Joint Tenancy – The (Not So) Easy Estate Planning Tool

If you own a home, a recreational property, or some other piece of real property, what is the best way to deal with it in your estate plan? Many people choose to add their spouse or children on title of their property in joint tenancy. Being a joint tenant means that you and the other person are both legal owners of the property, and if one of you dies, the other receives the property by right (known as the “right of survivorship”).

There are many advantages to passing property in this way:

  • If you die, the other owner takes possession of the property immediately upon your death. She does not need to wait for your estate to go through probate.
  • Because the property does not fall into your estate, it is not subject to probate fees.
  • The property may be protected from creditors of your estate.
  • If anyone applies to vary the terms of your Will, the property does not form part of the estate.

Unfortunately, there are some significant problems with placing property in joint tenancy. As a joint tenant, the other owner can sever the tenancy at any time. Once the joint tenancy is severed, the right of survivorship is lost (instead, both tenants have an interest that will pass into their estate, defeating the purpose of the joint tenancy). You may have to sue the other owner to recover your interest in (and control over) the property. There is more bad news. Unlike a will, which you can change any time, you cannot unilaterally revoke joint tenancy if you decide you do not want to leave your property to the other owner.

For years, Canadian courts have witnessed the fallout of joint tenancies gone awry. Here are three recent examples to ponder.

In the Saskatchewan case of Bradford v. Lyell, 2013 SKQB 330, Gladys Lyell transferred title of her condo into joint tenancy with her granddaughter, Alana Lyell, in 2003. The lawyer who assisted her advised the court that Gladys’ intention was “that she wished to give Alana a share of her estate by gifting to her this condominium.” In 2009, Gladys revised her will to state “I do not want my granddaughter, Alana Lyell, to have any share of my condo…” Gladys also asked her lawyer to have Alana removed from title as a joint tenant. Before this could happen, Gladys died.

Despite Gladys’ change of intention in 2009, the court concluded that her intention in 2003 when she transferred title to Alana was that the property was a gift. The court held, at para. 13, “The gift is complete when the joint title is created if the intent of the transferor at the time is to gift the beneficial ownership of the property that remains at the time of his or her death to the transferee.”  In other words, Alana received the property because of the joint tenancy, despite that Gladys changed her mind.

A few months later, the B.C. Court of Appeal dealt with a similar case in Bergen v. Bergen, 2013 BCCA 492. Mr. and Mrs. Bergen had invested in some land, and asked their son, Robert, to construct a house on the property. The Bergens added Robert as a joint tenant of the property. Their intention “was that Robert would eventually inherit the property and this would ensure that the property by-passed probate.” Robert believed that his parents were gifting the property and house to him outright. When the house was complete, the Bergens moved in, though their relationship with Robert deteriorated over the misunderstanding.

The Bergens started an action to recover the interest Robert held in the property. At trial, the judge found for the Bergens, concluding that “nothing in evidence, however, displaces the presumption that the property and improvements purchased entirely with funds advanced by the [Bergens] is held on a resulting trust in their favour…” The appellate court agreed, and held that a transfer of title does not in and of itself signify an immediate gift of title, regardless of the transferor’s intention. If Robert wished to assert an immediate and absolute gift, he had to prove that this was his parents’ intention.

In March, the Ontario Court of Appeal heard Kavanagh v. Lajoie, 2014 ONCA 187, a dispute between brother Mark and sister Laurie. In 2005, their father, Donald, had added Mark as a joint tenant of Donald’s Ottawa home. In 2009, Donald severed the joint tenancy with Mark and transferred his interest to Laurie. Mark did not learn of this until after Donald died in 2010, and Mark realized that he did not have outright title to the Ottawa home. He started an action to recover Laurie’s half of the property. He argued that the whole of the property had been gifted to him outright in 2005. Both the trial and appellate courts rejected his argument. The appellate court cited Bergen, and stated that the gift was incomplete, leaving Donald free to change his mind.

If you have questions about estate planning or estate litigation, please feel free to contact one of the lawyers in our Wealth Preservation + Estate Litigation Practice Group.

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