Severing Joint Tenancy: Pitfalls to Guard Against

July 4, 2017 David M Smith Beneficiary Designations, Common Law Spouses, Estate Planning Tags: , , , 0 Comments

Joint tenancy is a great way for parties to hold property when there is a common desire to pass the property by right of survivorship to the surviving joint owner.  However, when the relationship between the parties fails, proactive steps must be taken to sever the joint tenancy to ensure that the title-holding reflects the new reality of the dissolved relationship. Case law is littered with examples of spouses who did not take such steps.

MacNeil Estate v. Bower, a recent decision of the Ontario Superior Court of Justice, is a good example of how litigation can ensue when arrangements don’t fully keep pace with the reality of a failed relationship.  In this case, Robert and Mark began a conjugal relationship began in 1995 and the relationship progressed such that Robert designated Mark as beneficiary of his RRSP and group life insurance in 2007.  In 2008, Robert and Mark purchased a property as joint tenants, notwithstanding that Robert contributed the entire down payment approximating about 20% of the value of the property. In 2010, the relationship between the two ended and Robert entered into a new relationship.  Thereafter, Robert became seriously ill and began to arrange his affairs such that he changed his beneficiary designations and sought legal advice to draft an agreement changing title to the townhouse to tenancy in common.

Litigation ensued because the Agreement was not finalized and executed before Robert died.  Mark claimed right of survivorship as title was still held in joint tenancy.  Robert’s Estate Trustee argued that the joint tenancy had in fact been severed regardless of the incomplete status of the Agreement.

Severing joint tenancy requires one of: (i) a unilateral act affecting title, (ii) a mutual agreement between the co-owners to sever the joint tenancy, or (iii) any course of dealing sufficient to clearly demonstrate or intimate that all owners’ interests were mutually treated as constituting a tenancy in common.  In MacNeil, the Court found that both the second and third types of severance were realized.

Thanks for reading,

David Morgan Smith

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