When a Gift is not a Gift—Resulting Trusts in Real Estate

December 09, 2024

Written By Simon Crawford and Vanessa Kiraly

When it comes to estate planning, joint tenancy is often seen as a simple way to transfer property after death while bypassing probate fees. But as the case of Jackson v Rosenberg shows, what may seem like a straightforward solution can lead to unexpected legal disputes. When Nigel Jackson added Lori Rosenberg as a joint tenant of his home, he intended to secure her inheritance through the right of survivorship (a hallmark of joint tenancy). However, when a change of heart led Jackson to sever the joint tenancy, the move sparked a legal battle over the true meaning of a “gift” in property law and whether Rosenberg had an interest in the home beyond the right of survivorship. Here's what unfolded and what it means for future property owners.

Background

Nigel Jackson owned a home in Port Hope, Ontario. In 2012, he transferred the title of the home into joint tenancy between himself and Lori Rosenberg, his late partner’s great niece, with the intention of leaving her the property upon his death without probate fees—the idea being, that a joint tenancy results in one tenant becoming the owner of the other’s interest upon death, without it becoming part of the estate. Rosenberg did not pay for the gratuitous transfer, and she never contributed financially to the home’s upkeep or lived there.

Of course, another hallmark of joint tenancy is that both joint tenants have rights of occupation and use of the property immediately… not only upon the death of the other.

In 2020, Jackson got wind that Rosenberg had intentions on dealing with the property prior to his death (potentially trying to sell the home), which caused him great concern. It was his intention that Rosenberg’s rights would vest on his death, not immediately. So, Jackson severed the joint tenancy by transferring his interest in the property to himself as a tenant in common (relying on the fact that tenants in common do not have survivorship rights). The core legal issues focused on in the lower court decision were a) did the 2012 transfer create a joint tenancy with Rosenberg acquiring the beneficial interest in half the property, and b) whether the 2020 transfer extinguished Rosenberg’s right of survivorship over Jackson’s retained interest.

Why would this be in question? The Resulting Trust.

Lower courts have found (consistent with earlier case law), that when real property is gifted from one person to another, there is a presumption that the person receives that interest subject to a resulting trust in favour of the donor. That’s a fancy way of saying that the gift is presumed to not really be a gift. That is only a presumption, however. It can be rebutted.

This makes sense. Often gifts of real estate are given by persons who are (or could be considered to be) more vulnerable than those who receive those gifts. And so, courts recognize that there had better be some compelling evidence that it was a gift in order to enforce it as a gift. The recipient must rebut the presumption that the resulting trust was created. So, in this case, the question was, could Rosenberg rebut the presumption of a resulting trust and demonstrate that Jackson’s gift was of an inter vivos beneficial interest in the property?

The Initial Ruling

Was the presumption rebutted by Rosenberg? Only partly. The application judge found that the 2012 transfer created a gift to Rosenberg, but only of the right of survivorship, not of a beneficial interest in the property during Jackson’s lifetime. During Jackson’s lifetime, Rosenberg had no beneficial interest in the property and held her share in trust for him. Jackson remained the sole party with control over the property and had the right to encumber or sell it. The application judge also held that Jackson’s 2020 transfer severed the joint tenancy, eliminating Rosenberg’s right of survivorship over Jackson’s share of the property. However, Rosenberg would still inherit any remaining equity in the property from the 50% share held in trust upon Jackson’s death.

The Appeal Decision

Rosenberg appealed the decision, arguing that the application judge erred by finding that the 2012 transfer did not bestow upon her all rights of enjoyment and occupation associated with joint tenancy. In addition, she argued that the gift made to her included a gift of survivorship over Jackson’s retained interest, and that Jackson could not revoke or partially eliminate that gift through the 2020 transfer. Put simply, she argued that once a gift of real estate is made by the granting of a joint tenancy interest…. that gift includes all present and future rights in the property characteristic of a joint tenancy, including the right of survivorship, and there can be no “take backsies” of any of those gifted rights and benefits.

The Ontario Court of Appeal dismissed Rosenberg’s appeal, upholding the lower court’s rulings, with the following key points:

1. Intention of the 2012 Transfer: The court affirmed that Jackson’s intention in 2012 was to gift only the right of survivorship, not full beneficial ownership or any control during his lifetime. The court ruled that a joint tenancy can be created for the sole purpose of survivorship without transferring other rights.
2. Right to Sever: The court agreed that Jackson retained the right to sever the joint tenancy in 2020. Severance is a recognized legal option for joint tenants, allowing them to convert a joint tenancy into a tenancy in common, which ends the right of rights of survivorship. The court emphasized that a joint tenant can unilaterally sever a joint tenancy, even when the joint tenancy was created as a gift.
3. Rosenberg’s Share After Severance: The court accepted that after the severance, Rosenberg continued to hold a 50 percent share of the property subject to the resulting trust, but her right to inherit Jackson’s share upon his death was extinguished. The court noted that no right of survivorship over Jackson’s share could exist once the joint tenancy had been severed, and that upon Jackson’s death, Rosenberg would receive only the 50% interest she held in had held trust, with Jackson’s share passing to his estate.

Both parties agreed that the application judge had made an error by suggesting that Rosenberg’s right of survivorship over her own 50 percent share could persist after the severance, as survivorship rights can only exist in joint tenancies. The court invited both parties to submit arguments on whether any changes should be made to the application judge's formal judgment to address this point.

Key Takeaways

1. Limited Gifts in Joint Tenancies: Joint tenancies can grant survivorship rights without gifting beneficial ownership to the transferee during the transferor’s lifetime. If the transfer is gratuitous, the transferee may only have limited rights unless there is clear evidence of gifting further ownership rights.
2. Survivorship Rights are Contingent on Joint Tenancy: Survivorship rights are inherently tied to the existence of a joint tenancy. A joint tenant can unilaterally sever the joint tenancy at any time, ending survivorship rights, even if the original transfer creating the joint tenancy was a gift.
3. Clear Estate Planning and Legal Advice: This case shows the need for clear legal advice in estate planning and more generally, in any gifting of real estate. A gift may mean different things to the donor and the recipient, and with the operation of resulting trusts, there may be conflicting expectations in the absence of clearly set out intentions.

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