This blog post was written by Alicia Mossington, Estate and Trust Consultant, Scotiatrust London

Executors in Ontario are often required to obtain a Certificate of Appointment of Estate Trustee (colloquially and historically referred to as “probate”). Although Estate Administration Tax (“probate tax”) is applicable across many jurisdictions in Canada, it is slightly higher in Ontario. This leads many people to take steps to avoid or minimize it.

 

Joint ownership is a commonly used strategy. Among the most frequently asked questions of this author is: “what if I transfer my property into joint ownership with my adult children/grandchildren/family member?”

 

In Ontario, there are two types of joint ownership:

 

1. Tenancy in Common – with tenancy in common arrangements each joint owner may or may not own equal shares of an asset. When one owner dies, their share is left to their estate and the distribution instructions contained in their Will (or on intestacy).

 

2. Joint Tenants (Ownership) with Right of Survivorship – with right of survivorship each joint owner has equal ownership and control of the asset. When one owner dies, ownership and control remain with the surviving joint owners.

 

As a result of the decisions of the Supreme Court of Canada in Pecore [1] and subsequent cases, the law related to gratuitous transfers from sole ownership to joint ownership were clarified. It  is established that when a person gratuitously transfers their solely owned asset into joint ownership with their adult child (or adult children), the presumption of resulting trust will apply.

 

Steps can be taken to rebut the presumption of resulting trust, and it is prudent for estate planners to canvass these steps with their estate planning clients. For example, it may be useful to have the testator clearly state their intention for the jointly owned asset at the time of the transfer. This statement might be included in the testator’s Last Will and Testament.

 

The rights and attributes of each type of ownership extend beyond the right of survivorship. In addition to the right of survivorship, joint owners have rights including the right to an undivided interest in the property, a right to possession, a statutory right to compel partition or sale of the property, and the right to sever the joint tenancy.

 

The right to sever a joint tenancy is the attribute at issue in the recent case of Jackson v Rosenberg which was appealed to the Ontario Court of Appeal and heard in April 2024.[2]

 

Mr. Jackson owned his home in Port Hope, Ontario, in his name alone. In 2012 he transferred title to Lori Rosenberg, the great niece of Jackson’s late partner. The transaction occurred at no cost to Rosenberg. Although Jackson’s Will would have left the property to Rosenberg, evidence was that “he wanted to do so without probate fees.”[3] Rosenberg did not reside in the house, and did not pay for any expenses associated with it.

 

In 2020, Jackson was told that Rosenberg and her spouse wanted to renovate the house, sell it and use the proceeds to purchase a new property where Jackson could live with them. Approximately one month after learning Rosenberg’s plan, Jackson transferred his interest in the house to himself, with the intention of severing the joint tenancy and converting it to a tenancy in common.[4]

 

The application judge held that:

 

Considering the evidence as a whole, I am satisfied that Mr. Jackson’s intention at the time of the [2012] transfer was to gift the right of survivorship in the Port Hope property to Ms. Rosenburg (…). There was no intention to give Ms. Rosenberg any control over the property before Mr. Jackson’s death…. Ms. Rosenberg’s beneficial interest in the property would arise only after Mr. Jackson’s death.

 

This finding was upheld by the Court of Appeal, also concluding that the application judge “was right to find that Mr. Jackson maintained the right to sever the joint tenancy after the 2012 transfer.”[5] Following the 2020 transfer and severance of the joint tenancy,[6] no right of survivorship could apply, and the Court of Appeal indicated that Rosenberg continued to hold an interest in a tenancy in common in trust for Jackson, as the presumption of resulting trust had not been rebutted.

 

A comprehensive estate plan should take into account the testator’s wishes, their assets and ownership structure. Although joint ownership can be a good planning strategy, the risks of joint ownership are not often fully understood and appreciated, and in some cases lead to unintended consequences.

 

Thank you for reading.

[1] Pecore v Pecore, 2007 SCC 17.

[2] Jackson v Rosenberg, 2024 ONCA 875 (CanLII). Retrieved from: https://www.canlii.org/en/on/onca/doc/2024/2024onca875/2024onca875.pdf.

[3] Ibid at para 15.

[4] Ibid at paras 20-22.

[5] Ibid at para 51.

[6] See also Thompson v Elliott Estate, 2020 ONSC 1004 for a summary of the Ontario law applicable to severing a joint tenancy. Retrieved from: https://www.canlii.org/en/on/onsc/doc/2020/2020onsc1004/2020onsc1004.pdf