Parents often wish to transfer their real property into joint tenancy with their adult child, or add their child as a co-owner of their bank accounts. The parents may have a number of reasons for taking such steps: to avoid probate fees, to avoid having to go through probate entirely, for convenience to allow the donee to access funds easily for the benefit of the donor, because they want that child to be a full owner of that asset with them immediately, or because they want that child to be the full owner of the asset on the death of the parent. However, the legal implications and potential consequences of gratuitously adding someone to a real estate title or to a bank account can be serious, and often what is intended to simplify a matter results in litigation after the original owner dies.[1]<\/a><\/p>\n\n\n\n In this two-part series, we will be discussing some of the implications of gratuitously transferring property into joint tenancy and why it is important to document what the intentions are when such a transfer is made. In this first part of the series, we will focus on what forms of ownership interests can arise from a gratuitous transfer into joint tenancy with a focus on the gift of the right of survivorship. The second part of the series<\/a> will focus on the gift of the right of survivorship with respect to real property.[2]<\/a><\/p>\n\n\n\n From a legal perspective, when property is gratuitously transferred into joint tenancy, there are three possible ownership scenarios that can arise:<\/p>\n\n\n\n When considering whether to add someone gratuitously to title or to a bank account, it is important to understand that a dispute can arise as to which one of these three ownership scenarios exists and what rights or restrictions go along with each ownership interest.<\/p>\n\n\n\n The concept of joint tenancy was outlined by Justice Khullar in the Alberta Court of Queen\u2019s Bench decision, Pohl v Midtal<\/em>[4]<\/a>:<\/p>\n\n\n\n When property is held in joint tenancy, each owner \u201c\u2026 holds an equal interest in the property as a unified whole.\u201d[6]<\/a> Joint tenancy may be severed by one of the joint tenants, which converts the ownership interests of the joint tenants from joint tenancy into that of tenancy in common.[7]<\/a><\/p>\n\n\n\n Pecore<\/em> v Pecore<\/em>[8]<\/a>from the Supreme Court of Canada (\u201cSCC\u201d) is the governing authority in Canada on the presumption of resulting trusts. In this case, a father gratuitously placed assets in a number of bank accounts and investment accounts into joint names with his daughter and the Court had to determine who owned the assets on the father\u2019s death. The daughter\u2019s ex-husband argued that the assets were to form part of the father\u2019s estate, of which he was a residuary beneficiary. Notwithstanding the SCC\u2019s confirmation of the presumption that a gratuitous transfer to an adult child is on a resulting trust basis such that the asset falls back into the parent\u2019s estate, it was found in this case that the joint accounts were owned by the daughter on the father\u2019s death. The Court found that there was sufficient evidence to show the father intended to gift the joint accounts to the daughter on his passing.[9]<\/a><\/p>\n\n\n\n In Pecore<\/em>, Rothstein J., after setting out the law on the presumption of resulting trusts, moved on to a discussion of the rights of survivorship that come with a gratuitous transfer into joint ownership:<\/p>\n\n\n\n In cases where the transferor\u2019s proven intention in opening the joint account was to gift withdrawal rights to the transferee during his or her lifetime\u2026 and also to gift the balance of the account to the transferee alone on his or her death through survivorship, courts have had no difficulty finding that the presumption of a resulting trust has been rebutted and the transferee alone is entitled to the balance of the account on the transferor\u2019s death.<\/p>\n\n\n\n In certain cases, however, courts have found that the transferor gratuitously placed his or her assets into a joint account with the transferee with the intention of retaining exclusive control of the account until his or her death, at which time the transferee alone would take the balance through survivorship [citations omitted].[10]<\/a><\/p>\n<\/blockquote>\n\n\n\n In a recent British Columbia Supreme Court decision, Kennedy v Smith<\/em>[11]<\/a>, Justice Francis elaborated on the concept of the \u201cgift of the right of survivorship\u201d and when it can arise. Relying on her own decision in Petrick<\/em> (Trustee) v Petrick<\/em>[12]<\/a> Justice Francis held that a gift of the right of survivorship occurs when:<\/p>\n\n\n\n \u2026 a joint tenant is gratuitously placed on title and has no beneficial entitlement to the property during the lifetime of the donor, but if the donee survives the donor, the donee will receive the entire property by right of survivorship.<\/p>\n\n\n\n There has been some debate as to whether the inter vivos gift of a right of survivorship as described in Pecore is a new kind of gift, or whether Rothstein J. was simply describing an implied trust when discussing the beneficial entitlement that arose on the facts in Pecore [citations omitted]. Either way, post-Pecore, it is possible for a donor to make a gratuitous transfer into joint tenancy which will be an immediate inter vivos gift but will allow the donor to retain the whole beneficial interest during the donor\u2019s lifetime, and then have the property pass to the surviving joint tenant on the donor\u2019s death.[13]<\/a><\/p>\n<\/blockquote>\n\n\n\n Applying the law of the presumption of resulting trusts, the transferee must prove the intent of the transferor was either to gift the right of survivorship or to gift an immediate full beneficial interest in the property. If an intended gift cannot be proven, the presumption will not have been rebutted and the asset will not be owned by the transferee on the transferor\u2019s death, but rather will fall to the transferor\u2019s estate.[14]<\/a><\/p>\n\n\n\n The gift of the right of survivorship is an inter vivos<\/em> gift.[15]<\/a> However, if the transferee only receives the beneficial entitlement on the death of the transferor and the transferor retains the beneficial ownership until the transferor passes, what exactly does the gift entail?<\/p>\n\n\n\n Addressing concerns that the legal elements required for a valid inter vivos <\/em>gift are not met because the donor can continue to use the account, which includes the ability to drain the account, during his or her lifetime, Rothstein J. held that:<\/p>\n\n\n\n [t]he nature of the joint account is that the balance will fluctuate over time. The gift in these circumstances is the transferee\u2019s survivorship interest in the account balance \u2013 whatever it may be \u2013 at the time of the transferor\u2019s death, not to any particular amount.[16]<\/a><\/p>\n<\/blockquote>\n\n\n\n Other Courts have described the gift of the right of survivorship as \u201c\u2026 a form of expectancy regarding the future. It is a right to what is left of the jointly-held interest \u2026 when the donor dies\u201d.[17]<\/a><\/p>\n\n\n\n Although the donor can continue to use the assets in the bank account during his or her lifetime, once the gift of the right of survivorship has been made, it cannot be revoked; neither can a gift of the right of survivorship in real property.[18]<\/a> However, Canadian Courts have been inconsistent as to whether the donor can continue to use real property as the donor sees fit during his or her lifetime after a gift of the right of survivorship has been made. The second part of this series will focus on how the gift of the right of survivorship is treated in the context of gratuitous transfers into joint tenancy of real property.<\/p>\n\n\n\n Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s Private Client Services<\/a> group.<\/p>\n\n\n\n [1]<\/a> The rights and risks associated with joint ownership during the transferor\u2019s lifetime are also important factors to consider prior to making any transfer into joint tenancy; however, such rights and risks are beyond the scope of this article.<\/p>\n\n\n\n [2]<\/a> \u201ctransferor\u201d, \u201cdonor\u201d and \u201cgrantor\u201d will be used interchangeably in this article, as will \u201ctransferee\u201d and \u201cdonee\u201d.<\/p>\n\n\n\n [3]<\/a> Kennedy v Smith<\/em>, 2022 BCSC 1622 (\u201cKennedy<\/em>\u201d) at para 80.<\/p>\n\n\n\n [4]<\/a> Pohl v Mitdal<\/em>, 2017 ABQB 711 (\u201cPohl<\/em>\u201d), aff\u2019d Pohl v Mitdal<\/em>, 2018 ABCA 403 (\u201cPohl <\/em>ABCA\u201d).<\/p>\n\n\n\n [5]<\/a> Pohl <\/em>at para 27.<\/p>\n\n\n\n [6]<\/a> Zeligs Estate v Janes<\/em>, 2016 BCCA 280 (\u201cZeligs Estate<\/em>\u201d) at para 38.<\/p>\n\n\n\n [7]<\/a> Simcoff v Simcoff, 2009 MBCA 80 (\u201cSimcoff<\/em>\u201d) at para 62.<\/p>\n\n\n\n [8]<\/a> Pecore v Pecore<\/em>, 2007 SCC 17 (\u201cPecore<\/em>\u201d).<\/p>\n\n\n\n [9]<\/a> Pecore<\/em> at para 75; see Pecore <\/em>at para 24 for Rothstein J\u2019s legal description of the \u201cpresumption of resulting trust\u201d.<\/p>\n\n\n\n [10]<\/a> Pecore<\/em> at paras 45 and 46.<\/p>\n\n\n\n [11]<\/a> Kennedy<\/em>, note 2.<\/p>\n\n\n\n [12]<\/a> Petrick<\/em> (Trustee) v Petrick, <\/em>2019 BCSC 1319 (\u201cPetrick<\/em>\u201d).<\/p>\n\n\n\n [13]<\/a> Kennedy <\/em>at para 80, citing Petrick<\/em> at para 40.<\/p>\n\n\n\n [14]<\/a> Pecore <\/em>at para 53.<\/p>\n\n\n\n [15]<\/a> Pecore <\/em>at para 48.<\/p>\n\n\n\n [16]<\/a> Pecore <\/em>at para 50.<\/p>\n\n\n\nWhat ownership interests can arise?<\/h2>\n\n\n\n
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True joint tenancy<\/h2>\n\n\n\n
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Resulting trust<\/h2>\n\n\n\n
The gift of the right of survivorship<\/h2>\n\n\n\n
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What is being gifted?<\/h2>\n\n\n\n
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