Can You Add Someone to the Title to Avoid Probate?

You may have heard that properties registered under joint tenancy bypass the probate process; however, simply jointuring title to avoid probate can come with many legal consequences. In this article, we outline some risks you should consider and discuss with an Estate Planning lawyer.

Legal Consequences of a Transfer into Joint Tenancy: Understanding Intention

The intention of the individual with a beneficial interest in the property is an essential consideration when analyzing how the courts will treat a joint tenancy.

Beneficial ownership means an interest in the economic benefit of property, as well as the right to enjoy and use the property. Legal ownership is separate from the beneficial ownership and the legal owner or owners will not necessarily be the same as the beneficial owner or owners. The beneficial owner of the land will have a right to the income from the property or a share in it.

It used to be believed that a transfer of property by one person into joint tenancy with another had only two alternative legal consequences. Either:

1. a true joint tenancy, where the surviving joint tenant gained an immediate beneficial interest and full ownership by survivorship; or
2. the new joint tenant acquired only legal title to the property, and on the death of the transferor, and held the property in trust for the deceased’s estate (where it would be subject to probate fees and claims by spouses or children to vary the will)

The Pecore v. Pecore and Madsen Estate v. Saylor decisions added a third option:

3. A transferor can retain the beneficial interest during their lifetime while gifting only the right of survivorship, allowing the property to pass directly to the transferee outside the estate upon death. This gift of the right of survivorship is an irrevocable gift within the beneficial and legal owners’ lifetime and vests when the gift is made (Pecore at para. 48).

However, the transfer of land into joint tenancy does not automatically create a complete or irrevocable gift of the right of survivorship. Instead, the gift becomes irrevocable only if the transferor’s intention to make a gratuitous gift is clearly established by the surrounding evidence.

Pecore v. Pecore – The Leading Precedent in Joint Tenancies and the Presumption of a Resulting Trust

Under Pecore, a transfer into joint tenancy might result in:

1. an immediate gift of a beneficial interest in the property;
2. a gift of the right of survivorship only; or
3. a transfer of legal title only, so that the transferee holds the property on resulting trust for the transferor’s estate.

The outcome depends on the intention of the transferor at the time of the transfer.

A transferor’s intentions can be difficult to determine after their death, parties may choose to expressly agree (through contract) that the joint tenancy cannot be severed. This helps avoid uncertainty about whether the right to sever was retained (Haan v. Haan, 2015 ABCA 395).

Another important finding in Pecore is:

If someone gives property to another person for free and puts it in joint tenancy, the law usually assumes the recipient is holding it in trust for the giver’s estate (the presumption of a resulting trust), not as a true gift.

There’s an important exception: if the recipient is the giver’s spouse or minor child, the law instead assumes it was meant to be a gift (this is called the presumption of advancement).

Where the presumption of resulting trust arises, the onus falls on the transferee to rebut the presumption by establishing on a balance of probabilities that the transferor intended to make a gift.

NOTE: The court should rely on the presumption of resulting trust only if the evidence is insufficient to establish the transferor’s actual intent at the time of the transfer (Fuller v. Fuller Estate, 2010 BCCA 421); affirmed 2020 BCCA 239).

How do The Courts Analyze Whether There is a Resulting Trust?

The courts will analyze whether there is a resulting trust in a joint tenancy by starting with the presumption of the trust existing, and then weighing all the evidence to determine, on a balance of probabilities, the actual intention of the transferor.

The following is a non-exhaustive list of how the court may analyze the facts to determine whether the presumption of a resulting trust can be rebutted:

1. The presumption of resulting trust does not arise where there is consideration for a transfer (Petrick (Trustee) v. Petrick, 2019 BCSC 1319 (Chambers) at paras. 55 to 68). An example of this would be the person added to title pledging credit as a co-borrower on the mortgage registered on title;
2. In accordance with s. 81.1 of the FLA, the presumption of advancement nor the presumption of resulting trust can be applied “in questions respecting the ownership of property as between spouses”(applying to legal proceedings commenced on or after May 11, 2023, unless the parties agree);
3. Was there documentation explicitly stating the intention of the transferor;
4. What was the intention of the transferor at the time of the transfer; or
5. Is there a contradiction of the jointure of the property, through the division of the estate in the Will of the transferor.

Sawdon Estate v. Sawdon: A Fourth Potential Outcome 

In Sawdon Estate v. Sawdon, the court held that it was possible for joint tenants to hold the property in a way where the right of survivorship is actually meant to benefit other people, not just themselves.

In Sawdon, the deceased placed bank accounts in joint names with two children but intended all five children to share them after his death. He then made a will leaving the residue of his estate to a charity.

The charity asserted that the surviving joint tenants held the accounts on resulting trust for the estate.

The court rejected a claim that the accounts belonged to the estate, finding instead that the father had made an immediate gift of the right of survivorship to all five children. The two joint account holders, therefore, held the funds in trust for all five, based on clear evidence of the father’s intention.

The court reached this conclusion on evidence that:

• The deceased was aware of the consequences of joint accounts with the right of survivorship; and
• The deceased had accepted and desired those consequences;

The principles in Sawdon relating to joint tenancy have not yet been considered by a British Columbia court.

However, in Cooke v. Gacina, 2020 BCSC 694, in dismissing a claim for resulting trust, the B.C. Supreme Court agreed that the mother with a terminal diagnosis gifted the right of survivorship in her real property to her daughter (who testified that she now held the property in trust for herself and her siblings). The court concluded that it was the deceased’s intent in the transfer for “an easier and less costly implementation of her testamentary wishes”.

The lawyer in this case who conducted the transfer of the title, testified that he met with the deceased alone to find out why she wanted to transfer title to her daughter, and she confirmed her will left everything to her three children.

The lawyer stated that the transfer into joint tenancy was sensible because Elizabeth believed her death was imminent. That made it unlikely Theresa would face any significant tax implications from the transfer into joint tenancy. He also confirmed it would save a significant amount of probate and other fees upon his mother’s death.

The deceased had explicitly explained the reason why the transfer was only to one daughter, the reason being that she was the only one who could qualify to take over the mortgage. The two other children of the deceased testified that their mother explained the transfer was to carry out her testamentary wishes without incurring the fees and taxes of probating the will.

Can the Beneficial Owner of the Property Sever Joint Tenancy While Living?

The individual with beneficial ownership of the property is not barred from dealing with the property while alive. The beneficial owner can even eliminate survivorship, for example, by withdrawing all funds from a joint bank account or by severing a joint tenancy of land.

In British Columbia, the courts have held that a transferor can give a gift of a joint tenancy while living, and later during their lifetime, take actions to sever the joint tenancy and render the right of survivorship worthless (Mong Alter Ego Trust No. 1 v. Yip, 2022 BCSC 1327 at para. 96).

Disclaimer: The information provided in this blog is for educational purposes and is not personalized counsel. We recommend individuals seek legal advice prior to implementing the above strategies, as estate planning best practices will vary depending on individual and family circumstances. As laws and regulations vary by jurisdiction and may change over time, we recommend you consult a qualified estate planning lawyer for advice regarding your specific situation.

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