Monday, 29 May 2017

Transfers Between Spouses in Alberta Still Presumed Gifts

Author: Nathaniel Brenneis, Student-at-Law 

One individual transfers property over to another individual without receiving anything in return. In this situation, it is generally assumed that the individual receiving the property will hold the property in trust for the transferring individual who remains the beneficial owner. This is called the "presumption of resulting trust." It is up to the recipient of the property to rebut this presumption by proving that the transferred property was actually intended to be a gift.

There is a limited exception to the presumption of resulting trust called the "presumption of advancement." This presumption only arises in cases where the transfer is made from spouse to spouse or from parent to minor child. The principle provides that, absent evidence to the contrary, a gratuitous transfer of property between such parties will automatically be considered a gift.

The presumptions of advancement and resulting trust are both legal tools that assist in determining a transferor's intention at the time of a transfer. This is particularly important when a transferor has died and his or her intentions are being disputed. As a consequence, the presumptions can have a major impact on the division of assets as between spouses and beneficiaries. For example, they help determine whether jointly held property belongs to the surviving spouse or is divided up along with the rest of the deceased's estate.

There are members of the legal community, however, who question whether the presumption of resulting trust still applies between married couples in Alberta. The presumption of advancement between married partners has already been abolished across most of Canada, and many argue that contemporary social conditions no longer support its application. The presumption of advancement is largely based on the outdated understanding that most wives depend on their husband's financial support to survive. For obvious reasons, this sort of justification is no longer relevant in modern society.

Nonetheless, the Alberta legislature has yet to abolish the presumption of advancement. As a result, unless there is no evidence suggesting otherwise, transfers between Albertan spouses will still be presumed to be gifts. However, due to present social conditions, it is unlikely that a court would require a great deal of evidence to defeat this presumption when spouses are involved. In such a case, the transfer would be treated as a resulting trust.

So what does this mean? It means that any property that you transfer to or hold jointly with your spouse will likely be treated as a gift unless you explicitly express otherwise. If you do not intend for your spouse to be the beneficial owner of the property in question, it is important that you carefully record and document your true intentions and share them with both your spouse and beneficiaries.

Alternatively, for ways to ensure that your gifts are securely given to your loved ones, please see our blog post, Supporting Gifts and Property Transfers Down the Road.

Thursday, 4 May 2017

Unequal Treatment of Adult Children Beneficiaries

Author: Barbara Kott, Student-at-Law

When drafting a will, people expect that their wishes will be respected after they pass away. However, like any other legal document, the validity of a will may be challenged. If a challenge is successful, your estate may be divided based on the Wills and Successions Act of Alberta, which may not be in keeping with your wishes. If you plan to treat your adult children unequally in your will, you should consider the possibility of challenges from the adult child inheriting a smaller share.

Adult children beneficiaries may challenge a will by arguing that their deceased parent lacked the requisite mental capacity to make the will. Or, they may argue that the deceased parent was under duress or was unduly influenced when they made the will. Regardless of whether these arguments have merit, your estate will have to defend them, and pay the cost of doing so. Litigating a challenge to a will can significantly reduce or deplete the assets of an estate.

In some instances, a conversation with your children may be sufficient to relieve you of a concern that they may challenge your will. In other instances, further precautions may be necessary. Here are some tips for preventing your adult children from successfully challenging your will:

1. Inter Vivos Gifts
An inter vivos gift is a gift given during the donor's lifetime. If you give property away during your lifetime, it will not pass through your estate. Therefore, you may prevent a child who is unhappy with their inheritance from challenging your will by giving all, or some, of your property before your death. However, a gift is also open to challenge. For ways to ensure that your gift is securely given see our blog post, Supporting Gifts and Property Transfers Down the Road.

2. Document Your Intention
You can prevent a claim against your estate by an unhappy child beneficiary, or create evidence to be used by your estate in defending a claim, by drafting a document stating your intention. The document should state that you intend an unequal distribution of your estate, and why. You can keep the document private, only to be provided to the executor of your estate, unless the will is challenged, in which case you can leave instructions that it may be provided to a child challenging the will, and also used as evidence in support of the will. The use of a document stating your intention can be discussed with your lawyer when you prepare a will.

3. Update Your Will
Assets that are not disposed of in your will, or codicil to a will, will be disposed of in accordance with the Wills and Successions Act of Alberta. If you are looking to treat your adult children unequally, an intestate disposition may not achieve that end. Therefore, it is important to update your will so that it includes all of your assets and is in keeping with your wishes.

Another factor to consider is whether you want your child's spouse to benefit from the inheritance you leave to your child. If you give property to a child during your lifetime, or through your will, your child will need to take steps to prevent that property from becoming family property for the purposes of division in the event of a divorce. Your child should be aware of the exempt property provisions under the Matrimonial Property Act, so that they can make decisions about whether they want all or a portion of an inheritance to be property of their marriage.