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Ontario Wills & Estate Law

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Ontario Wills & Estate Law – Trust -vs- Gift – Bergen v Bergen

In Wills and Estate planning, the transfer of assets and gifts often becomes an area of dispute. A common estate planning technique is to transfer assets into joint ownership. While the intention of such transfers may be to avoid probate fees, the transferor must also consider some legal consequences to avoid unintended results at a later stage.

[/vc_column_text][esVerticalSpacing base=”spacing-2″][vc_column_text el_class=”article-description”]Assets can be held in joint ownership if the intention is to create an immediate gift to the beneficiary. Sometimes, the transferor may not intend the asset to be a gift at all but the joint ownership may be intended to facilitate its temporary management and avoid probate costs.

It is always prudent to document the transfer of gifts and assets.A failure to properly document creates a risk that this intention will not be carried out. In Bergen v. Bergen case [2013 BCCA 492], the father and mother included their son in a joint ownership of their property with the intention of gifting it to him after their death.

The son after the transfer to joint tenancy (1/3 each) built a house on the property, paid for by the parents. He assumed that they intended for him to own it.After a falling out, the parents severed the joint ownership.The property was sold.The parents wished to retain the full proceeds of sale.The son disputed this and claimed a one-third interest.

The trial judge accepted the evidence of the mother (the father having died by the time of trial) that the parents had put the property into joint tenancy thinking it would become the son’s property eventually, but had never intended to gift the property to the son during their lifetimes.The British Columbia Court of Appeal dismissed the son’s appeal.

The law in Canada states that when severance occurs, nothing remains of the right of survivorship. In determining the beneficial ownership of a jointly-held asset, it is the intention of the transferor that is paramount.Since the parents bought the property and advanced all the money for the house the son had built, there was a presumption that the property was that of the parents and the son held his interest in the property in trust for his parents (resulting trust).The son’s evidence of his parents’ intention did not rebut this.

If you are planning to set up a joint ownership or transfer property as a gift, ensure that proper documentation is done at every stage. The easy way to document the intention of transferring gifts, whether as an immediate gift of the beneficial interest or as a gift of the right of survivorship, is to put in writing a separate signed memo documenting one’s intention. Trust agreements should be considered where assets, particularly accounts, are transferred into joint names for ease of management without any intention to gift. Less formal documents, such as a Declaration of Intention, can also be effective to ensure the transferor’s intention is carried out.

Formal documentation with effective legal advice ensures that the transferor’s gifting intention is carried out properly. It also serves as evidence to the Province of Ontario Ministry of Finance that probate need not be paid where assets properly pass outside of an estate.

This is a very complex area of the law and that is why it is recommended that you should work closely with an Estate Planning Lawyer.

At Mackesy Smye, you can meet with an experienced lawyer who will take the complexity out of the estate planning process and walk you through the process from beginning to end.

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