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Monday, January 14, 2019

Risky (Estate Planning) Business: Joint Tenancies May Expose Assets to Third Party Creditor Claims

I know that a lot of you parents out there have added one or more of your children's names to your home or cabin. I keep warning you about it but you keep doing it, because it's easy and inexpensive, and nobody really believes that the bad stuff is going to happen to them. There is a new case from BC that illustrates exactly the risk I keep mentioning.

I read about the case on a blog published by a Vancouver law firm called Alexander Holburn Beaudin + Lang. Click here to read their analysis of the case in more detail than I am giving here.

The case involves Tina Gully, who added her son, Steven, as a joint owner of her home. She did this as part of her estate planning, at the time she did her will. She confirmed in the will that she intended for Steven to own the property after she passed away. Steven was unaware that his name had been put on the property. Unfortunately, Steven owned a business that ran into trouble and ended up with a judgment against it and against Steven. The creditor put a lien against Steven's half of the house.

When Ms. Gully found out about this, she did her best to head off the damage. She made a new will leaving Steven out. She severed the joint tenancy of her home. She then asked the court for a declaration that Steven was actually holding half the house in a resulting trust so that it could be passed to her grandchildren. It didn't work.

The court decided that Ms. Gully had given Steven half the house when she put him on title. She couldn't say that she hadn't gifted it just because his half was now subject to his debts. What was done, was done.

I hope parents who are adding children (or others) to the title of their homes will see that these things happen even when the children intend no harm to the parent. Sometimes circumstances cannot be controlled. Once you add a person to your title, you have given legal rights and responsibilities to that person. This case shows that the court will protect the legal rights of others, including creditors, who are entitled to rely on the legal position you create when you add a joint tenant.

The case is called Gully v. Gully and can be read in its entirety by clicking here.




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