June, 2022

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What is a Resulting Trust?

Disclaimer: This article on the concept of a resulting trust is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

When many people plan their estates, they are thinking of their beneficiaries. How can you create a simple estate plan that does not leave your children with a complicated mess?

Some people choose to pass property to their beneficiaries while they are still alive. However, it is more complicated than simply gifting your home or another asset. There are legal principles that apply, and ignoring these could create arguments and disagreements after you pass.

In this article, we will outline the different types of ownership and the different types of trusts that apply to passing property to your heirs. Then, we will outline how the courts will determine if the property was given as a gift and how you can make your actual intention clear.

Of course, when it comes to estate planning, we encourage our clients to make sure they have a plan that is designed for them and is unique to their circumstances and wishes. Reach out to us today to make sure your estate plan fits your needs.

Types of Ownership: Legal Ownership versus Beneficial Ownership

It may come as a surprise to you, but there are different types of ownership. Let’s define and contrast these two: legal ownership and beneficial ownership.

Legal ownership is  what you probably think of when you hear the word “ownership.” It is what is written on the title of your home or car. When you purchase a property, the transfer is recorded at the land registry office and you become the legal owner.

Beneficial ownership is different. Even though somebody else may be the legal owner, you may receive the benefits of that property, making you the beneficial owner.

So, for the purposes of estate law, when an elderly person passes the legal ownership to an adult child, while still residing in the home, the adult child is the legal owner and the parent is the beneficial owner.

When that happens, a resulting trust is created.

What is presumption of resulting trust?

A resulting trust is created when the legal ownership of a property is transferred from a person to their adult child.

The presumption under law is that because the adult child did not give any value or pay for the property, then it will be returned to the original owner (the parent).

So let’s continue our example of a parent transferring legal ownership of a property to their child. Was the transfer a gift or a resulting trust? The answer is important once the parent passes away. Will the property become part of the estate and subject to probate tax? Or does it now belong to the adult child?

Again, the presumption is that the transfer was not a gift. If you choose to transfer property to your heirs you want to make sure that there is evidence to support that it was, in fact, a gift.  

A note about spouses

The transfer of a property to spouses upon the breakdown of a marriage (including death) is covered under the Family Law Act and will not be considered in this article. If you have any questions about this scenario, please reach out to our office.

Resulting trust versus gift

Since the presumption under law is that the property was transferred to create a resulting trust, the onus is on the recipient (or adult child) to prove – on a balance of probabilities – that the transfer was intended to be a gift.

In the example of adding an adult child to the title of a property, this typically means a gift agreement or a trust agreement.  In the absence of clear, persuasive evidence, your beneficiaries could end up in court arguing over what you intended.

We strongly recommend that you do not leave these issues to chance. Again, a well-designed estate plan will consider exactly what your intentions are and make sure that those are communicated clearly and accurately to your heirs.

Retain an estate lawyer that sees the whole picture

At Beeksma Law, we practice estate law that encompasses both planning your estate and estate litigation, that is, handling any issues and disagreements that arise.

Our comprehensive style of practice allows us to be more proactive when preparing your estate. We see the issues that may arise and can draft language that will prevent or resolve those issues.

We also understand what the court will be looking for if your estate ends up in litigation and can help you build a strong case for what you intended.

If you have any questions about resulting trusts, gifts, or any other estate law issue, please reach out to our office. We would be happy to help.

Your Guide to Mortgages in Ontario

Disclaimer: This article is intended for the purposes of providing information on mortgages in Ontario and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

With housing prices creeping higher and higher, most home purchases involve a mortgage.  The first step in the home-buying process is often getting pre-approved for a mortgage, which gives you an idea of how much you can afford to spend on a home. 

With mortgage requirements changing and interest rates rising, it is more important than ever to fully understand the principles behind how a mortgage affects your purchasing decisions. This article will outline how your mortgage relates to the purchase of your home, including reverse mortgages. For any other questions about mortgages in Ontario, we encourage you to reach out to our team today! 

What is a mortgage?

A mortgage is a loan that you use to purchase a home or other property. The loan is secured by the home itself. This means that if you default on the loan, the bank can foreclose on the home to recoup its losses.

The lender is typically a bank or other financial institution, and the borrower is the person taking out the loan. You may hear someone refer to your mortgage as a “charge”, especially in the context of registering it on the title of your property. 

The mortgage gives the lender an interest in the property. This means that if you default on the loan, they can take possession of the home and sell it in order to recoup their losses.

There are many options to choose between when it comes to your mortgage, such as its term and interest rate. You can also choose between a fixed-rate or variable-rate loan. Discuss these choices with your lender or mortgage broker to get a better sense of what the right choice is for you.

Pre-approval versus a letter of commitment

A pre-approval is not the same thing as a letter of commitment. A pre-approval is simply an estimate of how much you could borrow based on your current financial situation. It’s important to remember that a pre-approval is not binding, and is subject to change if your financial situation changes.

A letter of commitment, on the other hand, is provided after a deeper level of analysis by the lender. It’s a binding agreement where the lender commits to loaning up to a certain amount, provided you meet certain conditions.

If you make an offer subject to financial approval, ensure you get a letter of commitment instead of a pre-approval. This will give you more peace of mind that your financing is in order before moving forward with the purchase.

What is a reverse mortgage and should I obtain one?

A reverse mortgage is reserved for those over 55 years of age. It allows them to borrow against the equity in their home. The borrower does not have to replay the loan until the borrower dies or sells their home.

The pros of a reverse mortgage are that it can provide you with additional income in retirement. As well, you do not have to repay the loan until you die or sell your home. The cons are that it can be expensive, and it can decrease the inheritance you leave to your heirs.

If you’re considering a reverse mortgage, speak with a financial advisor to ensure it’s the right decision for you.

Get the right advice for financing your home

Every step of the journey to your new home will run more smoothly if you have a team of professionals by your side.  When it comes to your legal needs, trust our team at Beeksma Law to make sure that everything is in order.

One of our clients recently said, “Beeksma Law made our buying and selling experience stress free and easy.”

If you want a smooth real estate experience and information on mortgages in Ontario, contact our office and speak to our team. We would be more than happy to help.

Case Study: Appointing a Guardian

Disclaimer: This article on guardianship law is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

The media has recently paid significant attention to guardianship law (or conservatorships, as they are known in the United States). Britney Spears and her father Jamie Spears have been in the headlines for their ongoing conservatorship battle.

This has created some confusion about how the process is used, specifically here in Ontario.

This article will review the purpose of guardianship law. We will then outline a recent case highlighting the benefits of having a strong estate plan.

Why might you need to appoint a guardian?

The purpose of appointing a guardian is to protect individuals who are unable to take care of themselves or their property due to physical or mental incapacity. You must first convince the court that the person in question truly does not have the capacity to make those choices for themselves.

Having a well-thought-out estate plan in place can help to avoid this process. You can appoint someone you trust as a power of attorney to make financial and/or personal decisions on your behalf in the event that you cannot do so.

Let’s outline a recent scenario that illustrates why you should have powers of attorney in place.

Our client’s father (let’s call him John Doe) was aging and had diminishing cognitive abilities. He had a handwritten will and powers of attorney that he prepared, but did not execute.

An elderly man who is the subject of guardianship law

By the time they came to us, John no longer had the capacity to execute a proper will or powers of attorney. He needed to have a guardian appointed to handle his affairs.

In order to do that, the family had to apply to the Ontario Court of Justice. This involved completing a capacity assessment. As we have previously noted, a medical professional cannot perform this assessment. Rather, a specially-trained capacity assessor recognized by the Capacity Assessment Office must assess the person’s capacity.

The Solution

In this case, the family was successful in appointing a guardian. However, the process took several months and was quite costly. In fact, it cost several times more than it would have cost to prepare and properly execute John’s will and powers of attorney.

A Better Way

If John had executed a power of attorney while he still had the capacity to do so, this entire situation could have played out differently. He could have selected the person to care for his needs instead of that choice being made for him.

John would have also saved his family a lot of time and money. Any time we need to apply to the courts, it involves a fair amount of effort, energy and cost. Caregiving can be incredibly stressful. We want to help your family have one less thing to worry about.

We know that no one wants to imagine a day when they cannot take care of their own affairs. However, you must prepare for the unexpected. If you have not done so already, we encourage you to put an estate plan in place.

Contact our office to learn more about how we can assist you

Case Study: Co-Ownership Gone Wrong

Disclaimer: This article is intended for the purposes of providing information on property co-ownership only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

We have spoken before about the importance of having a co-ownership agreement in place. It’s important because it helps avoid conflict and delineates the responsibilities of each owner.

“But that doesn’t apply to me. I’m buying a house with my very best friend – it won’t go wrong.”

That is what our clients thought too. Let’s discuss their real-life example of co-ownership gone wrong, and how to prevent it from happening to you.

At Beekmsa Law, we have seen time and time again that an ounce of prevention is worth a pound of cure. This is especially true in the case of co-ownership agreements so if you are considering buying a home with another party, speak to us first. We can help save you a lot of headaches. 

The Scenario

Two couples (let’s call them the A’s and the B’s) were close friends. They decided to buy a home together. They found the perfect house and put in an offer, which was accepted. Couple B lived in the home and the other half was rented out.

They were so excited about the new venture that they didn’t get a lawyer to draw up a co-ownership agreement. After all, they knew and trusted each other. They felt that in the event there was a disagreement, they could resolve it as friends.

After some time, couple A decided that they would like to sell the home. Couple B liked their living arrangements and refused to sell the home. Tensions grew, as the parties disagreed on who paid for what expenses and what each party had expected going into the transaction. 

That is when couple A came to us. With no agreement in place, there were two options: to come to an agreement with couple B, or to apply to the court for a partition and sale.

An application to the court would have come at a high cost – in both time and money – so the couple decided to try to come to an agreement with couple B first. This is where we were able to help.

The Solution

We helped couple A negotiate with couple B, and in the end, the house was sold.

However, this is not the rosy ending we would have preferred to see. That relationship was forever damaged, and it could have all been avoided with a co-ownership agreement in place.

A Better Way – Co-Ownership Agreement

We wish that Couple A had come to us before purchasing the home and setting up a co-ownership agreement.

If a co-ownership agreement had been in place, there would have been a clear process in place for when one party wanted to sell. The disagreement would have been limited because the contract would have anticipated this, and the friendship may still be intact today.

A co-ownership agreement would have helped to avoid conflict by setting out each party’s expectations from the start. It would have addressed important issues such as:

– Who is responsible for what expenses?

– What happens if one party wants to sell the property?

– What is the procedure for making decisions about the property?

The Lesson

While we often go into situations expecting that everything will go well, it’s always best to be prepared for the worst. This is especially true when entering into a co-ownership agreement. Buying a property is a big investment, and you want to make sure that you are protected now and in the event anything changes in the future. 

If you are considering buying a property with another person, come and speak to us first. We can help set up a co-ownership agreement that will protect you and your investment. Book a call here and our team will be more than happy to talk to you about your situation.