“This is a case about a ‘zombie’ deed.”
So begins the decision in Thompson v. Elliott Estate, 2020 ONSC 1004, a decision of Justice MacLeod-Beliveau.
The case addresses the effect of “zombie” deeds, and whether such a deed can result in the severance of a joint tenancy.
Justice MacLeod explains that a “zombie” is a folklore reference to a person who is reanimated through magic after their death. A “zombie deed” is a transfer of an interest of land that is registered after the death of the grantor as if the grantor was alive.
In the case in question, Husband and Wife owned a home as joint tenants. Wife signed an Acknowledgement and Direction, transferring her interest in the home to herself, for the purposes of severing the joint tenancy. However, through lawyer inadvertence, the transfer was not registered with the Land Registry Office until after Wife’s death.
If the joint tenancy was severed, Wife’s half-interest in the home would pass through her estate to her children from a prior marriage. If the joint tenancy was not severed, it would pass to Husband.
Husband argued that the registration was improper, and therefore did not sever the joint tenancy.
The court agreed that the registration of the transfer after Wife’s death was improper. The lawyer should not have registered it. In many cases, the registration would be rejected by the Land Registry Office. However, the LRO is often not able to determine whether the registration is improper. In the case before the court, the lawyer registering the transfer had falsified many of the “law statements” required when registering the transfer.
Although the transfer was improperly registered, the court found that the joint tenancy was, however, actually severed. A joint tenancy can be severed by a transfer of a joint interest to oneself. Whether a joint tenancy is severed is a question of fact based on the evidence.
Of note is the holding that it is the “delivery” of the transfer and not the actual registration of the transfer that determines whether the joint tenancy is severed. The court held that there was sufficient evidence to establish that Wife clearly intended to sever the joint tenancy by signing the Acknowledgment and Direction and by giving immediate and unconditional instructions to her lawyer to register the transfer.
Zombie deeds are sometimes used to avoid probate taxes and fees. The deceased signs the Acknowledgment and Direction before death, but, on title, remains owner of the property. After death, the deed is registered to transfer title to intended beneficiaries. This practice is improper.
Thanks for reading. Have a great weekend.
It is often said that an Attorney for Property can do anything on behalf of the grantor’s behalf except make a will. This is on account of section 7(2) of the Substitute Decisions Act (the “SDA“), which provides:
“The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will.” [emphasis added]
Although at first glance it would appear that the potential tasks that an Attorney for Property could complete on behalf of a grantor are almost absolute, with the Attorney for Property being able to do anything on behalf of the grantor except sign a new will, in reality the tasks that an Attorney for Property may complete relative to the grantor’s estate planning is more restrictive than this would suggest at first glance. This is because the definition of “will” in the SDA is defined as being the same as that contained in the Succession Law Reform Act (the “SLRA“), with the SLRA in turn defining “will” as including not only typical testamentary documents such as a Last Will and Testament or Codicil, but also “any other testamentary disposition“. As a result, the stipulation that an Attorney for Property can do anything on behalf of the grantor “except make a will” would include not only a restriction on the Attorney for Property’s ability to sign a new Last Will and Testament or Codicil on behalf of the grantor, but also a restriction on the Attorney for Property’s ability to make “any other testamentary disposition” on behalf of the grantor.
It is fairly common for individuals such as spouses to own real property as joint-tenants with the right of survivorship. When one joint-owner dies ownership of the property automatically passes to the surviving joint-owner by right of survivorship, with no portion of the property forming part of the deceased joint-owner’s estate. Although such an ownership structure may make sense when the property is originally purchased, it is not uncommon for circumstances to arise after the property was registered (i.e. a divorce or separation) which may make one of the joint-owners no longer want the property to carry the right of survivorship. Should such circumstances arise, one of the joint-owners will often “sever” title to the property so that the property is now held as tenants-in-common without the right of survivorship, making efforts to attempt to ensure that at least 50% of the property would form part of their estate should they predecease the other joint-owner.
Although severing title to a property is fairly straight forward while the owner is still capable, circumstances could become more complicated should the owner become incapable as questions may emerge regarding whether their Attorney for Property has the authority to sever title to the property on behalf of the grantor, or whether such an action is a “testamentary disposition” and therefor barred by section 7(2) of the SDA.
The issue of whether an Attorney for Property severing title to a property is a “testamentary disposition” was in part dealt with by the Ontario Court of Appeal in Champion v. Guibord, 2007 ONCA 161, where the court states:
“The appellants argue that the severing of the joint tenancies here constituted a change in testamentary designation or disposition and is therefore prohibited by s. 31(1) of the Substitute Decisions Act because it is the making of a will.
While we are inclined to the view that the severance of a joint tenancy is not a testamentary disposition, we need not decide that question in this case. Even if it were, we see no error in the disposition made by the application judge, because of s. 35.1(3)(a) of the Substitute Decisions Act.” [emphasis added]
Although the Court of Appeal does not conclusively settle the issue in Champion v. Guibord, the court appears to strongly suggest that they are of the position that an Attorney for Property severing a joint-tenancy is not a “testamentary disposition” within the confines of the SDA.
Thank you for reading.