A court ruling in Canada presents an important reminder for our blog readers. Canada, of course, has a different law system from that of the United States, but the issue itself is one that often comes up in our discussions with Geyer Law estate planning clients, having to do with treatment of property held jointly by parents and children…
In this 2007 ruling (Pecore v. Pecore), the Supreme Court (of Canada) acknowledged that there are legitimate reasons why parents transfer property into joint names with children, including
- assistance with financial management
- simplification of estate administration
- avoidance of probate fees payable on death
But holding property with children can be risky, the Pallettvalo newsletter points out, and “parents should never add a child’s name onto bank accounts or other property without proper legal advice, as few other issues cause as much conflict in the administration of estates”.
Why does adding a child’s name often cause conflict? ”Whenever property owned by a parent is transferred into joint names with one of his or her children, it raises questions about whether the parent intended to have the property go to the child/joint owner alone, or intended to have such property distributed according to his or her will.” (What if the will divides the parent’s estate among all of his or her children equally, and now the child who is joint owner believes the property was intended to be theirs alone?)
As estate planning attorneys in Indiana, it is very interesting to us that, because of the Pecore case and others like it, it is now the law in Canada that whenever a parent gratuitously transfers property into joint names with an adult child, the court will presume that the property is not intended to pass to such child on the death of the parent, but is intended to form part of the deceased parent’s estate to be distributed in accordance with his or her will.
Proper estate planning, we explain to our Geyer Law clients, does more than put you in charge of your finances. It can also spare your survivors misunderstandings and bitter disputes.
– by Ronnie of the Rebecca W. Geyer & Associates blog team