A different kind of joint problem

A different kind of joint problem

Parents who intend to transfer their assets into joint names with some or all of their adult children need to carefully consider that decision before implementing the transfers.  A series of recent Court cases in Western Canada highlight the need for careful legal advice when parents are considering such transfers in the context of estate planning or family business operations.

In Canada, ownership of property as a joint tenant carries with it the right of survivorship. In simple terms, it means that the joint owner who survives the longest stands to inherit the entire asset.  However, in 2007 the Supreme Court of Canada confirmed a general rule that when parents transfer property into joint names with adult, independent children without receiving any consideration in return, the law presumes that on the parent’s death, the child holds the property on a resulting trust for the parent’s estate.  If the surviving child (who stands to inherit the whole property by right of survivorship) can show that the parent’s intention at the time of the transfer was actually to gift the property to that child, then they can overcome the presumption.  If the child is unable to rebut the presumption, he or she would have to distribute it in accordance with the parent’s will or the applicable intestacy rules.

While there are some useful reasons why a parent may want to hold property with an adult child in such a manner, there are a number of potential pitfalls and problems, which the cases below illustrate:

  1. Coates v Coates, 2017 SKQB 303: a mother placed a series of properties in joint names with her four children as part of the family’s estate plan. One of the children was financially irresponsible and had a judgment against him for various debts.  The creditors registered the judgment against title to the family property, which was ultimately sold to pay out the son’s judgment.  Seeing the potential for similar actions in the future, the mother asked the children to transfer the properties back to her name alone.  All but the financially irresponsible child agreed, and the mother was forced to sue him on the basis that he held the property on resulting trust for her.The Saskatchewan Court of Queen’s Bench confirmed that in that province, the Land Titles Act had abolished the presumption of resulting trust.  However, the mother had sufficient documentary evidence to prove that she had not intended to immediately gift the property to her children when she placed their names on title.  Rather, the intention was for them to inherit the beneficial title to the property only upon her death.

    In this case, there was sufficient and detailed written evidence of the mother’s estate plans in the form of a will and a testamentary agreement with her children.  In most cases we see, that is not the case, and the Court and the parties are left to piece together various bits of circumstantial evidence to determine the transferor’s intention.

  2. Heebner v Heebner, 2017 SKQB 343: this case also concerned parents who were suing their son after they transferred title to a number of properties into joint names with him as part of an estate plan. The parents brought a summary judgment application to direct the transfer of the lands back into their names.  The Court ruled there was insufficient evidence to grant the judgment at this stage, but made a number of procedural orders and directed that the matter return for a hearing after further evidence was adduced.
  3. Kyle Estate v Kyle, 2017 BCCA 329: this was a dispute between siblings about the proceeds of a bank account placed into joint names by their deceased father and one of the children, C. The trial judge found that the presumption of resulting trust applied and that C’s evidence was insufficient to rebut it.  The judge concluded that it was the father’s intention to provide C with funds which would be shared equally to all four children upon his death.On appeal, the court reviewed the principles set out in the Pecore case and did not find a reviewable error.  The Court of Appeal found that it was open to the judge to draw the conclusions he did based on the evidence at trial and confirmed that the funds in the joint bank account were held on resulting trust for the father’s estate.
  4. Finally, in Alberta, the Court of Queen’s Bench just released a decision in Pohl v Midtal, 2017 ABQB 711, yet another illustration of the dangers of transferring property to children as joint owners. The case was initially litigated years ago, and in 2014 the Court found that the daughter had rebutted the presumption of resulting trust and had established the parents’ intention to gift the right of survivorship. The parents then tried to sever the joint tenancy under the procedure set out in the Land Titles Act.The Court concluded that the when the parents had transferred the property, they had irrevocably gifted the right of survivorship to their daughter.  That meant they had given up their ability to now try and sever the joint tenancy.

    While the Court limited the decision to the facts of this case, it is an important reminder that at the end of the day, the evidence will determine the result.  Had the parents in this case obtained proper legal advice, they may have been able to document their intentions more clearly (like in the Coates case above) to avoid the finding of an irrevocable intention to gift.

If you are a parent contemplating transferring your property into joint names with some or all of your children, or the adult child who will be receiving the property, we would be happy to begin the discussion about the potential consequences of the transfer.

Thank you for reading and have a great weekend!

Predrag Tomic

Predrag Tomic

Predrag (Peter) Tomic is a Calgary-based wills and estates lawyer with a primary focus on estate litigation. Peter’s practice includes estate planning, probate matters and resolving complex estate and trust disputes for clients throughout Alberta and Canada. Peter also regularly acts in matters involving Power of Attorney disputes, mental capacity litigation and adult guardianship and trusteeship issues. Peter has presented on estate topics for the Legal Education Society of Alberta and CPLED and frequently teaches adult education courses about estate planning and executor duties.

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