In this blog, I've talked many times about property that is put into joint names between a parent and a child. The question is always whether on the death of the parent, the child receives the property as a surviving joint owner, or the property becomes part of the parent's estate. It's a question that comes up all the time because people are continually being sucked into thinking that putting the kids' names on their property is a good estate planning move.
The issue of whether the child who was named as a joint owner could keep the property was addressed in the Khadikin case.
Mr. Khadikin was a widower with two children. His daughter, Elizabeth, had predeceased him. He put his home in joint names with his son, Ronald. When Mr. Khadikin passed away, Elizabeth's children challenged the estate, saying that the jointly owned property should have been part of the estate.
When a parent adds a child's name to an asset, there is a legal rule that comes into play under which the law presumes that the asset, though in joint names, properly belongs in the parent's estate. This is important because if the child gets the asset as a joint owner, the child will also get any share of the estate he is given under the will. This gives one person a much greater share than anyone else, which of course is never popular.
Because it's a presumption and not a proven fact, the presumption can be rebutted (or in plain English, overturned) by evidence that the parent did in fact intend for the child to own the property as a joint owner. But what evidence is needed? Many a beneficiary is finding out that simply telling people that "Dad told me I could have it" is simply not going to cut it.
In the Khadikin case, the court called as a witness the lawyer who prepared the transfer of the house into joint tenancy. The lawyer was questioned extensively about what he had said to Mr. Khadikin, and what Mr. Khadikin said in response. It was important that the lawyer had insisted on meeting Mr. Khadikin without the son being present, and had asked him frank questions about why he wanted to transfer the property. The court looked at the notes taken by the lawyer during the meeting as well.
The court was satisfied, based on the lawyer's testimony, that Mr. Khadikin had in fact intended for Ronald to own the property on Mr. Khadikin's death. The lawyer recalled Mr. Khadikin's explanation of what he intended to do, and his reasons for making the transfer. Therefore Ronald could keep the property and it didn't have to go into the estate.
This case illustrates how the courts look at legal rules on a case by case basis. The court takes a basic legal rule or statute, and factors in the specific facts of a case to see how they affect those rules. This case would have had the opposite result if Mr. Khadikin had told the lawyer that he was just adding his son's name to avoid probate, for example.
The case should also be an example to all of the parents out there who have put their kids' names on their properties of what it takes for their kids to straighten out the joint property questions after the parents pass away. Is it really cheaper to pay for a full trial in court than to pay probate fees? Is it easier for your kids to hire a lawyer, wait for many months, to give testimony in court, and to wait again for the judge to hand down a decision than it is to apply for probate?