An inter vivos gift usually cannot be revoked once it is made – as a general rule, there are no take backs. However, if the gift is a right of survivorship in property that is held by both the donor and the recipient as joint tenants, the donor could deprive that gift of any real value if they so choose, as illustrated by the Court of Appeal’s recent decision in Jackson v. Rosenberg, 2024 ONCA 875. To accomplish this feat, the donor must simply sever the joint tenancy so that the property is instead held by the parties as tenants in common, which does not include a right of survivorship. Under these circumstances, it appears that the recipient would simply end up holding an interest in the land in trust for the donor.

The Court of Appeal’s decision in Jackson v. Rosenberg is important in light of growing interest in using joint tenancy as an estate planning mechanism to avoid probate fees. In fact, the lower court’s decision, reported at Jackson v. Rosenberg, 2023 ONSC 4403, was included in our list of the Top Wills & Estates Cases of 2023.

In this case, Mr. Jackson gratuitously transferred his home into joint tenancy with Ms. Rosenberg, the great niece of his late romantic partner, as part of his estate plan. Eight years later, after learning that Ms. Rosenberg and her spouse intended to renovate the home and sell it while Mr. Jackson was still alive, he severed the joint tenancy so that he and Ms. Rosenberg instead held the property as tenants in common.

The court was then asked to determine whether Ms. Rosenberg held the property in trust for Mr. Jackson as a result of the gratuitous land transfer, or whether the transfer was intended to be a gift. Justice Charney concluded that:

• Mr. Jackson only gave Ms. Rosenberg a survivorship interest in the property, meaning she had no exercisable rights in it during Mr. Jackson’s lifetime, such as a right to possession, or a right to compel the sale of the property.
• Mr. Jackson had the right to sever the joint tenancy.
• Pursuant to the doctrine of resulting trust, Ms. Rosenberg held her 50% interest in the property as a tenant in common in trust for Mr. Jackson while he was still alive.
• Severing the joint tenancy extinguished Ms. Rosenberg’s right of survivorship with respect to Mr. Jackson’s interest in the property. As a result, she would only receive 50% of whatever equity remained in the property when Mr. Jackson passed away.

For a more thorough review of Justice Charney’s decision, see Diana McBey’s blog post, The Perils of Using Joint Tenancy as an Estate Planning Tool: A Warning from the Ontario Superior Court of Justice.

Dissatisfied with this outcome, Ms. Rosenberg appealed, arguing that Mr. Rosenberg had gifted a full beneficial interest in the property to her, rather than a right of survivorship, and that the gift could not be revoked, meaning that the joint tenancy could not be severed. The Court of Appeal for Ontario was not swayed by these arguments, however, and upheld most of Justice Charney’s decision on appeal.

First, the Court affirmed that Justice Charney could find that only a gift of survivorship was intended, recognizing that:

“… the authorities establish that in the case of property transferred gratuitously from the owner into joint names, a showing that a gift was intended, not of any current rights but solely of what remains of the property upon death of the transferor, only partially rebuts the presumption [of resulting trust]. The result is a gift of survivorship, not of any rights exercisable during the transferor’s lifetime. The latter rights are held in trust for the transferor.”

The Court also noted that Justice Charney’s determination was entitled to deference.

Second, the Court of Appeal confirmed that Mr. Jackson was entitled to sever the joint tenancy, so that he and Ms. Rosenberg held the property as tenants in common. Three reasons were set out as grounding this conclusion:

• First, the Court noted that each tenant to a joint tenancy has a unilateral right to sever the joint tenancy, thereby ending the right of survivorship, regardless of whether the joint tenancy was created for consideration or gratuitously.
• Second, the Court observed that “the right of survivorship is entirely contingent on there being no severance … To adopt the view that a gifted right of survivorship precludes severance is to change the nature of the right.”
• Third, given that a gift of survivorship is limited to what remains when the donor dies, the Court held that such a gift “does not, on its own, prevent dealings by the donor that could denude the right of any value.” In other words, the fact that the right of survivorship is given as a gift “does not prevent the donor from dealing with the retained joint interest – for example, by exercising the right to sever – in a way that puts an end to the right of survivorship.”

The only aspect of the original decision that was overturned on appeal was the conclusion that Ms. Rosenberg’s right of survivorship remained in effect as a 50% interest in the property after the joint tenancy was severed. Recognizing that the right of survivorship only flows from a property interest held in joint tenancy, the Court of Appeal invited the parties to make submissions as to whether references to Ms. Rosenberg’s continued right of survivorship in the property after the joint tenancy had been severed ought to be deleted from the lower court’s judgment.

We will keep you updated as to whether the Court of Appeal releases additional reasons in this case in light of the invitation extended to the parties to make further submissions.

Thank you for reading and enjoy the rest of your day,

Suzana.