# Real-estate beneficiary



## FrugalGuy (Oct 25, 2013)

My understanding is having my daughter’s name as beneficiary on the house would avoid paying the probate fee in the future and knowing that her husband can’t go after part of the house in the event there is a separation between the two. Her name is not on the title. Is there a more effective way to protect the asset? Thanks.


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## Mukhang pera (Feb 26, 2016)

FrugalGuy said:


> My understanding is having my daughter’s name as beneficiary on the house would avoid paying the probate fee in the future and knowing that her husband can’t go after part of the house in the event there is a separation between the two. Her name is not on the title. Is there a more effective way to protect the asset? Thanks.


I am struggling to understand the situation. 

What do you mean by "beneficiary on the house"? Do you mean leaving it to her under a will? If so, title can pass to her only on probate. You say she is not on title, so, if that situation is to prevail, then I guess you are talking about passing it to her by way of testamentary disposition.

In the same terse wording of facts (to the extent it can be said that any are revealed), you express concern about not only probate fees, but protecting the asset from a spousal claim. Is the house in question presently owned by you and occupied by your daughter and her husband? If such be the case, and if there is nothing to suggest that the house was intended as a gift to the daughter or that she was intended to have any beneficial interest, then the house is probably safe from being declared a "family asset" and divisible between the spouses. How it all goes will depend to some extent on the _situs_ of the property and the governing law. You do not mention what province is involved.


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## twa2w (Mar 5, 2016)

Agree with Mukhang. Need more details to be sure of your intent.

Is this your principal residence that you reside in?. If so, do your daughter and husband also reside with you?
Is this a house you own that is rented to your daughter and SIL. 
Is this a major component of your estate? Have you made any promises or hints about disposition of home?
What province are you in? Are you single? Married? C/L, divorced or separated with support obligations?
I could go on but that should give us enough to get an idea.

Cheers
J


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## FrugalGuy (Oct 25, 2013)

twa2w said:


> Agree with Mukhang. Need more details to be sure of your intent.
> 
> Is this your principal residence that you reside in?. If so, do your daughter and husband also reside with you?
> Is this a house you own that is rented to your daughter and SIL.
> ...


•	House is owned by myself since spouse passed away years ago. Daughter’s name is not on the title.
•	Daughter and SIL are currently living with me
•	This is in BC and the house is my principal residence
•	I intend to pass the house to my daughter after I am gone, and I want to have full control while I am still alive even in sickness.
•	Having daughter’s name on the title as joint tenant is the simplest way to pass the house to her but SIL can make a claim of his share on it since he is the spouse of my daughter even while I am still alive
•	My understanding is putting her as so-called beneficiary of the house on the will then she would get the house when I am gone and not having to pay probate fee. SIL cannot make any claim on the house while I am still alive in the event they separated
•	I am looking for a best way to protect my asset and passing it to her with minimal effort and cost involved.

Regards.


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## Mukhang pera (Feb 26, 2016)

My view is that your daughter should receive the house as a legacy under your will. But I am not sure that such is a strategy that will avoid probate fees. Do you have any authority for that proposition? But the fees, even in tax-hungry BC, are not the end of the world. About $13,000 on a million-dollar house. Perhaps worth it for the sake of simplicity and peace of mind. 

As you are aware, joint tenancy is not a really great plan since you would lose the "full control" you wish to retain and it exposes some part of the property to a "family asset" claim in the event of dissolution of marriage. 

Another possibility is a trust arrangement, but those can be complicated, involve some cost, and come with their own set of issues. 

Based on what you have said, I would say gifting the house under your will is the best plan. That assumes there are no other kids or dependants (which could include future dependants) who could challenge the will.

Finally, if the probate fees really cause you to freeze at the clutch, and a formal trust arrangement does not call to you, you can take some comfort, I suppose, from the modern legal view that an _inter vivos_ and gratuitous conveyance of real property gives rise to a "rebuttable presumption of resulting trust". That means that a transfer into joint tenancy could work for you. If you wish further assurance, beyond the common law rebuttable presumption, you and daughter can execute a co-owners' agreement, where she acknowledges your control. But still, in the end, I think the testamentary gift is the best option.

For a recent BC case discussing joint tenancies, rebuttable presumptions, etc. in a matrimonial litigation context see:

_G. (J.D.)_ v. _V. (J.J.)_ S.C., Fleming J., 2016 BCSC 2389, Vancouver E120763, December 21, 2016 , 92pp.

http://www.courts.gov.bc.ca/jdb-txt/sc/16/23/2016BCSC2389.htm


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## AltaRed (Jun 8, 2009)

Would like Mukhang to commit on the possibility of there being joint legal title (JTWROS) but list the OP as the beneficial owner (daughter may have to have a 1% beneficial interest...not sure). It would remain so until his death. It could(?) pass muster with respect to probate, but at the same time keep the OP essentially in full control.


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## Mukhang pera (Feb 26, 2016)

AltaRed said:


> Would like Mukhang to commit on the possibility of there being joint legal title (JTWROS) but list the OP as the beneficial owner (daughter may have to have a 1% beneficial interest...not sure). It would remain so until his death. It could(?) pass muster with respect to probate, but at the same time keep the OP essentially in full control.


Not sure I can "commit" to anything. If I am being asked to "comment", I do not think we can have a "joint legal title" with the OP as sole beneficial owner. If title is in any way to be "joint" then 2 or more persons must appear on title. That's my comment, but it's possible that I don't really understand what AltaRed is suggesting. Pls. clarify if I have missed the point.

As you have suggested, AltaRed, the daughter could have a registered 1% interest. Father and daughter can still be joint tenants even with a 1%/99% split. If they went that route, I would still suggest a co-owner agreement. In it's simplest form, it could be in the form of a "side letter" signed by father and daughter, setting out their mutual understanding of the true intent and nature of the transaction (eg., that it's part of an estate plan, not intended to confer any beneficial right of ownership on daughter during father's lifetime.)


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## kcowan (Jul 1, 2010)

My attitude is to pay the probate as a small insurance fee against all the other eventualities that might happen.

All other possibilities have potential costs associated with them. And some are onerous.

We did with MIL and the only downside was the increase in capital gain that would have been shared.


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## AltaRed (Jun 8, 2009)

Mukhang pera said:


> Not sure I can "commit" to anything. If I am being asked to "comment", I do not think we can have a "joint legal title" with the OP as sole beneficial owner. If title is in any way to be "joint" then 2 or more persons must appear on title. That's my comment, but it's possible that I don't really understand what AltaRed is suggesting. Pls. clarify if I have missed the point.


I would agree the OP likely could not be sole beneficial owner (my post was not clear) with joint title, but the 1% beneficial interest with daughter is possible. That is often done in BC with a co-signer on a mortgage. The co-signer has to be on legal title but may be limited to 1% beneficial interest...and not be responsible for any of the benefits or costs of the asset. The part I am clueless on whether this passes the no-probate test.

As Keith suggested, stop getting hung up on probate. People sometimes do the stupidest things to avoid probate. It is mostly a red herring. Really!


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## Mukhang pera (Feb 26, 2016)

AltaRed said:


> As Keith suggested, stop getting hung up on probate. People sometimes do the stupidest things to avoid probate. It is mostly a red herring. Really!


That was my point also, when I said, in my first comment:



Mukhang pera said:


> But the fees, even in tax-hungry BC, are not the end of the world. About $13,000 on a million-dollar house. Perhaps worth it for the sake of simplicity and peace of mind.


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## OhGreatGuru (May 24, 2009)

OP's first assumption, that he can avoid probate by passing the house through the will, is wrong. If it passes through the will, it is an asset of the estate and subject to probate. So he should start from there and rethink his options.

As pointed out by others, adding daughter to title might keep it out of probate, and looks like a simple solution on the surface. But it has all kinds of other complications. Some of these have been discussed on other threads. So tread carefully.

Insofar as keeping it out of SIL's, reach, I would suggest he get legal advice. There is information on the web to the effect that inheritances are excluded from the division of property upon separation or divorce. See https://www.familylawhelp.ca/inheritances-gifts/ for example. But the state of family law is constantly changing, so a check with a lawyer in the province in question would be wise.

If inheritances are protected. it would seem to argue in favour of passing it though the will, because then you have documentation that it was an inheritance.

Once the property comes into the possession of the daughter, there is nothing to prevent her from sharing it with her spouse if she chooses. If OP is trying to prevent this from happening after his demise then he needs a trust of some kind.


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## Mukhang pera (Feb 26, 2016)

OhGreatGuru said:


> OP's first assumption, that he can avoid probate by passing the house through the will, is wrong. If it passes through the will, it is an asset of the estate and subject to probate. So he should start from there and rethink his options.


That is why I commented:



Mukhang pera said:


> My view is that your daughter should receive the house as a legacy under your will. But I am not sure that such is a strategy that will avoid probate fees. Do you have any authority for that proposition? But the fees, even in tax-hungry BC, are not the end of the world. About $13,000 on a million-dollar house. Perhaps worth it for the sake of simplicity and peace of mind.


In BC, absent a very recent change in the law of which I am unaware, he'll be stuck with probate fees. But I offered to let him enlighten me as to any support he had for the proposition that the fees could be avoided. I could be in for a surprise.



OhGreatGuru said:


> Insofar as keeping it out of SIL's, reach, I would suggest he get legal advice. There is information on the web to the effect that inheritances are are excluded from the division of property upon separation or divorce. See https://www.familylawhelp.ca/inheritances-gifts/ for example. But the state of family law is constantly changing, so a check with a lawyer in the province in question would be wise.
> 
> If inheritances are protected. it would seem to argue in favour of passing it though the will, because then you have documentation that it was an inheritance.
> 
> Once the property comes into the possession of the daughter, there is nothing to prevent her from sharing it with her spouse if she chooses. If OP is trying to prevent this from happening after his demise then he needs a trust of some kind.



As for inheritances being "excluded property", one can turn up information on the web to support just about any theory. In BC, stripped to its essentials, the law is that inheritances are not divisible between spouses provided the inheritance has never been put to a "family purpose". A simple example would be where one spouse inherits money during the marriage and places it in bank account in her name and there it sits (none used to pay for anything used by the family) until after the parties separate. Probably then it's not a family asset. I say "probably" because there is always room for argument. One argument would be that the parties had long relied on the notion that the inheritance would be there to secure their retirement. That common understanding as to how the funds would eventually be deployed might just open the door to a "family asset" characterization. 

I would not count on a trust, either, but maybe OhGreat knows of some trust strategy that will preserve the house from any spousal claim after the death of the settlor of the trust and where the daughter can be the sole beneficiary of the trust. And that’s assuming she has no desire to bust the trust, which, in ordinary circumstances would not be difficult. One also has to deal with vexing issues such as the rule against perpetuities and other considerations unique to trusts.

As mentioned, in BC at least, there is no black and white about when and under what circumstances a court will regard all or part of an inheritance as a family asset subject to division as opposed to the inheriting spouse not having to share. I offer a few illustrations of what our courts have said in recent times (which means, in part, after the Family Law Act replaced the Family Relations Act). Links to the full judgment follow each summary.

MATRIMONIAL PROPERTY — Inheritances • Reapportionment — Parties marrying in 1985, and, commencing in 1988, living with wife’s parents in a home owned by the parents — Wife inheriting the home in 2004, 4 years before parties’ separation — Court finding parties had enjoyed the house as though they owned it for 16 years, so wife’s formal receipt of title late in marriage was not a factor supporting reapportionment — Given parties’ similar economic circumstances, and the 23-year marriage, court ordering equal division of the home, and of wife’s pension and RRSPs — Husband to pay compensation for assets he removed from house, and for retroactive child support and costs from his share of assets.

_Patrich_ v. _Patrich_, S.C., Schultes J., 2014 BCSC 161, New Westminster E30891, January 31, 2014 , 37pp.

http://www.courts.gov.bc.ca/jdb-txt/SC/14/01/2014BCSC0161.htm

MATRIMONIAL PROPERTY — Inheritances • Husband receiving inheritance near end of parties’ 22-year marriage — Evidence not showing inheritance to have ordinarily been used for a family purpose — Inheritance not a family asset. • CHILDREN — Maintenance — Adult children — Court finding parties’ eldest child, 24, although a full-time student, not a child of the marriage for support purposes.

_Davidson_ v. _Davidson_ S.C., Bernard J., 2015 BCSC 890, New Westminster E42489, May 28, 2015 , 39pp.

http://www.courts.gov.bc.ca/jdb-txt/SC/15/08/2015BCSC0890.htm

Then, sometimes, the courts are less clear about what should happen with inheritances. In the case below, the chambers judge shied away from making a summary determination and suggested the parties slug it out at trial.


MATRIMONIAL PROPERTY — Inheritances • PRACTICE — Advances — Respondent husband inheriting $6 million not long before parties’ separation — Husband using inherited funds to purchase the matrimonial home, worth $2 million and to open a joint account worth $2.5 million — Husband applying for order declaring those assets excluded property, not subject to division — Court finding the matter not so clear and leaving the issue for resolution at trial, 5 months away — Although husband voluntarily paying spousal support, court allowing wife’s application for an advance of $200,000 from $600,000 sale proceeds of parties’ former matrimonial home, given her status as a university student, her responsibility for parties’ child and her need to pay legal fees.

_Tully_ v. _Haber_ S.C., Sharma J., 2014 BCSC 1856, Vancouver E132783, August 27, 2014 (oral), 7pp.

http://www.courts.gov.bc.ca/jdb-txt/SC/14/18/2014BCSC1856.htm

That case never went to trial. Too risky for both sides, I suppose. They reached a settlement in 2016 under which the home was sold, with the wife receiving $1,470,000 of the net sale proceeds.

Finally, to support my comment that an inheritance can become a family asset by virtue of its aspect of "future security" for the spouses, see (in particular the discussion commencing at para. 140):

_Lee_ v. _Lee_ S.C., Skipp J., Vancouver F970256, May 11, 2001 , 65pp.

http://www.courts.gov.bc.ca/jdb-txt/sc/01/02/2001bcsc0295.htm


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