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Thursday, July 23, 2015

BC case shows what it takes to deal with title when kids have been added as joint to parents' property

There is a new case from the BC Supreme Court that sheds some light on a topic that is of consistent interest to the readers of this blog. I'm going to give a summary of the case here, but anyone who'd like to read the full case of The Estate of Walter Khadikin, please click here.

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?





14 comments:

  1. Although a Power of Attorney of attorney can sell a house on behalf of their not capable parent, can they then distribute some of the proceeds of the sale as gifts to self and "some" of the siblings?

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    Replies
    1. No. They cannot. Ask yourself why this would be legal. Is it because you believe the people will inherit the money one day? Based on what? A will that says they get an inheritance after the parent dies? Well since the person hasn't died, the will isn't in effect yet. So there is absolutely ZERO legal authority to distribute that money. Also, any POA who benefits in that way (by being one of the people who gets some of the funds) is contravening the Trustee Act, and can be removed from the position by the court. Finally, check out the Canada Criminal Code section 331 entitled "theft by power of attorney".

      Lynne

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  2. Im posting on this post in the hopes that you will see it. Your blog is great and so informative.

    If a property is held in tenants in common between 3 siblings, can one sibling force the others to sell teh property or to buy their portion?

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    Replies
    1. any comment in response to the question above?

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    2. No, one tenant in common can't force anyone else to sell their portions. But your question is a wonderful illustration to all of the parents out there as to why it's a crap idea to put all three kids' names on one property.

      Lynne

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  3. Lynne, you provide the best description of "presumption of resulting trust" I've read anywhere. Well put.
    Joint ownership with kids can work, but only where there is clear documentation by the party or parties concerned. If dad had specified in his handwriting or had a properly worded and witnessed document that he intended for the house to become the sole possession of his son, it's unlikely that the matter would have ever gone to court. The lawyer should have made sure this was in place and encouraged such communication with any potentially interested parties.

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    1. Thanks for the positive feedback. I agree that it can work if properly set up. The problem really is that people read articles or posts that suggest they use joint names as a way of avoiding probate, without really making the drawbacks clear. If the parent is advised and assisted by a competent lawyer, it should be fine. Thanks for reading.

      Lynne

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  4. Thanks for the great summary!

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    1. You're welcome. Thanks for reading :)

      Lynne

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  5. Thank you for this blog."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."Thank you for this information.
    Family Lawyers Northern Beaches

    ReplyDelete
    Replies
    1. Just out of curiosity, do you ever get any clients after you've repeated a line from my blog for no reason, then posted a link to your webpage. I notice that you do that frequently, even though my readers are in Canada and you are not. I would have thought that you'd make a better impression on potential clients by actually contributing to the conversation rather than cutting and pasting a random line of text. Just wondering.

      Lynne

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  6. I have a question that I am sure applies to others. I am interested in purchasing a condo with a nephew and his wife, and I am thinking of spliting everything 50/50. Down payment would be 50/50 and ALL maintenance issues also split. I am concerned with when we go to sell the property will I be short changed and things then be split 33.33% each??

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    Replies
    1. If someone came into my office and raised this question, we'd probably devote quite a bit of time to debating the upside and downside of the arrangement. However, since you have asked a specific question and I have no other information, I'll answer your question in general terms.

      If you set it up as three joint tenants, on the sale of the property you'd probably end up with 1/3 of the proceeds. If you set it up so that you are a tenant in common with 50%, and they are joint tenants of the other 50%, then on sale you'd get 50% of the proceeds.

      All I can say is good luck. These things are easy to get into, and really tough to get out of.

      Lynne

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  7. Northern Beaches Lawyers 20 years of experience in Litigation relating to Wills and Estates. Graeme established Northern Beaches Lawyers for clients from the Northern Beaches and surrounding Peninsula to take advantage of his expertise in Wills and Estate Planning.Disputing A Will

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