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A Joint Tenancy Gone Wrong |
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Be cautious about transferring your house into a joint tenancy with one of your children. I know some people may think it is a good way to avoid probate fees. In many cases it is not.
Those who recommend joint tenancies with children may say that on the death of one joint owner of a house held in a joint tenancy, the title passes to the survivor outside of the deceased's estate. In this way, they may argue, you can avoid probate fees of up to 1.4% of the value of the house. But, joint tenancies with children can create a whole host of other problems.
Here is a real life example from a recent Supreme Court of British Columbia decision, called Schoennagel v. Schoennagel and Gateway Automotive, 2006 BCSC 1830.
After her husband died, Daphne Schoennagel moved from 100 Mile House, B.C. to New Westminster, B.C. She bought a house in October 1996, in New Westminster, which she registered in her sole name.
In 1997, her accountant advised her that if she transferred her house into a joint tenancy with her daughter, she could avoid probate fees.
In 2000, Daphne Schoennagel's daughter prepared a letter for her to sign instructing a lawyer to prepare the documents to transfer the house into a joint tenancy. The lawyer spoke with Daphne on the phone, and then sent her the transfer documents. She signed the transfer before a notary public. The lawyer then had the title transferred into a joint tenancy with her daughter.
Daphne Schoennagel testified at trial that when she transferred the title, she considered that the house was still hers. She agreed to transfer the house into a joint tenancy because at the time, she wanted her daughter to get it on her death, and her daughter did not want to have to pay probate fees on the value of the house.
Unfortunately, Daphne Schoennagel and her daughter later had a falling out. Daphne Schoennagel sued her daughter for the return of the daughter's interest in the title to the house. She argued that the transfer should be set aside on the basis of duress, undue influence or as an unconscionable transaction.
Mr. Justice Truscott of the Supreme Court of British Columbia dismissed Daphne Schoennagel's claim. He found that she intended a gift of an interest in the house when she transferred it into a joint tenancy with her daughter.
Daphne Schoennagel could not now take back the interest in her house that she had transferred to her daughter.
By Stanley Rule, of the law firm Tinker, Churchill, Rule. You can read his weblog, Rule of Law, at http://rulelaw.blogspot.com |
