Previous Issues of The Posner Page

In This Issue of the Posner Page

COTTAGE- VACATION HOME – COUNTRY RETREAT BUT WHAT TO DO WITH IT- THE NEXT GENERATION

NOW THE GRANDPARENTS ARE SUED FOR SUPPORT

NUDITY NOT ENOUGH TO GET OUT OF DEAL

TAKING A BYE FROM THE LAWYER’S SHOW

COTTAGE- VACATION HOME – COUNTRY RETREAT
BUT WHAT TO DO WITH IT- THE NEXT GENERATION

I am consulted so often on one subject that I have decided to devote the next part of several issues on the subject. That subject is the transfer of the cottage to the next generation and the issues surrounding that kind of step. What I propose to do is to raise what I perceive to be some of the questions you should ask yourself before taking any radical steps to change ownership. I may not cover each and every situation but my guess is that you will recognize something familiar in the questions I pose. I will try to give you a suggestion as to how to respond to these significant problems that face almost every family owning a cottage at the lake.

The first area that I will discuss is the notion of transferring to your kids. Later I will examine a transfer to a spouse, parents, other family members or a corporation or trust controlled by you. My start off piece of advice is to determine from your children (assuming they are old enough to be able to formulate their thoughts on this subject) whether or not they intend to use the property at least as much as you have. Do they intend to bring their kids up just as you did? Do they intend to maintain the cottage in good repair? The answers to these very basic questions will allow you have an idea of their commitment to the cottage. Clearly you will not want to foist the cottage on someone who has no real desire to use it and care for it. If you can cross this hurdle, then I suggest the next thing to do is ask them some of the following questions:

1. Do they have inkling as to the cost of keeping a second home even when it is not occupied for a part of the year or if it is occupied?

2. Do they have an idea as to what is involved in the cost of the so called toys that are associated with cottages as in boats, skidoos and the like?

3. What knowledge do they have as to the consequences to them of running another home?

4. Has it occurred to them that one day they too will have to deal with this problem and the costs associated with transferring the property to another generation and not actually getting any money for their cottage?

5. And try this one on them. Do they know that you may intend to be in control of this property during your life, they may well be hit with a possibly large gain on the property?

6. Has any thought been given to skipping the kids and passing the property to their children?

    

Of course the problems connected with title transfer to a child are compounded when there is more than one child involved. This situation, which by the way is most common, often brings to the forefront competing siblings and sometimes rekindles simmering tensions that have developed over many years. As a parent, you may want to treat all of your children equally as they equate equality with fairness. But is it? Consider this fact situation.

You and your spouse have three children. One is a teacher and makes a comfortable income. The wife is a stay- at – home Mom to the three children. The second child is an executive and she and her husband have one child who has high aspirations to be like her mother. The third child is in the arts as an actor and his wife is also in the arts. They have two kids. Now you and the spouse are trying to decide what to do with the cottage.

Ask yourself these questions. Does it matter that these kids have a very different financial makeup? One is very high, one average and the other modest. Does it matter at all that there are 6 grandchildren but they do not come from the same background. If you believe in equality, then down the road the cottage will be split so that the daughter of the most well off parent gets 1/3, the two children from the actor’s kids will each get 1/6 and the three kids from the teacher will each receive about 11%. Is that fair? Does it matter what ages the grandchildren are? Or if you ignore the grandchildren and focus only on the parents, then what about divorce, remarriage and blended families. What if your actor son had a child from a previous marriage, as did his wife? Then what about the fact that of your three children, one is located in Winnipeg and has access to the property but the other two cannot get to it often but long for the days when they can be there. But, one of your kid’s spouses hates the place. Perhaps one of these three children has a child who loves the place and is responsible for keeping it in good shape. How do you reconcile equality with these possibly conflicting issues. How do you reconcile equality with the fact that two of these children of yours cannot hope to maintain the cottage and the one that can does not live here. The questions are never ending but the big question is how do you resolve this dilemma.

Well here is what you have waited for and it is neither easy or cheap and not guaranteed. But, it is my best shot at a solution. Convene a meeting with your group with spouses. Hear their thoughts out after you explain to them what it is you are trying to do; that is find way to transfer the cottage to your kids free of problems or as reasonably free as is possible. This kind of meeting ought not be tried alone but rather with an impartial trained mediator, likely a professional advisor who can assist in trying to sort out the competing issues and resolve them. I believe that if you try this alone, it will not work and will break down through no fault of your own nor, for that matter, your children’s either. It is the dynamics of the situation, which militate against success. What is certain is that there are no foolproof solutions and what is also certain is that there is no one fits all solution. You do the best with what you can but you can make the effort to do the best and it does improve the odds. Even if you fail, you will realize the extent of the problem and you can, if necessary, throw your hands up in the air and say, "let them solve it- it is their problem. I tried ".

NOW THE GRANDPARENTS ARE SUED FOR SUPPORT

I thought I had heard just about everything but surprises are always turning up and a case I came across recently fit that bill. It was an Ontario case. An Ontario court struck out statutory child support claims against wealthy grandparents but did allow their daughter- in – law to go ahead with a law suit against them based on the allegation that they cut her off. This claim advanced by Sheri Lyn Fein, 37 was based on a breach of contract (none in writing) and of fiduciary duty to her and the two granddaughters, ages 5 & 9. The argument advanced was that the Plaintiffs, that is Sheri and her two infant daughters, were maintained by the parents for 12 years by the grandparents, Lawrence & Beverly Fein. What she said was that these grandparents supported an extravagant lifestyle, including a $ 715,000.00 home in Toronto, vacations in Palm Beach, $300.00 a week for herself so she could stop work, not to forget the claim that her husband was no longer receiving the $200,000 per year to be a kind of executive in the family business once the marriage started to deteriorate. The husband now only earns $15,000.00 supposedly.

Justice Craig Perkins stated that the claim is that "the grandparents created a dependency on the income they supplied, arranged for the father to lose his job when things soured between husband and wife, assisted him in becoming judgment-proof and then after separation, cut off the support they had formerly been providing, while continuing to support their son in his former comfortable lifestyle ". Of course what is most startling to most people about this kind of claim is the fact that it is grandparents that are being drawn into the foray. But, the solicitor for the Plaintiffs painted a picture that I found most interesting:

"I don’t think it’s quite as dramatic as people want to say it is. This is a case involving a course of conduct and whether a cousin, a friend, or a grandparent engages in that course of conduct, the bottom line is that is a course of conduct..."

And later she argued that:

"I understand that people, at first blush say: ‘ jeez you are actually litigating generosity or you are punishing the withdrawal of generosity’ … but there is a big difference between getting a very expensive gift on your birthday and having the gas in your car paid for. Number One, they are depending on it, but the reason they are depending on it is that those are the necessities of life. " Still, this is a stretch and it is hard to envision success for the Plaintiff. I will follow this case and try to let you know what transpires. This was the first hurdle to cross that is just being allowed to continue with the lawsuit.

NUDITY NOT ENOUGH TO GET OUT OF DEAL

A recent decision of the B.C. Supreme Court gave prospective purchasers a lesson in what is sufficient to extricate a buyer from a real estate contract. It turns out that a Kelowna couple had entered into a purchase agreement of a property on Lake Okenagan. They tried to back out of the deal when they learned that nudists used an adjacent property. The judge hearing the case stated quite categorically that

"There is no duty on the vendor to disclose the existence of the nude beach."

And he went further. "The presence of nude bodies next door or parading in front of one’s house may or may not be a defect. This requires a subjective test. To allow defects to be determined by individual preferences would open the floodgates of litigation by remorseful purchasers and create an impossible standard of disclosure by vendors."

The date of the Offer was November 14, 1998 and the trail judge, Mr. Justice Robert Metzger concluded that the buyers, Mr. & Mrs. Ronald Allen, had time to investigate the property and the neighbourhood before they removed the ‘subject to clause’ that was in their contract and in fact in many contracts of this type. The evidence disclosed that the couple knew that when they removed the subject to clause, and delivered the $100,000.00 deposit, that they had indeed bought the property. That all happened in early November 19, 1998. Yet within 5 hours of the deposit being tendered, they stopped payment because they learned that there was a nude beach one lot over and worse nude frolicking on the beach right in front of the house they had just bought. The judge determined that had the purchasers spoken to someone prior to removing the subject to clause, they would have not gone through with the deal. But, they did not and when they failed to make the deposit, they were in breach of their contractual obligation to the vendors, Kenneth & Dorothy Summach. And they were ordered to pay the $100,000.00 plus interest. The judge also noted that even though the Allens had taken the position that that the very existence of the nude beach was a defect, they also conceded that it was not a patent defect as this occurred in the middle of November. Even though the weather in the Okenagan is far better than is Manitoba in November, even there in the sunny B.C. interior, the temperature is cool enough to dissuade nude cavorting.

TAKING A BYE FROM THE LAWYER’S SHOW

Don’t look for me in this year’s production of One Flew Over the Cuckoo’s Nest. I took a pass this year. I hope to be back if they do a musical next year. It’s a nice rest.