Zombie deeds: Scarily risky estate planning tool

A pair of legal decisions have left “zombie” deeds hovering – appropriately enough – between life and death.

The deed gets its spooky name from the manner of the property transfer involved: the owner signs the deed while they’re alive, but it’s not registered until after they’re dead.  

Although zombie deeds often occur by accident or coincidence, they have been suggested as an estate planning tool for testators looking to transfer property without it going through the estate – avoiding the 1.5 per-cent Estate Administration Tax and lengthy delays that come with the probate process.

Back in 2015, an Ontario Superior Court judge appeared to endorse the technique when he validated the transfer of a woman’s interest in her home to her son. Despite the fact the woman was dead by the time the transfer was registered by her lawyer, the judge found that it took effect when she had signed it, noting that the failure to register earlier was an oversight.

However, a more recent judgment of the same court went in another direction in a case involving a mother who died a few weeks after signing a deed to split her share of her marital home between her adult children. This time, the judge was critical of the attempt to register the deed, suggesting that zombie deeds can’t be registered without misleading the Land Registry Office.

At best, the future of zombie deeds as an estate planning tool is tenuous, but there are other options for those seeking to pass on their property while sparing heirs the hassle and expense of probate. Each has its own potential risks, so it’s always advisable to consult an experienced estates lawyer who can guide you through the process and help you work out what works best for you. 

For example, parents may want to consider setting up a joint tenancy with a child, which generally allows the property to flow automatically to the co-owner by right of survivorship.

If the house has been owned by the same person for long enough, it may qualify for the “First Dealings” probate exemption, which applies to property purchased before Ontario’s conversion from the old Land Registry System to the newer Land Titles System.

Just a small portion of the province’s real estate remains on the old system, but it’s important to know that the tax break only applies when the owner had a valid will in place at the time of their death.

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