Many of my fellow bloggers have blogged about joint tenancies, whether the focus of those blogs was on a case where the facts involved a joint tenancy or was to simply advise of the issues and risks related thereto. (See Brittany Sud’s blog on January 19, 2018, Steven Frye’s blog on June 6, 2017, and my blogs of July 29, 2016 and November 11, 2010).
This blog is going to add to the repertoire, by reminding readers about one of the risks related to joint tenancies. Specifically, that putting your property into joint tenancy with someone else, like your child, can expose your property to their financial and creditor risks. A risk that became a reality for Chan Kui Tina Gully (Mrs. Gully) in the case Gully v. Gully (2018) BCSC 1590.
In 1999 Mrs. Gully bought a home in Burnaby (the “Property”). In 2015 she added her son Steven Gully (“Steven”) as a joint tenant on title to the Property. She did so based on legal advice that this would save taxes on her death.
Steven had not made any financial contributions to the purchase or upkeep.
Unfortunately Steven and his company were experiencing financial difficulties. In August 2017 they consented to judgement in favour of their creditor, Ledcor, in the amount of $800,000. As Mrs. Gully had not told Steven of what she’d done, he did not know he was on title to the Property.
The fact that Mrs. Gully did not tell her son about what she’d done is unlikely to surprise readers. In my experience it’s not unusual for parents not to want to tell their children about financial transactions they may engage in which benefit their children. Here though Mrs. Gully likely wished she’d been more transparent with her son, as it may have avoided what inevitably followed.
Ledcor registered a judgement certificate against Steven’s interest in the Property. Mrs. Gully then brought an application to the British Columbia Supreme Court for a declaratory order that, among other forms of relief, Steven was holding his interest in the Property on resulting trust for her.
After canvassing the relevant legal principles, the British Columbia Supreme Court held that Mrs. Gully intended to make a gift to Steven and there was no evidence he had repudiated the gift. As a result, Steven was not holding his interest on trust for Mrs. Gully. Ledcor was entitled to rely on the title registry such that it could register its judgment against the Property held by Steven, in respect of satisfying the amount owing to it.
In concluding its decision, the court aptly summarizes the lesson from this case:
“Mrs. Gully took a risk in registering her son as a joint tenant on her property. Whether she was properly advised of that risk is not before me. However, once she made the decision to register an interest in the Burnaby property in Mr. Gully’s name, third-party creditors of Mr. Gully became entitled to register judgement against Mr. Gully’s interest in the Burnaby property.”
Despite being successful in the matter, Ledcor expressed an intention to not execute against the Property while Mrs. Gully is living in the home. A small concession for Mrs. Gully but one that will at least allow her to continue living in her home.
The upshot – be careful before letting the ‘tax dog wag the planning tail’. In all likelihood whatever taxes will be saved on Mrs. Gully’s death have been far outweighed by the legal and emotional costs incurred by Mrs. Gully in dealing with the legal proceeding to attempt to protect her home.