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PROTECTING YOUR PROPERTY FROM THE SPOUSE OF YOUR CHILD

FAMILY FEUD- NOVA SCOTIA STYLE

A NEW SLANT ON CUSTODY- A PET'S VERSION

THOUGHTS ON CO - OWNERSHIP AGREEMENTS

PROTECTING YOUR PROPERTY FROM THE SPOUSE OF YOUR CHILD

How many times has someone come into my office to ask, even beg me to find a way to protect their property be it a home or more typically a cottage from the clutches of their children's spouses? You can bet there have been more than a few instances. The problem was acutely brought out in the open in a recent case arising from the Province of British Columbia but the principles enunciated and the reasons given in the judgment are instructive for anyone in any jurisdiction. The case was that of Koscak & Koscak v. Koscak. What happened in this case was that a young male husband of 34 died. He was the son of the Plaintiffs. The Defendant was the wife of the deceased. There were no children of this marriage. In 1998, the young couple had acquired a piece of property and had done so at the suggestions of the plaintiffs. The Plaintiffs, although not wealthy, gave the couple at a sacrifice to themselves the total down payment of $ 30, 000.00 to enable them to buy the property and then went a step further by giving them & 700.00 per month afterwards. Three years later, the couple sold the property at a profit and took the proceeds and used them to buy what was known as the McNair property. The title was registered in the names of both the husband and the wife each as to an undivided ½ interest. The Plaintiffs kept up the $700.00 a month payments and there was also insurance taken out on the lives of the young couple. In April 2002, the husband died, life insurance paid and the mortgage paid off and discharged. The Plaintiffs went to court to obtain an order confirming themselves as the rightful owners of their son's undivided ½ interest. In order that they could actually realize any funds from this property, the Plaintiffs also asked the court to sell the property if they could not get their daughter- in- law to buy their interest out. The daughter- in- law, now a widow, argued that this ½ interest was held in trust for her benefit and that the court should treat the funds contributed by the Plaintiffs as a gift to their son and his wife. The court sided with the Plaintiff parents saying that in all likelihood the parents were in fact the proper owners of this ½ interest. And here is the compelling part of the decision. The court examined the way the title was set up and discovered that the Plaintiffs were on the title as joint tenants as to an undivided ½ interest on the McNair property. The argument was that why would the names of the parents go on the title if they were not to be considered legitimate owners without a restriction as to gifts. The parents were in fact really investors who held an undivided 1/2 interest. This step was no accident but done to protect their investment. The mother gave evidence to the effect that the money advanced to their son and his wife was never intended to be a gift and that fact was verified by the way the title was registered. The plaintiffs knew that the couple could not repay the loan and that the only was to be secure about their money was to go on title. In arriving at this result, the court specifically rejected the claim of the widow that the Plaintiffs held the ½ interest in trust for the deceased. The court stated and this is the point I make here, that the Plaintiffs wanted to protect their funds from the daughter- in- law in case of a marriage breakdown. In this situation, there was no breakdown but a death. Still the same principle applied. The lesson to be learned here is that if you are concerned about giving money to your children for property purchases; consider taking the title out in more than just the names of the children. And that same thinking could go into cases where the parents just want to give the family cottage to their children. Of course, there are other considerations that come into play but clearly, this kind of fact situation has to be well thought out.

FAMILY FEUD- NOVA SCOTIA STYLE

A recent case from the Nova Scotia court of Appeal dealt with an issue that often arises but rarely goes to court and that is what happens when the person who is named as a beneficiary in a will predeceases the testator. What happens to that share if the testator never changes the will? In the Mitchell case, the Court of Appeal confirmed the decision of the trial judge and looked at the provisions of s 31 of the Wills Act in that province. The legislation in Nova Scotia essentially provides for the fictional survival of the deceased beneficiary until after the death of the testator. Thus, in the Mitchell case, the money passed to the Estate of the beneficiary rather than the other named beneficiaries of the testator. To be more specific, in this case, the testator, one J. D. Mitchell, had written his will dividing his whole estate among his 4 children, one of whom was a daughter Jane Mitchell. However, the daughter died in 1999 just before her father. The issue confronting the court was whether or not the estate of Jane Mitchell could inherit this portion of her father's will or whether that portion was to be divided among the three remaining children of J. D. Mitchell. The Supreme Court ruled at trial that the gifts to Jane Mitchell did not lapse when she died but rather that clause 31 of the Wills Act came into play so that the gift to the daughter Jane Mitchell passed to her state as if she actually had lived one minute after her father's death. There was no contrary intention expressed in the will anywhere that came to the attention of the trial judge. Since Jane Mitchell left issue surviving at her death, they stepped into her shoes and as a result they inherited her share. Well, this result was not well received by the other children of J. D. Mitchell and they appealed. The thrust of their argument was that the trial judge had erred in law in not finding a contrary intention in the will which, if found, would override the impact of s. 31 of the Wills Act. They also alleged that the provisions of the will were ambiguous and hence the court could hear other evidence as to the real intentions of the deceased testator. But, the Court of Appeal confirmed the trial decision and even said that even though there was a residuary gift to the other heirs, this did not have the effect of eliminating the application of section 31 of the Act. What is of some interest to me about this case is that this is not necessarily the law in each province although it may be. I would have to look at each provincial statute to check this out but my best guess is that it is representative of most provinces. Of course, the testator in this case could have changed his will once he realized his gift to his deceased daughter would be inherited by her heirs and not his surviving children. Alas, not every testator has the capacity to do so or is not aware of the provisions of the Wills Act. Or they do not care as to this effect.

A NEW SLANT ON CUSTODY- A PET'S VERSION

For those of you who wonder at where the world is going, you should only know that in Ontario, custody has taken on a new meaning but sad to say this case is a real dog's breakfast. The fight is over "Tuxedo", a Lab/ Border Collie mix who, when purchased from the pound in 1996, cost $ 100.00. This dispute over this animal is going to the Ontario Court of Appeal believe it or not. The court is being asked to review the trial decision of Mr. Justice Roger Timms who found that the dog was the property of Allison Goring, the ex- girlfriend of the appellant, one Christopher Warnicka. At trial, the judge concluded that while it was true that Warnicka might have purchased the dog and spent time with him, his involvement with Tuxedo was in fact dependant totally on his previous relationship with Goring. Now, this case was even more complicated than this one hearing as it turns out that prior to Timms getting involved, there were three other judges who had taken part in some way with the case. The trial judge noted that Warnicka had spent thousands of dollars already and "seems to know no reasonable limit'. Yet, counsel for Warnicka stated that what his client was fighting for was for all pet owners to have their rights determined by a court. Read and contemplate the words of the solicitor to the losing party Warnicka. "We think he (the trial judge) is wrong because for some people who are childless the pets are just as important as children, and loved just as much. People have wasted money on law suits over a lot of stupider things… and nobody suggested to these people that well if you are going to waste money, we are not going to give you a forum (to resolve your disputes )". This solicitor wanted the law to be changed so that pets would be treated like people and not chattels. The judge however, while taking note of the fact that for some people pets are surrogate children, did categorically state that they are not children. "I do not believe that any court should be in the business of making custody orders for pets, disguised or otherwise". Thus, while it may be true that this case has gone to the dogs, we will have to wait for the final adjudication from the Ontario Court of Appeal. But, for the moment, this dog Tuxedo is still just a dog and not like a person.

THOUGHTS ON CO - OWNERSHIP AGREEMENTS

As many of you are acutely aware, the value of property as in recreational property has increased substantially over the last few years. This appreciation has made acquiring this kind of property prohibitive for many people and even those families that want to pass the cottage on to the next generation are coming to grips with issues relating to the sharing of the cottage and the cost of operating it in the future. But, co- ownership could work. Co- ownership between family members or even different families can be a useful way to keep the costs down. Of course, the key to such an arrangement is a well thought out agreement dealing with the issues of maintenance, financial responsibilities, opening and closing, and of course the use of the cottage. It is my experience that the agreement should be quite specific as to the times of use for each owner and as way to keep solvent, to require prepayment of at least 6 months costs. The agreement could provide that each owner is allowed to use or rent out his time but is also responsible for fixing any damage done to the premises during that time. The agreement, if it is to be of any value, should also deal with what happens if there are defaults, and most importantly, the issue of purchasing other's interests. What you get in these kinds of agreements is the setting out of your shared interest (though that is recorded on the title) and various clause that deal with the respective use and operation of the cottage. Sometimes, the use indicates that there will be alternate times each year or any kind of combination of use that the parties agree to insert. It may well be appropriate to designate someone to be the manager of the agreement to take care of the different coming and going during the year and the cleaning of the place and allocation as to costs. Now, it is likely that you will want to make arrangements to pay this manager and of course there will have to be the assessment for the tax, insurance and maintenance charges. I can tell you I have been involved in several of these kinds of contracts and while I am careful to point out to the parties that they are only as good as the parties to the agreement, in fact, it is a contract that can be sued on (though some might shrink at the prospect of suing your sibling). There are other disadvantages of course with these fractional interests and the most obvious one is that lenders are not terribly excited about lending on someone's ¼ interest. Moreover, it is not likely you will find another buyer to take over your interest and the obligations contained in the co- owners agreement unless it is a family member. It seems to me that today where you have many cases of families trying to transfer the cottage to the next generation and where the next generation includes several children, it is imperative to try to come up with some kind of agreement as I have outlined here. Without it, you are rolling the dice.