An ounce of prevention is worth a pound of cure. It costs about $475, with taxes, to put in place a valid Power of Attorney (POA) to appoint a trusted person to act for you if were legally unable to manage your affairs and property due to, for example, a car accident or an unforeseen medical condition. When you lose legal capacity, the bank will freeze your assets, even while the housing and stock markets are dropping, until the bank is provided a valid POA Deed or a court order to appoint someone to administer your affairs and assets. How will your bills be paid? If a court order is needed because the incapable person did not have a valid POA, that will typically take 6 months to 1 year and cost about $6,000, assuming no one contests the court application. Apart from the costs and stress, a lot can happen waiting for the court’s order. Come meet with us and we will help you avoid such pitfalls by putting in place a sound estate plan.
Thinking of adding your adult child as a co-owner on title to your home? Stop! Please read this cautionary tale first. A retired mother invited her busy entrepreneur son over for a home-cooked dinner. After dinner, the mother asked, “How goes your new start-up software company”? The son reluctantly explained his latest venture failed. Despite huge sales, it never turned a profit. He sold most of his assets to raise funds for his venture. The son assured his mother, “I’m poor and my creditors can take nothing from me and I’m already onto my next venture that will be a big success”. Not wanting to worry his mother, the son did not mention his main creditor had obtained court judgment against him. He assumed his lack of possessions meant his creditor could not collect on the judgment. The mother bid good night to her son. Worried about his precarious finances, she mused, “I should ensure I leave him something after I’m gone”. Later, concerned about her son’s financial future, the mother met with her notary, whom she instructed to prepare land title documents to add her son as a joint tenant co-owner on title to her $1.3 million, mortgage-free condo. She anticipated that, on her death, title would automatically transfer outside of her estate to her son as the surviving joint tenant owner, avoiding probate fees, 1.4% of estate assets’ value ($18,200) and the cost of probating her will ($3,000). She signed the legal documents and completed the generous gift to her son. A year later, the son’s creditor ran a land title search and discovered the son co-owns ½ of a $1.3 million condo. The creditor immediately registered its $800,000 judgment as a charge on title to the mother condo. The mother learned of the charge against her principal residence when the creditor advised her: “You may live there until we decide to foreclose and sell your condo to collect our $800,000.” In her court application to save her home she told the court, “I never intended to give an immediate gift of ½ of my home to my son”. Her efforts failed because she had no evidence to rebut the presumption under statute and legal title that the son owned ½ of the condo. The hard reality: the court ruled collection of $800,000 by foreclosure sale of the mother’s home was legitimate. If appropriate legal documentation were in place to establish that the mother did not intend an immediate gift of ½ here condo, her son would be on title holding his interest in trust for mother pending her demise. His ownership in the condo would not vest until her death. Mother would have kept her home. Worse yet, by failing to properly document her transfer of title, she lost ½ of her principal residence tax exemption and imposed a further tax liability on her son upon transfer of title into his name. This story parallels the real-life facts in the BC court case of Gully v. Gully, 2018 BCSC 1590. If Mrs. Gully had taken advice from a qualified estates and trusts lawyer, she and her son could have avoided this calamity. Come see us and we will advise you how to avoid such pitfalls and help you put in place a prudent estate plan suitable for your needs. -Oliver Hamilton, TEP