You are the owner of real property that you would like to transfer to one of your children upon your death. Although you could include the bequest of this property in your Last Will and Testament, in the hope of potentially minimizing estate administration tax you decide to sign the transfer for the property now and provide your lawyer with clear instruction that it is not to be registered until after your death. Is this transfer valid and/or an effective estate planning tool?
A transfer/deed of land for real property which is not registered until after the transferor’s death is known colloquially as a “zombie deed”, insofar as they are said to come back to life after the transferor’s death. The use and availability of zombie deeds in Ontario is highly problematic.
The potential validity and/or enforceability of “zombie deeds” was recently considered by the Ontario Superior Court of Justice in Thompson v. Elliott Estate, 2020 ONSC 1004, wherein the court confirmed that zombie deeds were generally inoperable and could not be registered by a lawyer after the transferor’s death. In coming to such a decision the court places great emphasis on the fact that the Ontario registry office is correct in refusing to allow the registration of “zombie deeds” as they require the lawyer registering the document to knowingly make false statements, namely that the individual completing the transfer is still alive.
The Ontario Court of Appeal in Re Sammon (1979), 22 O.R. (2d) 721, confirmed that in order for a transfer to be valid the transferor must have intended to be “immediately and unconditionally bound” by the transfer at the time of signing. This requirement to be “immediately and unconditionally bound” by the transfer raises obvious questions surrounding whether a transfer that was signed under the instructions not to be registered until after the transferor’s death could be a valid transfer, as by the very instruction it would appear the transferor did not intend to immediately be bound by the transfer.
The Ontario Court of Appeal in Carson v. Wilson, [1961] O.R. 113, confirmed that a transfer that was signed under direction not to be registered until after the transferor’s death could not be considered effective due to the issues surrounding the requirement to be “immediately and unconditionally bound”. As summarized by the court in Tubbs v. Tubbs, [2006] O.J. No. 4373:
“The court held that the documents did not operate as present assignments or either immediate or remainder interests in the particular lands because there was no acknowledgement by the deceased, express or implied, of any intention to be immediately and unconditionally bound by them. Nor could the deeds be regarded as effective escrows. Delivery was contingent on death, and accordingly the court found that they were not effective deeds or assignments but testamentary dispositions which failed for want of compliance with the Wills Act. The Court of Appeal went on to hold that it could not be argued that the documents amounted to valid declarations of trust by the deceased.” [emphasis added]
The requirement that the individual transferring the property must have intended to be immediately and unconditionally bound by the transfer makes the potential use and availability of zombie deeds problematic, for by their very design the transferor likely intended to continue to enjoy some level of control over the property after signing the deed, whether it be the continued use and occupation of the property or otherwise. As a result any individual considering the potential use of a “zombie deed” should likely approach the topic with caution.
Thank you for reading.