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Court of Appeal Decision Demonstrates the Importance of Documenting Intention in Estate Planning
It is important that you document your intentions in estate planning. A lack of clarity in a will can give rise to family disputes and even litigation. Pavlovich v Danilovic, 2019 BCSC 153, a decision which was recently upheld by the Court of Appeal for British Columbia, provides an example of the issues that can arise when intentions aren’t well documented.
Pavlovich v Danilovic: An Estate Dispute Between Siblings
The BC Supreme Court case known as Pavlovich revolved around a brother (Alexander) and sister (Ljuba) fighting over two properties, the family home and a vacation property, originally owned by their deceased father. The father had written a Will dividing his estate equally between his children.
Unfortunately for Ljuba, when their father passed, Alexander took the position that he was the rightful owner of both family properties, despite the Will. What had happened?
After the siblings’ mother passed away in 1984, the properties passed to their father by right of survivorship. Alexander continued to live in the family home with his father. In 1988, Alexander was added to the title of the family home jointly with his father for consideration of only $1. In 2011, Alexander was also added as a joint tenant on the vacation property, again for only $1.
With a joint tenancy the default is that, if one of the owners passes away, the other owner receives the property by right of survivorship. In such a survivorship scenario, beneficiaries under the will are not entitled to the property. Despite the right of survivorship, it was Ljuba who was successful at trial and recently at the Court of Appeal, not Alexander. How can this be? Keep reading to find out!
The Court’s Decision
Although the Land Title Act indicates that the owner of a property is the person named on the title, the common law (i.e., Judge-made law) may trump a statute. In this case, the principles that flow from a resulting trust led to Ljuba’s success.
As noted in the Supreme Court’s decision, “A resulting trust is presumed to arise in circumstances where a person gratuitously transfers property to another.” This means that in some circumstances, including this case, where a parent gives property to an adult child, the law presumes that the parent intended to convey the legal title, but keep the beneficial interest.
With a beneficial interest attached to the properties, they are effectively held in trust for the deceased’s Estate and form part of the Estate for the beneficiaries named in the Will. Thus, Alexander had to prove his father’s intention for transferring title to the properties. Specifically, Alexander was required to show evidence that his father wanted to gift him the properties, to the exclusion of his sister.
Alexander was unable to provide sufficient evidence of his father’s intent. It appears their father likely transferred the properties for tax reasons and was aware of the estate tax benefits if the properties passed outside of his Estate. As a result, the judge declared that Alexander held the properties on a resulting trust for the benefit of the personal representatives of the deceased.
Lessons From This Case: Importance of Documenting Intention in Estate Planning
When considering estate planning, it is crucial that the intent of your actions is known. For example, in this case, if the deceased planned on gifting the properties to Alexander, he could have indicated in his Will that he had specific properties jointly held with Alexander and that it was his specific intention that they pass to Alexander by right of survivorship. On the other hand, if the properties were held jointly for tax purposes, this ought to have been documented by the deceased in writing, with family members aware of the decision. The main lesson here? Documenting intention can prevent litigation.