KPA Lawyers - June 5, 2020
A loved one has died and left behind a residential property. Whether you are the estate trustee, a beneficiary or a joint owner in the property, you may be wondering what happens now. How real property in Ontario is handled in the administration of an estate largely depends on a few things:
- If the property was held by the deceased as the sole owner or as a “joint tenant” (all owners own the whole of the property) or “tenant in common”(each owner owns only their portion of the property) with one or more people;
- If the deceased died with or without a will; and
- If there are any debts of the estate.
The first element above is important as it will address whether the property even forms part of the estate. A home will only be part of an estate if it is solely owned by the deceased in their own name or it was owned by the deceased as a tenant in common with one or more people. If it is the latter situation, the only portion of the property that forms part of the estate is the deceased’s interest.
A property does not form part of an estate when it is owned by the deceased and one or more people as joint tenants unless the deceased was married, the home was a matrimonial home and the spouse of the deceased was not on title.
Subsection 26(1) of the Family Law Act states as follows:
If a spouse dies owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse, the joint tenancy shall be deemed to have been severed immediately before the time of death.
Where Real Estate Does Not Form Part of the Estate
In the event the property does not form part of the estate, the surviving joint owner or owners are responsible for registering a Survivorship Application on title to remove the deceased’s name from title.
What your lawyer will need:
- Proof of Death. Proof of death is provided either by an original death certificate issued by the Office of the Registrar General under the Vital Statistics Act, an original certificate issued by the funeral home that handled the funeral arrangements, or an original Certificate of Appointment of Estate Trustee with or without a will (“Certificate”);
- Proof of Ownership. This can be done by your lawyer pulling a parcel register to confirm the owner on title and nature of ownership; and
- Spousal Status of the deceased. This can be proved by a marriage certificate.
Where Real Estate Does Form Part of the Estate
Should the property form part of the estate, the process to convey or distribute the property to one or more beneficiaries is notably different.
Typically, there are two stages to conveying an estate’s real property where the real estate actually forms part of the estate:
- Register a Transmission Application. This transfers title from the deceased to the estate trustee; and
- Register a Transfer. A Transfer transfers ownership of the property from the estate trustee to either a third party or the beneficiary.
In most instances, the estate trustee will be required to obtain a Certificate, but it is not always necessary. There are three situations where a Certificate will not be required. These are:
- The value of the estate does not exceed $50,000.00;
- The transfer of the property would qualify as a “first dealing”; or
- The transfer is done by a beneficiary.
If one of the above scenarios applies, the estate can avoid major expenses like Ontario’s estate administration tax and additional legal fees.
1 – Valuing the Estate
In order to assess the value of the entire estate, you are best served speaking with an Estates Lawyer. To assess the value of just the real estate, you take the fair market value of that property and deduct the value of any encumbrances (i.e. a mortgage) registered on title.
2 – First Dealings Exception
The first dealings exception is a product of the Ontario Government unilaterally converting properties from the Land Registry System to the Land Titles System in the 1990s and early 2000s. The result of the Government’s convesion is that property conveyances and amendments can now be done online rather than in person, however, the result is also that you now almost always require a Certificate to affect the transfer on behalf of an estate. Before the change, transferring property following the death of the owner would have been done by registering their will on title. The conversion denies the estate of the opportunity to save the costs I noted above and so the first dealings exception was born. You will know if your property is eligible for the first dealings exception based on the title qualifier indicated on the parcel register. It will read “LT Conversion Qualified.”
3 – Transfer by Beneficiary
Property can be transferred by a beneficiary provided that: the will does not expressly vest title in the property to the estate trustee, the real property has automatically vested in the beneficiary by law or, in an intestacy situation (where there is no will), the beneficiary is entitled to the property under the Succession Law Reform Act.
Land Transfer Tax
Whether real property is transferred by Survivorship or Transmission and Transfer to a beneficiary, no Ontario Land Transfer Tax will be payable because the consideration for having completed the transfer is zero or nil.
As can be expected however, there are exceptions to this rule. If the estate trustee transfers to a beneficiary, who is one of several beneficiaries, and he or she has elected to receive the property as their share of the estate while the other beneficiaries split the remaining estate assets, there will be Land Transfer Tax payable. Only the share the beneficiary was bequeathed to receive of the estate will be considered nil for the purpose of the value of the transfer, while the remaining “shares” of the other beneficiaries will deemed to be a conveyances from those beneficiaries and not the estate. As an example, say there are three beneficiaries who are all entitled to the assets and residue of an estate equally (1/3rd each). Part of that estate includes a property, which one of the beneficiaries has elected to take as their 1/3rd share of the entire estate. The other two beneficiaries will be splitting the remaining assets and residue of the estate between them. The value of their 2/3rd share of the property will be the consideration for the transfer and will be taxable.
As you can see, there are a lot of rules and exceptions to what happens with real property after someone has passed and it can be difficult to navigate the administration of an estate. Knowing what is and isn’t possible as well as what to expect in different situations will help ease your stress levels and make for a more streamlined process.
This article is intended to be information and does not constitute legal advice. Every situation is different. KPA Lawyers is open and has suspended consultation fees in an effort to maintain public access to legal information during this difficult time. If you need advice from an Estates Lawyer or myself, give us a call at 905-965-626