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Nov 5, 2020

Don’t count on ‘zombie deeds’ in estate planning: Part one

Published in The Lawyer's Daily | Wednesday, November 04, 2020

Alitha Elizabeth Elliott transferred her house on April 18, 2017. There was only one problem: Elliott was dead. She died three days earlier on April 15, 2017. But this was not the case of a miraculous resurrection or a stolen identity; this was another case of a so-called “zombie deed.”

The question is: if a deed is signed by someone prior to their death and then registered after they have passed away, is the registration legally enforceable and ethically appropriate (a.k.a. “are we good with that?”)?

In the recent case of Thompson v. Elliott Estate 2020 ONSC 1822, the court was decidedly “not good with that.” The case featured strong commentary as to the inappropriateness of the transfer which had been registered. By contrast, the older Winarski v. Sproul 2015 ONSC 812 decision appeared to give validity to zombie deeds.

While both cases ultimately validated the effectiveness of the posthumous registration of the zombie transfers that were made, the rationale used makes future use of zombie deeds unlikely and the use of zombie transfers for planning purposes impossible.

The ghost of Ann Sproul

In Winarski v. Sproul, Ann Sproul signed a deed on Nov. 15, 2002, transferring her interest in the property to her son James. When the lawyer went to register the transfer, a writ of execution was found on his sub-search and the lawyer contacted James and asked him to look into it and clear it up prior to registering the transfer. Although the lawyer followed up a number of times, James did nothing to resolve the issue and the transfer was never registered. Sproul eventually passed away and litigation commenced over whether James or Sproul’s estate owned her interest in the property.

The court held that the transfer of the property to James had been effective notwithstanding that the transfer had never been registered, citing authority that a valid transfer is made as soon as the deed is delivered to the solicitor for registration. While this proposition does support the legitimacy of zombie deeds, casual observers should pay careful attention to the historical context of this case.

In Winarski v. Sproul, the deed which was signed was a paper form of deed that was common with registration under the Registry Act. This is a physical deed granting Sproul’s interest in the property to James that is signed by both James and Sproul and deposited within the Land Registry Office. This document is itself a deed in its actual form which is merely recorded in the Land Registry Office so that notice of a person’s interest can be given to the world. When the majority of property in Ontario was administered under the Registry Act, it was common for a deed to be signed on a date other than the date that it was registered. This was so common, in fact, that the historical books would record both the date that the deed was signed and the date that the deed was deposited to the Land Registry Office.

In modern times, the vast majority of land in Ontario is administered under the Land Titles Act. Under this Act, deeds can only be registered electronically. A practice has developed whereby clients will sign an Acknowledgement and Direction addressed to their lawyer, authorizing and directing the lawyer to register a deed, a draft form of which is typically attached.

Jeff Lem, director of titles for the province of Ontario, has argued that the Acknowledgement and Direction is a power of attorney, whereby the grantor authorizes the lawyer to sign the electronic document on their behalf and which document, after being signed on the grantor’s behalf by the lawyer, is submitted for registration. As a power of attorney, Lem has argued that the Acknowledgement and Direction ceases to operate after death, preventing the zombie deed from being registered.

In contrast, when a physical deed is signed and a lawyer has been instructed with respect to its delivery, there is no clear inappropriateness in the delivery of the document after the signatory has died. The existing document is registrable in its own right without the need of additional signatures from any person or the assistance of a lawyer — it need only be submitted to the Land Registry Office. However, with the change to electronic registration, such deeds are no longer registrable unless the property is one of a small few that are still governed by the registry system.  

As a result, if we were to accept the director of title’s position that the Acknowledgement and Direction is merely a power of attorney, it would be inappropriate for a lawyer to register a zombie deed in the Land Titles system.

This is the first of a two-part series.

 Don’t count on ‘zombie deeds’ in estate planning_ Part one - The Lawyer's Daily




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