well. The costs may be up to a couple thousand dollars.

The tax implications in changing tenants in common and joint tenancy

When you change ownership of real estate, there may be land transfer tax payable, but typically only when consideration (cash, other assets, a loan, etc.) is being paid for the transfer. If co-owners change ownership and no consideration is exchanged, like changing from tenants in common to joint tenants, there will typically be no land transfer tax implications.

If you both own 50% of the lot, and you change the ownership to joint tenants with right of survivorship, there should be no income tax implications either, Sheila. If you own a different percentage than 50% prior to changing the ownership, there may be income tax implications.

When spouses transfer capital assets like real estate between each other, the transfer typically takes places at cost, unless you elect otherwise. That means any potential capital gains tax is deferred until sale. Future income—whether capital gains or rental income—could be attributed back to the spouse who transferred some of their ownership to the other spouse.

As an example, if you owned 75% of a rental property and transferred 25% to your spouse, so you each owned 50%, the rental income and eventual capital gain on sale should likely still be reported 75% by you rather than equally on your tax returns.

If the property qualifies as your principal residence, as I suspect is the case for you, Sheila, there may be no income tax implications whatsoever. If in doubt, seek tax advice from a professional.

Once you change the ownership of the lot, Sheila, if either you or your partner dies, the ownership of the lot and any buildings on it will transfer to the survivor. It will not pass through your estate. So, the terms of your will do not apply to it. The property will become part of your estate on the second of your two deaths and be distributed to the beneficiaries of your will at that time.

Generally speaking, all of this commentary would apply to both legally married and common-law spouses.

Other advantages and disadvantages to know about

There may be other implications for you to consider, Sheila. If you are building a home, there may be sales tax (Good and Services Tax or Harmonized Sales Tax) that may be payable upon completion but may qualify for federal or provincial rebates.

There may also be family law implications if you and your partner later separate, and one of you contributed more to the purchase of the lot than the other. Also consider if one of you will contribute more than the other to the home construction. As a result, you may need additional sales tax or family law advice.

While it is relatively easy to have a real-estate lawyer change the ownership of the lot, there are a lot of other things to consider here as well, Sheila.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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Making sense of the markets this week, October 17

They’re saying “winter is coming” for the U.S. stock market, Q3 earning season kicks off, IMF inflation warning and more. (Including a cartoon worth a chuckle.) The post Making sense of the markets this week, October 17 appeared first on MoneySense.

Making sense of the markets this week, October 17

Each week, Cut the Crap Investing founder Dale Roberts shares financial headlines and offers context for Canadian investors. 

Winter is coming for U.S. stocks

Back in early September, I asked if the stock markets could run on fumes. It’s not that economic recovery had reversed itself, but that most of the news on the economic front showed that things were softening. 

Here’s a chart for iShares U.S. equities ETF, ticker IVV, courtesy of Seeking Alpha. 

Yes, I asked about the economy running on fumes at the most recent peak. And markets appear to have run out of gas, for now. 

In two very interesting back-to-back, hold-my-beer tweets, the Globe and Mail’s Scott Barlow suggested that winter might be coming for U.S. stocks. 

That’s the suspicion of Michael Wilson, Chief Investment Strategist at Morgan Stanley. 

Wilson sees headwinds this earnings’ season. And again it is largely related to the slowing growth in the market and the change in chatter. The current news is not as good as the news from a few months previously. He questions if we might see a 10% or 20% correction. 

In this Making Sense of the Markets post, I mentioned how margin calls might start to cascade at a 20% pullback, putting additional pressure on any market correction. It will be interesting to keep an eye on that correction level and margin calls. 

But keep in mind, through all of this, stock markets can run on fumes. On one occasion, we then had the lost decade for U.S. stocks. 

That second Barlow tweet “of concern” suggests that guidance—the company’s projections for their own future earnings and revenues—could be ugly. 

That guidance concern is according to a Bank of America (BAC) report. It expects strong earnings in-line with consensus. But it might be the companies’ outlook for the future that might cause markets to wobble. 

As I wrote on my own website, I see good news in the markets, but I know that markets are forward-thinking and forward-looking, though. 

BAC sees big challenges for earnings and growth rates in 2022. 

I am certainly suggesting that I know (or that anyone knows) how the markets will digest the Q3 earnings season. That said, we might take these “Winter is coming” and other dire suggestions as a reminder that all good things must come to an end. And that includes robust bull markets. 

Yes, some investors and portfolio managers do like to read the tea leaves and adjust their portfolios based on how they perceive the risks and economic conditions and trends. 

Some are better at that than others. 

And this won’t help the cause, gross domestic product (GDP) estimates are now starting to come down, but not to the level of the Atlanta Fed … 

Earnings season kicks off in the U.S. 

We now have the opportunity to look at the actual third quarter Q3 earnings and forward guidance for U.S. stocks. Earnings season is under way. 

Let’s have a peek at a select group. There were many banks and diversified financials that were batting lead off this Q3. 

U.S. Bancorp (USB) had very strong numbers, and it beat on earnings and revenue. 

Bank of America (BAC), Morgan Stanley (MS) and Wells Fargo (WFC) all delivered strong numbers. The banks and investment houses are well situated as we continue to move to the other side of the pandemic. They are seeing improved consumer strength, consumer health and improved business conditions. 

Here’s a taste of the U.S. financial terrain, courtesy of a Wells Fargo summary on Seeking Alpha. 

The headline read: “Wells Fargo Q3 earnings rise on credit benefit, consumer and commercial banking.”

If it’s too long to read, I’ve got some key take-away points for you here: 

  • Wells Fargo Q3 earnings beat the Wall Street consensus and was helped by a provision from credit loss benefit and strength in its consumer banking, commercial banking, and wealth and investment banking divisions.
  • Consumer banking and lending net income of $2.46B climbed 15% from Q2 and 181% from Q3 2020.
  • Commercial banking net income of $759M fell 3% Q/Q and rose 295% Y/Y.
  • Corporate and Investment Banking net income of $1.53B held even with Q2 and rose 41% Y/Y.
  • Wealth and investment management net income of $579M gained 25% Q/Q and 38% Y/Y.
  • Loans increased to $862.8M at Sept. 30, 2021 from $853.3 at June 30, 2021; compares with $920.1M at Sept. 30, 2020.
  • Deposits at Sept. 30, 2021 of $1.47B increased from $1.44B at June 30 and $1.40B at Sept. 30, 2020.
  • Q3 provision for credit loss was a benefit of $1.40B vs. benefit of $1.26B in Q2 and cost of $769M in Q3 2020.

There is strength across the financial industry. Financials are known to be a good hedge against inflation and have been enjoying a robust 2021. They can also prosper in a rising rate environment, an event we might see continue as inflation worries persist. 

Courtesy of S&P Global we see that financials top this leaders and laggards list for the third quarter. 

Those financials listed above were off to a good start in Thursday’s (October 14) trading after announcing their results. 

Here’s a few other notables with interesting themes and stories. 

We know that the world runs on chips (semiconductors). It is a modern commodity in my eye. And there is an ongoing and perhaps accelerating chip shortage. 

It may be no surprise that Taiwan Semiconductors (TSM) knocked it out of the park. From that CNBC post overview of stocks that are making a move. 

“Taiwan Semiconductor (TSM) – The chip maker reported a better-than-expected 13.8% jump in third-quarter profit, thanks to the surge in global chip demand and a shortage that’s pushed prices higher. Shares jumped 3.8% in the premarket.”

I am a big fan of investing in commodities that are in short supply. This is on my core and explore list: on the explore side of the ledger, of course. While I hold Texas Instruments and Qualcomm, I’d be more than happy to round out the semiconductor diversification. 

Canadian investors might have a look at Horizons CHPS ETF. You’ll find TSM as a top holding. 


Also in that CNBC post were United Health (UNH) and Walgreens (WBA). WBA is a stock that we hold in one of my wife’s accounts. We hold 20 U.S. stocks from 2014, and that is the only stock sitting in a losing position. It was the fifth consecutive earnings beat for WBA. It would be nice to see all of our positions in positive territory. Maybe that will come to be. I’m greedy that way. 

U.S. stocks are getting a lift from the positive earnings. It’s adding a little spark for those fumes. Time will tell if there is any staying power. 

And this is more than interesting. Canadian stocks have led the way in 2021. 

Source: S&P Global

The Canadian market is over-weighted to financials, and we still get a boost from our energy and commodities exposure. The Canadian banks have a very good beat over the market in 2021. 

Finally the last note on this earnings snapshot belongs to BlackRock (BLK). Readers might know that BLK is one of my two U.S. growth picks (along with Apple (APPL)). Both continue to ride the ETF wave in Canada and around the globe. 

The headline from CNBC reads: “BlackRock profit beats estimates as assets soar to record $9.49 trillion.”

I like to call this investment thesis “an undeniable trend.”

The Dividend Calculator … 

Here is an incredible tool dividend investors can benefit and enjoy. We know Canadians love big dividends. This dividend calculator tool is from one of my investment blogger twitter friends, Dividend Athlete. (Henrik is a professional football—ahem, soccer—player who helps other investors and other professional athletes build wealth. As you’ll learn from his website, professional athletes are notorious for earning a ton of money, as well as not saving nor investing, and ending up in the poor house.)

His dividend calculator will offer you the portfolio metrics for total returns, the growth of the dividend payments over time, cumulative dividends, yield on cost, and more. You will have to make some assumptions, though, but you can certainly do the research on historical dividend growth and historical share price appreciation for individual stocks or ETFs. 

Of course, past performance or past dividend growth do not guarantee future growth. 

Here’s one of my go-to sites for dividend history. 

Have fun, and let me know what you think in the comments section below.

IMF warns on inflation

Many are starting to take inflation and the prospect of lasting inflation a little more seriously these days. As has long been reported in my columns, on opinions are divided: Inflationistas on one side and the transitories on the other. 

Will inflation be fleeting or stick around a while to cause all kinds of trouble? 

Inflation is seen as one of the major threats to economic recovery and stock market health. 

The International Monetary Fund (IMF) joins the chorus of those who are becoming concerned that the transitories that include many central bankers and finance ministers should stand on guard. This BBC post shared the warning from the IMF that …  

“Nations must be ‘absolutely vigilant’ about inflation,” says IMF.

While the IMF appears to be of the mind that inflation will hang around, it suggests that the rising costs will be potentially under control in 2022. Central bankers should be ready to act. 

IMF chief economist, Gita Gopinath says, one of the biggest problems was high inflation, particularly in the U.K. and U.S., where it is running at 3.2% and 5.3% respectively. These rates are partly due to a “mismatch between demand and supply,” but also in the case of the UK soaring gas prices.

She says inflation was likely to stabilise in most places by mid 2022, although it would take until 2023 for it to happen in the U.K. However, central banks “should absolutely be vigilant about what’s happening.”

IMF reminds us that hiking interest rates by central banks are the weapons of choice, and the banks should not be afraid to use that stick at the first sign that inflation is getting out of control. 

That said, when supply chain bottlenecks, commodities shortages and tight labour markets are the cause of inflation, that rate trajectory stick becomes more of a wet noodle. 

IMF has also modestly cooled its growth forecasts. More from that same BBC post …

“IMF cut its projection for global growth in 2021 only marginally to 5.9%, but said it masked large downgrades for some rich countries.

Notably, it expects the world’s largest economy, the U.S., to grow by only 6% this year, down from the 7% the fund forecast in July.

It said that Japan and Germany, the third and fourth largest economies, would expand by 2.4% and 3.1% respectively: down from 2.8% and 3.6%.

The U.K.’s economy is forecasted to grow by 6.8% this year, down from the previous forecast of 7%.

IMF downgraded Canada’s 2021 GDP growth forecast to 5.7% from 6.3%, but upgraded its 2022 GDP growth forecast to 4.9%  from 4.5%.

Here’s the link for their World Economic Outlook reports. 

The report from IMF also noted the vaccine divide between developed and developing nations. Of course, most importantly, there is the human cost of not vaccinating the developing nations at the same rate and urgency of developed nations. And there are also the economic costs. It is a dangerous divergence in holding back many developing nations. 

I’ve many times commented that we are playing with COVID fire here as well. The longer the virus thrives in any part of the world, the greater the threat that a new and dangerous variant will emerge. 

We might not yet count out inflation, or declare victory over the pandemic. 

As we get ready to wind down 2021, there is reason for hope and optimism on many fronts. 

Chip shortages, and we’re also out of coal

And here’s a little tweet present … 

@LanceRoberts tweets: #Pain In the #SupplyChain (@marketoonist) Exactly.

Dale Roberts is a proponent of low-fee investing who blogs at . Find him on .

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