If you hold an asset jointly with an adult son or daughter, such as a bank account or a cottage, you may be surprised to learn what will happen to the asset after you die. Like many parents, you might assume that the asset passes directly to your surviving child and that he or she can do whatever he or she likes with the asset. However, unless you have made your intentions clear, the law will presume that your child is holding the asset in trust for your estate. In other words, the law does not presume that the asset belongs to your child.
A recent court case from BC, McDermid v. McDermid, has confirmed this and illustrates the importance of ensuring that your intentions are clear. The case essentially pitted one brother, Robert, against another brother, Greg, in a dispute over a piece of property owned by their mother at her death. Approximately five years before she died, their mother transferred the property from her sole name into joint tenancy with Robert. Greg argued that their mother intended that upon her death, her half of the property should be divided equally among himself and his two other siblings, namely, Larry and Janice. Robert said that his mother intended him to receive her half of the property upon her death as a gift.
The BC court relied upon the decision in Pecore v. Pecore that deals with transfers between a parent and a child. As a result of this case, where a parent has transferred property to an adult child and the child has not paid anything for that transfer, the law does not presume a gift. Instead it is presumed that the parent intended that the child hold the property in trust for the parent (or parent’s estate). If the parent wants the adult child to have the property on the death of the parent, the adult child must present evidence to rebut the presumption and to demonstrate that the parent intended a gift.
In McDermid v. McDermid, the court reviewed the evidence of each of Robert and Greg in an effort to determine what their deceased mother intended at the time of the transfer. In the end, the court relied most heavily upon a note written by the deceased in which she states that upon her death, her son could divide her half of the property among her other children ‘if [he] so wishes’. The court held that this did not establish a trust but was a mere desire or wish. Taking the evidence as a whole, the court held there was sufficient evidence that the deceased, by transferring the property into joint tenancy with her son, intended to gift her half of the property to Robert upon her death.
Undoubtedly, this dispute caused significant, if not irreparable, damage to the siblings’ relationships with each other – not the kind of legacy most parents would intend and surely not the outcome their mother envisioned when she transferred the property to Robert.
With careful planning, having this happen to your family can be avoided. If you hold, or are planning to hold, any asset jointly with one of your adult children, be sure that you:
- Know exactly how joint title is held;
- Understand the consequences of joint ownership and particularly what happens if one of the joint owners dies; and,
- Ensure that your intentions for what is to be done with the property upon your death are clear and in writing.
As always, we urge you to seek the advice of a qualified professional before you change the title of any assets. There are a number of things to consider when changing the title of an asset. For example:
- Are there tax considerations?
- What if a joint owner goes bankrupt or is sued?
- What if the marriage of a joint owner ends in separation or divorce?
Ensure your intentions for holding the asset jointly with your child (or anyone else) are clear and in writing. Do not rely on your children to do what’s ‘right’ or to follow your ‘wishes’.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.