While a joint tenancy typically allows for a right of survivorship to the surviving tenant(s); this is not de facto the case with matrimonial properties.
Section 26 of the Family Law Act (FLA) in Ontario states that if a spouse dies owning a share in a matrimonial home with a third party (someone other than their spouse), the joint tenancy is considered severed at the time of death. This means that the surviving spouse has certain rights under the FLA that come before the rights of the third party. This can sometimes lead to unfair situations where the third party may lose their interest in the property.
Consider this scenario: A and X are joint tenants of a matrimonial home, and A passes away. B, A’s surviving spouse, receives a substantial portion of the estate but chooses not to elect their FLA entitlement because they are satisfied with the provisions set out in A’s will. The residue of A’s estate is left to charities. Under Section 26 of the FLA, half of the jointly held property in A’s estate would pass to the charities, even though B did not opt for their FLA entitlement. As a result, X loses half of their interest in the jointly held property, which is passed to the charities.
In the case of Whaley Estate v. Whaley, the court examined a scenario in which a spouse who jointly owned a matrimonial home with a third party passed away, resulting in the surviving joint tenant receiving only 50% of the property. The remaining half was given to charities as part of the deceased’s estate. The surviving spouse did not exercise their entitlement under the FLA and hence, did not inherit any share of the property. However, the judge ultimately ruled that the third party could not be denied the right of survivorship, which is common law principle, due to strict reading of the FLA. The judge noted that such an express limitation was not present in the FLA.
Although the judge ultimately ruled in favour of the joint tenant (third party), one should still have a spousal agreement or marital contract in place to protect one’s interests in the event of separation or death. Without such an agreement, unexpected and potentially devastating financial consequences may arise, where a portion of the jointly held property is lost. A spousal agreement can provide clarity and certainty for both parties and prevent disputes and potential litigation down the road.
