Can Creditors Take Jointly Owned Property After a Death in Ontario?

If a co-owner dies owing money, the survivor often worries that a house or account they now hold alone will be used to pay those debts. People commonly assume survivorship protects it completely, but the answer is more careful than that.

This article explains what Ontario law says about survivorship property, the situations where it can still be reached or challenged, and what depends on the facts. A lawyer can tell you how the rules apply to your debts and your property.

Why survivorship property is treated differently

Property passes to the estate trustee only if no one else has a right to take it by survivorship. A deceased joint tenant's interest goes to the surviving joint tenant, not under the will. For estate administration tax, jointly owned property that passes automatically to the other owner is not counted in the estate's value.

So the starting point is that a true survivorship asset is not part of the estate that the estate trustee gathers in. Whether a creditor of the deceased can still reach it is a separate question, and the answer depends on the type of debt, the type of asset and the facts.

Ways a joint asset can still be challenged

• The asset may not really be the survivor's. An adult child added to a parent's account or property without paying is presumed to hold it in trust for the parent, and on death for the estate. The person receiving the transfer must show a gift was intended.
• Courts may look at the wording of bank documents, who controlled and used the funds, any power of attorney, and the tax treatment of the account.
• Property held in another person's name that belongs to the deceased counts toward the estate's value for estate administration tax, and a joint asset held on resulting trust for the estate does not escape that tax.
• Heirs may challenge a surviving account holder, who may need to show the deceased intended the funds as a gift.

There is one exception to the presumption. For minor children, the presumption is a gift, and financial dependency of an adult child does not trigger it, though it can be strong evidence against a resulting trust. If the asset is found to belong to the estate, it is counted in the estate's value for estate administration tax. How it is treated for the deceased's debts depends on the facts, so it is worth confirming with a lawyer.

Other claims that can reach joint property

A dependant of the deceased can apply for support from the estate. For a support claim, money deposited in an account in the deceased's name and another person's, and property held by the deceased and another as joint tenants, are deemed part of the net estate. For joint deposits, only the portion of the funds that belonged to the deceased immediately before the deposit is counted, and the dependant making the claim must prove the funds belonged to the deceased. Payments may still be made unless a certified copy of a suspensory order has been personally served on the holder, and the section does not affect creditors' rights in any transaction where they have rights.

Any joint tenant or tenant in common of land may be compelled to make or suffer partition or sale of the land, and any person interested in the land may apply to the court for partition, or for sale if the court considers sale more advantageous. If the property is a matrimonial home held jointly with someone other than the spouse, the joint tenancy is deemed severed immediately before death and the deceased's share goes into the estate.

On tax, a deceased person is considered to have sold their capital property just before death, even if it passes by survivorship, which may produce a capital gain on the final return. Property transferred to a surviving spouse or common-law partner who is resident in Canada can roll over without an immediate gain if the conditions are met, and some or all of the gain on a principal residence may be exempt.

What the survivor's own creditors can do

Joint accounts carry risks while both owners are alive. Any named holder can withdraw at any time, and if one holder has financial problems or goes bankrupt, creditors could make claims on the money.

For land, a search for writs of execution need only be made against the exact name of the registered owner, and a writ filed under a different name has no effect. No registered land is bound by a writ of execution except as the Land Titles Act provides. Whether a deceased co-owner's judgments or writs continue against a survivor is a point on which the answer depends on the facts and should be confirmed by a lawyer.

What to do next

• List the deceased's debts and who the creditors are.
• Get the parcel register for any land and the account documents for any bank accounts.
• Write down who paid for each joint asset and why it was put in joint names.
• Do not move or spend joint funds in a hurry, since heirs may challenge the survivor.
• Ask a lawyer before paying or disputing any claim.

Frequently asked questions