DO NOT ADD YOUR CHILDREN ON TITLE TO YOUR HOME TO AVOID PROBATE
In another blog article we discussed the treacherous extension to beneficiary designations of the legal creature known as the presumption of resulting trust. That line of cases is fraught with many difficulties which are explained in that blog article.
However in the recent Ontario Court of Appeal decision in Kent v. Kent, the court held that a transfer of real estate is subject to the same presumption. The presumption was thusly applied. The owner of a property, in this case a mother, added her daughter as a joint tenant owner to her home gratuitously. After the daughter died, the beneficiary of her will, claimed after the mother subsequently died that the house is now mine. The court said no, that unless the recipient can rebut the presumption, there is a deemed presumption that the recipient – the daughter in this case – was holding her interest in the home in trust for the grantor – the mother in this case.
In an attempt to simplify the concept, we provide the following example. To begin one must understand the concept of joint tenancy, especially with respect to real estate.
Joint tenancy is the common method by which married couples own their homes and other property, but it can apply to any multiple owners of real estate. Owning property as a joint tenant means upon the death of one, there is an automatic right of survivorship. The surviving party, irrespective of the deceased’s Will, is now the owner of the deceased’s portion in that property. As an example, if a husband and wife own their home as joint tenants and the husband dies, the wife automatically is now the owner of the entire home irrespective of the husband’s Will and there is no need for probate or court approval.
But what if an aging parent adds a child or children as equal joint tenant owners? The Court held in Kent v. Kent that the presumption of resulting trust applies. In other words, because the daughter in this case paid no money in return for receiving her half interest in the house, the onus was on her to prove that the adding of the daughter’s name as a joint tenant owner was indeed meant to be a gift and not that the daughter was holding it in trust for her mother.
The specific facts in Kent v. Kent are rather unusual and complicated and it is unlikely that exact scenario will arise again. But what makes this decision important, is that when a child is added on title to a homethat is not the end of the matter. Kentv. Kent is an Ontario Court of Appeal decision, in other words, the second highest court in Canada to have weighed in on this issue.
In our office, we have a strategy for avoiding probate yet still sheltering the parental home from ex-husbands and wives of the parents’ children or creditors. It is important that a fully detailed trust declaration is completed and it is inappropriate to simply add a child’s name as one of the joint owners of a property in the hopes of avoiding the necessity of probate.