Joint tenancy is a common form of ownership for family holdings and is often used for estate planning purposes. The main benefit of a joint tenancy is the right of survivorship which provides that when one joint tenant dies, his or her interest in the property passes automatically to the surviving joint tenant(s). A recent decision of the British Columbia Court of Appeal gives a good reminder that a joint tenant may, through his or her unilateral actions, unintentionally sever a joint tenancy, thereby converting ownership into a tenancy in common and extinguishing the right of survivorship.

The decision in Zeligs v. Janes, 2016 BCCA 280 (CanLII) considered whether funds withdrawn from a joint bank account by one joint tenant and then transferred to herself for her own use would sever a joint tenancy. In this case, Dorothy Burnett owned a property (the “Knox Road Property”) jointly with her daughter, Diana Janes. Janes held a power of attorney for her mother and, in 2010, she sold the Knox Road Property for $2.7 million. The net proceeds from the sale of the Knox Road Property were deposited into a joint bank account in the names of Janes and her mother, Mrs. Burnett. That same day, Janes withdrew the full amount of the proceeds to pay for another property that Janes and her husband had purchased. A few months later, Mrs. Burnett died.

In her will, Mrs. Burnett provided that her three grandchildren should be given $50,000 each and the remainder of her estate should be divided equally among her two daughters, Janes and Barbara Zeligs. Zeligs died one year after her mother and Zeligs’ husband, as executor of Zeligs’ estate, commenced an action against Janes claiming, among other things, that the joint tenancy on the Knox Road Property had been severed when the property was sold.

In arriving at its decision, the BC Court of Appeal provided an excellent summary of the law relating to joint tenancy and how a joint tenancy may be severed. For a joint tenancy to exist, the court affirmed that “four unities” must exist: unity of title, unity of interest, unity of time and unity of possession. Unity of title means that the title of each joint tenant arose from the same instrument. Unity of interest means that the holdings are equal in nature, extent and duration. Unity of time means that all the interests are vested concurrently. Unity of possession means that each joint tenant has a right to present possession and enjoyment of the whole property but no right to exclusive possession of any part of the whole.

Considering prior case law, the court maintained that a joint tenancy may be severed and converted into a tenancy in common in three ways. First, a joint tenant may act unilaterally upon his or her share so as to destroy the four unities. Second, joint tenants may agree to sever by mutual agreement. And third, the joint tenants may, in the course of their dealings, intimate that their interests constituted a tenancy in common.

On this appeal, Janes argued that a joint tenant holding a joint bank account has the right to withdraw funds from the account and, when he/she does, the funds become the exclusive property of the withdrawer unless the funds are held on a resulting trust (which, on the facts of this case, the lower court found not to exist). Janes submitted generally that the withdrawal of funds from a joint account does not sever a joint tenancy.

The court disagreed. The court noted that a jointly held legal right to withdraw funds from a joint account does not enable an accountholder to assume beneficial ownership of the funds on deposit by the mere act of withdrawal. Further, the court found than when Janes withdrew the funds and transferred the proceeds to herself and her husband, she destroyed the unity of title in the joint ownership and hence converted the interest into a tenancy in common. Her unilateral act severed the joint tenancy and thus extinguished the right of survivorship.

As a consequence of the severance of the joint tenancy, the court decided that half of the sale proceeds from the Knox Road Property flowed to the estate of Mrs. Burnett. After the gifts to the grandchildren, Janes and her sister were to share the remainder equally.

This case highlights that care must be taken when dealing with assets held in joint tenancy. In particular, in dealing with bank accounts held in joint names, a joint account holder should be cautious in withdrawing funds unilaterally to be used for his/her own benefit. Such unilateral actions could sever the joint interest and the right of survivorship.