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!

It’s your funeral, but who calls the shots?

If you have a will, you may have spelled out your detailed wishes for your funeral in the document.  Would you be surprised to know that your personal representative does not have to follow them?  You may have also heard that funeral expenses get paid out from an estate in priority to all other expenses.  So, who actually has legal responsibility for arranging and paying for the funeral?  And what should you keep in mind at the outset when the question of funeral arrangements comes up?

 

Who has the legal duty for funeral arrangements?

In Alberta, it is well-settled that the personal representative named in a will has the sole legal responsibility and authority for making funeral arrangements.  That authority is confirmed by the Estate Administration Act, the Funeral Services Act, the Cemeteries Act and their respective regulations.  That means the personal representative does not have to follow funeral instructions in a will, though the vast majority do.

If there is no will or the personal representative is unavailable or refuses to give burial instructions, then the law gives the following people priority: spouse, adult child, parent, guardian, increasingly more distant relatives, with the Minister of Human Services being a decision-maker of last resort.  Where there are two or more individuals of equal rank, the right devolves on the eldest.  The Court has the discretion to vary the order of priority among all of the above categories.

 

Who has to pay for the funeral?

In Chernichan v Chernichan (Estate), 2001 ABQB 913, the Alberta Court of Queen’s Bench confirmed that the deceased’s estate has the primary responsibility to pay for the funeral expenses.

In that case, the deceased’s brother paid for the funeral out of his own pocket.  The personal representative used estate funds to pay out other estate debts before paying the brother back for the funeral expenses, leaving the estate insolvent.  The brother claimed that he should have been paid back in priority to all other creditors, including Canada Revenue Agency.

The Court conducted an in-depth review of the law and concluded that where the estate is insufficient to cover the funeral expenses, a secondary responsibility falls on the person responsible in law for supporting the deceased.  Therefore, a surviving spouse, adult interdependent partner or a parent of a minor child may have to make up the shortfall.  The residual responsibility to pay for the funeral rests with the Minister of Human Services.

In Chernichan, the Court also held that funeral expenses are entitled to a priority over other estate administration expenses and liabilities, except for the expenses of proving a will.  The personal representative, being the deceased’s wife, was ordered to pay the expenses to the brother.

 

What is a reasonable funeral?

The liability of the estate, the personal representative, and the responsible survivors for funeral expenses is limited to reasonable expenses.  There is no universal answer as to what is reasonable.  The analysis will depend on the deceased’s station in life, size of the estate and cultural background.  For example, in Lopushinsky Estate, 2015 ABQB 63, the Court held that a $26,000 funeral was reasonable given the deceased’s highly respected status in his community (the funeral required overflow seating and a video link to the service because of the number of attendees), the fact that he spent a similar amount on his wife’s funeral a year before, and the size of his estate.

 

Things to keep in mind at the start

On the planning side, pre-paid funeral arrangements may decrease family disputes about the type of funeral you want and will make the job easier for your personal representatives.  They also eliminate the risk of there being inadequate assets to pay for the funeral.

Whether you are an executor or a family member who is making funeral arrangements, always consider the reasonableness of the cost of the funeral in light of the deceased’s station in life and expressed wishes before making the final arrangements.

While personally paying the funeral expenses may be a generous gesture, one would be well advised to consider the likelihood that estate assets will be sufficient to reimburse those expenses.  Finally, ensure that your intentions with respect to the payment are documented at the outset – is the payment meant to be a gift or simply a short-term loan to the estate?

Funeral arrangements have the potential to set the tone for the rest of the estate administration.  Taking care to make the right decisions at the start is important and personal representatives and family members should not rush into decisions during the difficult and emotional time immediately following a loved one’s death.

 

Let us know if you have any questions or comments and thank you for reading.

-Predrag

(Don’t) live together, love together

A frequent area of estate litigation involves claims by adult interdependent partners against the estates of their deceased partners.  An adult interdependent partner is roughly the Alberta equivalent of a common law spouse, but may include other types of relationships.

To qualify as an adult interdependent partner, two people must cohabit in a relationship of interdependence continuously for at least 3 years, unless they have a child together or have entered into a written partner agreement.  Where there are no children or agreements, one of the first things we will want to see is evidence of the length of cohabitation.  This is a complex analysis which requires more than a review of the couple’s address history during the last three years of the deceased’s life.

In the recent case of Wright v Lemoine, 2017 ABQB 395, the Alberta Court of Queen’s Bench confirmed that cohabitation does not necessarily mean living under the same roof.  Courts in Ontario, British Columbia and even in Tasmania have arrived at the same conclusion.

In Wright v Lemoine, Ms. Wright sought adult interdependent partner support from Mr. Lemoine.  One of the key issues was whether the couple lived together continuously for at least three years. Due to his work schedule, he was frequently away in remote locations.  When he was not working, the couple spent time together in hotels or at his home in Saskatchewan.  Shortly after the relationship began, Mr. Lemoine purchased a trailer in which the couple resided when he was in town.  Sometimes Ms. Wright joined him at his work locations and they went on several extended vacations together.  When Mr. Lemoine was away, Ms. Wright stayed with her mother.  In the three years prior to their separation, 26 days was the longest time the two spent apart.

Mr. Lemoine asserted that as a result of frequent interruptions of their co-residence, the parties did not cohabit continuously for three years.  He also pointed to the fact that Ms. Wright kept her mother’s residence as her mailing address for the duration of the relationship.

Following an extensive review of the evidence and the existing case law, Justice Nixon held that the couple cohabited for the necessary period, and confirmed that the requirement for cohabitation did not equate to co-residence.  The judge reiterated that a flexible approach was necessary and that the couple’s intention was a key factor for determining whether they have cohabited for the purpose of the legislation.  Mr. Lemoine’s unique work schedule was not enough to displace the couple’s intention to live together when he was back from work.

A different illustration of the same principle can be found in this very recent decision of the Full Court in Hobart, Tasmania.  In that case, the deceased and his alleged common law spouse had not cohabited for much of their 23-year relationship because the deceased was a hoarder and his spouse had found it unbearable to live in the same residence as him.  Nonetheless, there was sufficient evidence that they saw each other almost every night, that they had an exclusive sexual relationship and were considered in the community as a couple.  The judge concluded that despite the daily separation, the relationship was significant and continuous for the amount of time required by the relevant legislation, such that the spouse was entitled to the whole of his estate.

In Alberta, a finding that a person was the deceased’s adult interdependent partner could have a significant impact on an estate.  It may entitle the surviving partner to a significant portion of the estate if there is no will, a right to make a claim for maintenance and support even where there is a will, and the priority to administer the estate.

We have experience with analyzing the required elements of the legislation together with the factual matrix to advise whether someone meets the legal definition of an adult interdependent partner.  Feel free to contact me if you think someone’s status may have an impact on an estate you are dealing with.

Thank you for reading!

-Predrag (Peter) Tomic

You can ask for advice and directions

Acting as an executor or personal representative is a challenging job.  A personal representative is expected to follow the terms of a will, trust document or Court order and to do so prudently and competently.  Sometimes, the testator or the settlor of a trust adds to an already difficult job by creating an unclear will or trust document which leaves the personal representatives guessing as to the deceased’s true intentions.  Other times, what the beneficiaries want conflicts with the instructions in the will or trust.  Since personal representatives may be personally liable for decisions made in the course of their administration, they should ensure they are making the correct decision.

Fortunately, a personal representative who is faced with an unclear and confusing document or a situation not contemplated by the document can seek advice and directions from the Court.  Generally, if the Court provides directions and the personal representative follows them, they will not be personally liable even if the decision leads to a loss to one or more beneficiaries.

In Alberta, authority for seeking the Court’s advice and directions is found in several statutes.  Personal representatives can turn to the

  • Estate Administration Act, which allows a personal representative to apply to the Court for advice and directions on any question respecting the management or administration of an estate.  The personal representative is shielded from liability if he or she follows the Court’s direction on the particular issue.

 

  • Surrogate Rules, which give the Court a very broad discretion to consider applications for directions by personal representatives or persons interested in the estate regarding practice, procedural or other issues and questions and ways to resolve them and “any other matter that may aid in the resolution or facilitate the resolution of a claim, application or proceeding or otherwise fairly or justly resolve the matter for which direction is sought.”

 

  • Trustee Act, which has a similar provision to the Estate Administration Act, allowing trustees to apply for advice and direction and absolving them of liability when acting on the opinion, advice or direction of the Court as long as there is no fraud or misrepresentation by the trustee.

A Court will not make a personal representative’s decision or exercise discretion for him or her.  Therefore, a personal representative should come to Court with a particular plan of action, which the Court can approve, deny or modify.  Most often, the Court will give directions on the steps to be taken to bring about a desired result or to move a matter forward.  However, the Court can also make determinations of fact and substantive rights of one or more parties.  Courts have in the past given advice and directions to:

  • break a deadlock among personal representatives;
  • determine if a particular individual qualifies as a beneficiary;
  • determine if a charitable gift fails where a charity has been incorrectly described or no longer exists;
  • determine if it was prudent for a personal representative to pursue collection of certain assets by way of litigation, or whether it was prudent for the personal representative to use estate assets to defend a claim; and
  • set down litigation plans to ensure that a contentious matter begun under a related Act or under the Surrogate Rules proceeds efficiently and in a timely fashion.

This is not an exhaustive list and the broad discretion given to the Court makes the application for advice and direction a powerful tool to advance the administration of an estate or a trust.

If you are a personal representative in Alberta who needs some clarity on an estate or trust administration matter, Field Law can help.  Do not hesitate to contact me to discuss in more detail: ptomic@fieldlaw.com or 403.260.8511.

Thank you for reading.