In the intricate landscape of property ownership, the concept of joint tenancy often emerges as a favored strategy, particularly among aging individuals seeking to transfer their assets to their adult children. While this approach can provide much-needed financial management assistance and the allure of survivorship rights, it also introduces a labyrinth of legal intricacies. The Pecore v. Pecore, 2007 SCC 17 ruling underscores the importance of the transferor’s intentions in determining what, if anything, beneficially transfers during such transactions. This article aims to offer an insightful exploration of these complexities, focusing on the fundamental shift from joint tenancy to tenancy in common through the act of severance in the unique context of British Columbia’s legal framework.
Understanding the distinction between joint tenancy and tenancy in common is crucial in this discourse. Joint tenancy, characterized by the right of survivorship, ensures that upon the demise of a joint tenant, their interest in the property seamlessly transitions to the surviving joint tenant(s), bypassing the deceased’s estate. However, this mechanism can be interrupted through a legal process known as severance, which effectively transmutes a joint tenancy into a tenancy in common, thereby extinguishing the right of survivorship. In contrast, under a tenancy in common, the deceased tenant’s interest persists posthumously, becoming a part of their estate. The process and implications of severance, along with its role in modifying these property relationships, stand at the heart of our discussion.
In light of the Pecore v. Pecore, 2007 SCC 17 ruling, understanding the transferor’s actual intentions, the application of the presumption of resulting trust, and its potential rebuttal are crucial, especially when dealing with jointly-held bank accounts. This comprehensive guide will endeavour to unravel these legal threads, providing clarity on how to navigate the process of severing a joint tenancy with the right of survivorship in British Columbia.
The principal characteristic of joint tenancy is the right of survivorship. When one joint tenant dies, his or her interest in the property is extinguished and passes to the surviving joint tenant(s); the deceased’s estate takes nothing. However, the right of survivorship will not apply if the joint tenancy has been previously destroyed by an act of severance. When a joint tenancy is severed, the joint tenancy is converted into a tenancy in common and the right of survivorship is extinguished. The interest of a tenant in common is different with respect to survivorship. Unlike that of a joint tenant, a tenant in common’s interest in property remains intact upon death and passes into his or her estate.
In British Columbia (BC), Canada, joint tenancy can be severed in several ways.
To sever a joint tenancy in BC, you would typically follow these steps:
The central issue in Zeligs Estate v. Janes, 2016 BCCA 280 was whether one co-owner of proceeds from the sale of jointly-held land severed the joint tenancy prior to the other co-owner’s death, thus extinguishing her survivorship rights. The co-owners in question were an elderly woman named Dorothy Burnett, and Diana Janes, one of Ms. Burnett’s two adult children. Ms. Burnett and Ms. Janes co-owned real property on Knox Road in Vancouver, British Columbia in joint tenancy following Ms. Burnett’s gratuitous transfer in 2002. Ms. Burnett also made Ms. Janes the donee of an enduring power of attorney and added Ms. Janes as a joint accountholder to her bank account. In January 2010, when Ms. Burnett was still alive but mentally incapable, Ms. Janes sold the property for $2.7 million. She executed the sale as a joint tenant and in her capacity as Ms. Burnett’s attorney. The net proceeds from the Knox Road sale were transferred into the joint bank account, but shortly thereafter Ms. Janes withdrew the whole of the sale proceeds and used them for her exclusive benefit.
Ms. Burnett died in April 2010 at the age of 103. By the terms of her will, Ms. Burnett bequeathed $50,000 to each of her three grandchildren and divided the residue of the estate equally between Ms. Janes and Barbara Zeligs (Ms. Burnett’s other adult child). Ms. Janes was the sole executor. After the bequests to Ms. Burnett’s grandchildren were paid, Ms. Janes divided the remaining balance in the joint bank account into two equal shares of $63,783 – one for Ms. Zeligs and one for herself. Ms. Zeligs died in May 2011, and her husband, Mr. Zeligs, brought an action against Ms. Burnett’s estate, arguing that any joint tenancy had been severed prior to Ms. Burnett’s death on the basis of a unilateral act by Ms. Janes, the result being that there was no right of survivorship in favor of Ms. Janes. If the joint tenancy had in fact been severed, then the half of the sale proceeds of the Knox Road property belonged to Ms. Burnett’s estate and by the terms of Ms. Burnett’s will, Ms. Zeligs and Ms. Janes should share the residue equally.
The Supreme Court of British Columbia and the Court of Appeal for British Columbia agreed with Mr. Zeligs and concluded that Ms. Janes was not entitled to the full proceeds of the sale of the property. When Ms. Janes transferred the entirety of the sale proceeds to herself, she severed the joint tenancy and extinguished the right of survivorship.
In a joint tenancy, the “four unities” must be present and co-owners hold an equal interest in the property as a unified whole:
Severance of a joint tenancy typically happens in one of three ways: by one person’s acting unilaterally upon his or her own share so as to destroy the four unities (for example, by selling it); by mutual agreement (for example, by written contract); or by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common (for example, by conduct which demonstrates all tenants mutually dealt with their interests as several).
In Zeligs, the joint tenancy in the Knox Road property remained in place despite sale of the property because the sale proceeds were deposited into the joint bank account – in other words, the four unities were continued. However, the joint tenancy was severed when Ms. Janes transferred the sale proceeds out of the joint bank account to the exclusive benefit of herself and her husband while Ms. Burnett was still alive. When Ms. Janes transferred the sale proceeds to herself and her husband, she destroyed the unity of title. In doing so, she automatically severed the joint fund, converting it into a tenancy in common composed of two equal shares and extinguishing the right of survivorship. As a consequence, Ms. Burnett’s estate was entitled to one-half of the sale proceeds which interest Ms. Janes held in trust for the estate.
A joint tenant may sever a joint tenancy, with or without the consent or knowledge of the other joint tenant(s), subject to contrary statutory provision. In fact, as Zeligs demonstrates, it is possible for one joint tenant to unilaterally – and unintentionally – sever a joint tenancy by using the joint fund for her sole benefit. If a joint tenancy is severed, the right of survivorship is extinguished.
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