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Misunderstandings can often lead to unintended outcomes. I think of our neighbour, Geneviève. She's originally from Quebec, is francophone and moved to Ontario a couple of years ago. Geneviève's English was not very good when she first arrived. She heard her son talking one day about "skinny-dipping," which she thought simply meant "a quick dip in the pool."

Now, Geneviève is a very friendly and hospitable person, so she thought it would be a kind thing to invite the neighbours over for "skinny-dipping" one weekend last summer. When no one showed up, she thought we were a rude bunch and the rest of the neighbourhood wondered who had just moved into town – both unintended outcomes.

People often misunderstand certain areas of estate planning, which has also led to unintended outcomes. I think of joint ownership as a prime example. If I only had a dime for the number of times people have said they put assets into joint names to save income tax. The truth is, joint ownership can often be problematic. Here's a reminder as to why.

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1. You might trigger a tax bill.
When adding a person other than your spouse or common-law partner as a joint owner on an asset, you'll be deemed to have sold that portion of the asset at fair market value, if beneficial ownership has changed. This could trigger a tax bill if the asset has appreciated in value.

2. Who gets what may be inappropriate.
If you hope to leave a particular asset to all of your children equally but have placed just one of them on title as a joint owner to avoid probate fees, there's no requirement for that joint owner to share the asset with anyone else. This may not be your intention.

3. Family or legal disputes could result.
Thinking about the scenario in No. 2 above, any child who is effectively disinherited could dispute the distribution of your assets. This is quite possible if it's felt that your intended distribution was different. Make your intentions clear, in writing, if you do choose to hold assets in joint names.

4. You may not save tax.
If you think that putting assets into joint names, perhaps with your spouse, will save you tax, you may be mistaken. Income earned by your spouse on his share of the assets will be attributed back to you unless you charge interest at the prescribed rate. In addition, owning assets jointly with a child will not allow you to avoid tax on your share of the assets when you die.

5. Assets could be exposed to creditors.
If the person who jointly owns an asset with you is subject to the claim of creditors, the value of the asset you hold jointly could be attacked by those creditors.

6. Testamentary trusts will be impossible.
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Although the 2014 federal budget eliminated some of the tax benefits of leaving assets to a trust for heirs when you die, it's still possible for your heirs to split income with a trust for up to three years, which can save taxes. Further, testamentary trusts can make sense to protect assets for your heirs. The problem with assets owned jointly, with right of survivorship, is that the assets will pass directly to the joint owner with no opportunity to place those assets in a trust upon your death.

7. Control over assets could be gone.
Owning an asset jointly with another person means you'll no longer have sole control over that asset.

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8. Portfolio objectives could differ.
If two or more people jointly own an investment account, it could be difficult to invest in a manner that suits the risk appetite and objectives of everyone. Particularly where there is a big difference in ages, this challenge could be real.

9. A principal residence could become taxable.
If you choose to put your principal residence into joint names with, say, a child, it may be necessary for both of you to designate that property as your respective principal residences to avoid tax on a sale of the property later. This could be a problem if your child has, or will have, another property that he owns. It could expose one of the properties to tax.

10. Joint tenancy may be permanent.
You can forget about undoing the joint ownership unless the other owner, or owners, agree to this change.

If you have a reason to be concerned about one or more of these potential drawbacks to joint ownership, give careful thought to whether or not it makes sense for you.

Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.

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