Joint tenancy is a common method for avoiding probate fees. However, a recent Ontario Superior Court of Justice decision shows that this strategy can be counterproductive. In Jackson v. Rosenberg, the applicant sought a declaration that the respondent held title to his home in a resulting trust and, further, that he had a 100% beneficial interest in the property. On the other hand, the respondent alleged that the applicant had gifted the property to her by making her a joint tenant. This case serves as an example of how courts might approach a similar situation. It also reminds individuals to ensure that they have a true understanding of the benefits and potential drawbacks of any estate planning strategy.

Joint Tenancy Created Then Severed

The Applicant, “NJ,” was in a romantic relationship with Bernie Taube (“BT”) for decades until his passing in July 2010. The respondent, “LR,” was Taube’s great-niece.

In 1999, NJ and BT purchased a condominium as joint tenants. In 2005, they created mirror wills that named each other as the sole beneficiary of their respective estates. Both wills named LR as the alternate beneficiary.

Following BT’s passing, NJ became the sole condominium owner through the right of survivorship of a joint tenancy. Later, he sold the condominium and purchased a new property as sole owner with the proceeds from the condominium sale. Initially, NJ was the sole owner of the property. He also maintained the upkeep of the property with his own money. Later, he made LR a joint tenant with the right of survivorship to the property. Several years later, NJ severed the joint tenancy.

Parties Disagreed on the Nature of their Entitlement to the Property

NJ had no family of his own, so he had intended to leave the value of his home to LR. This intention led to him adding LR to title as a joint tenant, though he had never intended to have her live with him or give her any rights to the home until he passed away.

NJ could have obtained the same result by making LR the sole beneficiary of his estate, which he had done in his will. However, he added her as a joint tenant to exclude the property value from the calculation of probate fees when probating the estate. This created a resulting trust with beneficial ownership that would transfer to LR once NJ passed away.

NJ later alleged that LR and her husband had visited the home, and LR’s husband advised that they intended to upgrade the home to sell it and purchase another property. He advised that NJ could live with them once the property was sold. However, NJ was concerned by this conversation and believed that LR and her husband intended to force him out of the house. Consequently, NJ consulted a real estate lawyer to sever the joint tenancy and convert it to a tenancy in common. This strategy meant that when NJ died, LR would not get the entire home.

On the other hand, LR alleged that NJ had gifted her an interest and ownership in the property by making her a joint tenant. Therefore, by severing the joint tenancy, NJ had breached his fiduciary duty as trustee of the property and breached a contract with LR.

Gratuitous Transfers and the Presumption of Resulting Trust

The Court began by considering whether the transfer amounted to a resulting trust, relying on the Supreme Court of Canada’s direction in Pecore v. Pecore. The Court outlined that when a gratuitous transfer occurs, there is a presumption that the transfer creates a resulting trust unless, in this case, LR could prove that it was intended as a gift. The Court determined that the evidence indicated that NJ had intended to gift the right of survivorship in the property to LR on his death and retain control of the property during his lifetime. This was evidenced by the transfer documents and his expressed intention to avoid estate taxes.

Following the Court’s consideration of whether the transfer amounted to a resulting trust, it considered whether NJ had gifted the right of survivorship in the property to LR through his actions. The Court determined that NJ gifted the right of survivorship to LR and that, until he died, he retained all rights and interests in the property and was entitled to do what he wished with the property.

Court Finds Tenancy in Common Had Been Properly Severed

Next, the Court considered whether NJ had been entitled to sever the joint tenancy, thereby creating a tenancy in common. Noting that all joint tenants have the power to transform a joint tenancy into a tenancy in common and citing the Conveyancing and Law of Property Act, NJ had not acted improperly when he severed the joint tenancy. As a result, upon NJ’s death, his 50% share in the property would become part of his estate and be distributed according to the terms of the will, and LR’s 50% share would pass to her.

As a result, the Court found that Jackson had properly severed the joint tenancy. Therefore, NJ retained all rights and interests in the property during his lifetime. Upon his passing, 50% of the property’s equity would become part of his estate, and 50% of the property’s equity would pass to LR through the right of survivorship.

What Does This Case Mean for Estate Planners?

As noted by the Court, this case is an important reminder of the potential complications associated with “non-traditional” estate planning tools. While avoiding probate fees might be tempting, it is best to speak with an experienced estate planning lawyer to better understand the potential implications of such tools and how they might impact your property rights. In this case, NJ could have simply left the property to LR in his will, thereby avoiding this litigation and complications during his lifetime.

This is also a reminder that estate plans can change over time. By creating an estate plan now, you are not necessarily beholden to that plan and can revisit and revise your will and other documents in the future if your intentions change. Transfers made during your lifetime, such as joint tenancies, can not only complicate your estate plan but can be difficult (and costly) to correct.

Oakville Wills and Estate Planning Lawyers Advising Clients on Estate Planning

At Campbells LLP, you can ensure that your assets are distributed in accordance with your wishes, your loved ones are cared for, and the risk of litigation is minimized with the assistance of our experienced wills and estate planning lawyers. We strive to provide unique, comprehensive solutions for every client and can help determine the best estate plan to suit your needs. If you are ready to create your estate plan or wish to revise an existing one, contact us online or call us at (905) 828-2247 to get started.