The heaviest influence on Estate administration (and litigation) in the last 20 years or so may have been the dramatic rise in real estate values in the Lower Mainland.
There was a time (in my memory) when a house and some money in the bank meant a “modest” Estate which was not high enough in value to litigate, so that even if children were not going to receive an equal share, the “economics” of it did not justify a formal dispute.
Now, however, a house and money in the bank can easily amount to a “large” Estate. In certain circumstances, litigation follows.
Shortly before last Christmas, reasons were released in the case McKendry v. McKendry. The general circumstances of this case have become a little more common in the last few years.
One child in the family challenged a transfer of title of a property to another child. In such a situation, if the Court overturns the transfer, the Estate becomes larger and Wills Variation litigation follows.
This relatively new area of law is worth a look because there are lessons to be learned.
One is that, if the transfer is being done to avoid exposure to Probate fees, there are some serious risks to consider before transferring title.
The parents married in Saskatchewan. They had five children, but one died in 1960, prompting their move to B.C.
They had another child after they moved to B.C. They bought a home in Vancouver in 1963, and that house had not been sold at the time of this case. (The Court said it was valued at $1.9 million.)
In the earlier years, the father kept operating the Saskatchewan farm and so was away between April and October. The three older children moved out of the family home around age 18.
Though they stayed in contact with their parents, it seemed that their relationships were complex. Meanwhile, for the two younger children, it seemed that their relationships with their parents were closer.
The father retired from the farming operation in 1995, and transferred the four quarters of the Saskatchewan farm property into the names of himself and four of his children as joint tenants (it is not clear as to the nature of his choice of children).
The father died in 2004 on a vacation. He had transferred title to the family home into his wife’s name four years earlier.
Following the father’s passing, the youngest child (the only boy) remained at home. The surviving wife took numerous Estate planning steps.
Chief among them was a transfer of the title of the family home, to herself and her son as joint tenants, in 2008. Two mortgages were also placed on the title, to help fund the purchase of a property in Richmond.
Understandably, other members of the family reacted strongly to this once they discovered it. One spoke with her mother and asked her to see her Lawyer and get some advice. The mother did so, and a Trust declaration was drawn.
The mother signed it, but the son did not. In 2010, the mother retained a new Lawyer and a new Trust declaration was drafted, which again the mother signed but the son did not.
The mother made more changes to her Will, and also made a note declaring that she wanted her home to be her son’s exclusively after she died. She passed away in 2012.
The first decision for the Court was whether the son held his interest in the house (as a joint tenant) in Trust for the Estate or for himself absolutely.
The Court held that, despite what the mother’s note said and despite the transfer, the mother’s intention at the time of the transfer was the relevant evidence that the Court had to consider. The son had to prove that, at the time of the transfer, the mother intended a gift to him of the property.
He was unable to prove that. The mother’s intention at the time of the transfer simply did not support such an intention.
The second decision for the Court was whether to vary the mother’s Will.
The Court did vary it to divide the residue of the Estate equally among the five children. That seems to have made the most sense in this case.
I should say first that I don’t know whether the decision will be appealed.
However, what was clear from this case is that the parent transferred title to her property, adding one child to title at least partly to save Probate fees.
I am not sure, though, that she really wanted to gift the entire interest to her son at the expense of her four daughters, given that the rest of her Estate was so small.
Overall, the decision makes sense to me, but again, such significant title decisions require a lot of thought and planning. They should never be made quickly.
This ad ran in the Richmond News on January 27, 2016.