Severance at the Date of Death: Will Accepted as Evidence to Sever Joint Tenancy Between Spouses

In the recent decision of Marley v. Salga, 2019 ONSC 3527, the Ontario Superior Court of Justice considered whether a will-maker and his second wife had severed joint tenancy to a property that they owned together by operation of the will-maker’s will.

Leslie Salga and his first wife had three children together: Suzanne, Michelle, and Andrew.

Leslie and his first wife later divorced. In 1999, Leslie married Karen Marley. On July 23, 2004, Leslie and Karen bought a property together on Loretta Drive (the “Loretta Drive Property”) and held title as joint tenants. No change was made to the title during Leslie’s lifetime. Leslie and Karen lived together as spouses until Leslie died on August 28, 2015.

On July 29, 2015, approximately one month before he died, Leslie executed a will. Leslie made gifts of personal property to each of his children and to Karen, and made his two daughters, Suzanne and Michelle, residual beneficiaries. With respect to the Loretta Drive Property, Leslie’s will provided that Karen be granted the use, occupation, and enjoyment his “one-half (1/2) interest” in the property for her lifetime, subject to some conditions. The Loretta Drive Property was valued at $400,000 when Leslie died.

After Leslie’s death, Michelle and Suzanne brought an application for an order declaring that, as residual beneficiaries, they were entitled to an undivided half-interest in the Loretta Drive Property. They argued that Leslie and Karen both intended to sever their joint tenancy in the Loretta Drive Property, and to hold it as tenants-in-common instead.

The outcome of the application would have a significant impact on the distribution of Leslie’s estate. If Leslie and Karen continued to hold the Loretta Drive Property as joint tenants at Leslie’s death, then the entire property would pass to Karen through a right of survivorship. If Leslie and Karen were found to have severed the joint tenancy, then Leslie’s half of the Loretta Drive Property would pass to Suzanne and Michelle as part of the residue.

At the hearing, the court noted that one of the three ways to sever a joint tenancy is by a “course of dealing” that makes it sufficiently clear that the both co-owners intended to treat their interest in the property as a tenancy in common. To determine whether Leslie and Karen held this intention would require an analysis of the evidence as a whole.

Turning to the evidence, the court found that the purchase documents for the Loretta Drive Property showed that Leslie and Karen had purchased the property as joint tenants. The court also noted that there was no marital discord or isolation of the couple’s finances that would indicate an intention to sever the joint tenancy.

The court then turned to Leslie’s will, finding that the gift of Leslie’s one-half interest to Karen was inconsistent with the entire Loretta Drive Property passing to Karen through a right of survivorship. While a testamentary gift itself cannot sever a joint tenancy, the court reasoned, it can be evidence of an intention to hold the property as tenants-in-common.

Evidence was also given of a recorded conversation between Leslie and Karen during the month prior to Leslie’s death. In the recording, Karen and Leslie both acknowledged that Leslie’s will, as drafted, would result in half of the Loretta Drive Property passing to Suzanne and Michelle.

The final piece of evidence accepted by the court was that Leslie had told a long-term friend in Karen’s presence that he intended to leave his half-interest in the Loretta Drive Property to Suzanne and Michelle.

Karen did not deny that Leslie had expressed an intention to give a half-interest in the Loretta Drive Property to his daughters. Instead, she argued that he had only made such statements to appease his daughters, and had directed Karen to go along with what his daughters wanted for appearances.

Based on the totality of the evidence, the court concluded that Leslie and Karen shared a common intention to hold the Loretta Drive Property as tenants-in-common. However, the court also concluded that Leslie’s will had expressly delayed the distribution of his half-interest in the Loretta Drive Property until Karen’s life interest ended. Therefore, Leslie’s half-interest in the Loretta Drive Property would not pass to Suzanne and Michelle until Karen died or breached a condition of Leslie’s will.

It is worth considering whether the Marley decision can be applied to other situations where a will contains words that suggest the will-maker’s intention to sever a joint tenancy, and the other joint tenant acknowledges the contents of the will, such that the joint tenancy could be severed. A determination of severance would then seemingly depend on whether other available evidence also points to an intention to sever.

Marley has not yet been appealed, nor has it been applied in B.C. to date.

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