Today’s blog was written by Doug Buchmayer, Gowling WLG
Trustees holding title to real property jointly with right of survivorship should make estate succession efficient and inexpensive. But recent changes implemented by the Director of Land Titles are challenging that notion.
Alter Ego and Joint Partner Trusts are popular strategies for sheltering assets from provincial estate administration taxes. They work by settling assets during life in inter vivos trusts rather than waiting until death for succession to occur.
Very few inter vivos trusts established for estate administration taxes avoidance purposes will have a sole trustee, aside from the appointment of a trust company. Few wish to risk being exposed to the “lottery of death,” being the chance that a sole trustee might die before the settlor of the trust, thus defeating the strategy.
This changes when there is more than one trustee holding legal title because trustees are deemed to take title as joint tenants. Subsection 62(3) of Ontario’s Land Titles Act provides that where two or more owners are described as trustees, the property shall be held to be vested in them as joint tenants unless the contrary is expressly stated. As such, the capacity of “Trustee” in Teraview needs to be used in a Transfer where there is more than one trustee shown as owners.
The registration on title of multiple trustees significantly reduces the risks associated with the lottery of death. The assumption is that as elder trustees (who are perhaps also the settlors) start dying, younger trustees (perhaps those who would have been executors) will continue to hold title in an unbroken fashion, compliments of the right of survivorship, and then deal with the real property as dictated by the terms of the trust. As each elder trustee dies, their names are removed from title with a “simple” Survivorship Application that requires only being supported by a death certificate. At least “simple” used to be the case until recently.
Survivorship Applications are no longer accepted when the owners hold title with a capacity of “Trustees.” The Director of Land Titles is now requiring an Application General with specific wording, which needs to be pre-approved prior to registration. The specific wording must include a writ statement for the deceased trustee. The Application, in addition to indicating the date of death for the deceased trustee, must set out the details of the parties to the trust. It must also point out that the applicants have satisfied the Office of the Director of Titles that, at all relevant times, the Applicants and the deceased were co-owners of the property collectively as trustees and described as such in a Declaration of Trust, a true copy of which trust instrument having been previously provided to the Office of the Director of Titles. The Application General must also contain a Covenant to Indemnify.
Suffice to say that this new Application General route is significantly more rigorous than the former ability to remove deceased trustees from title with a Survivorship Application.