Tag: family cottage
Perils in the Succession of the Family Cottage
A cottage is usually the setting for family bonding and happy childhood memories; however, when it comes to estate planning, ambiguous drafting can lead to family divisions and litigation that is both unnecessary and costly. This is exactly what transpired in the Ontario Court of Appeal decision of Donaldson v Braybrook 2020 ONCA 66, discussed in the Hull on Estates podcast (https://hullandhull.com/2020/02/hull-on-estates-589-cottage-planning/).
Facts
A cottage was owned by the mother of a family, who allowed all four of her adult children, Wendy, Susan, Thomas, and Barry, to use the cottage on allocated weeks. In 1995, the mother transferred the ownership of the cottage to herself, Susan, and Thomas, “as joint tenants as to the remainder in fee”, while Wendy and Barry were listed as “additional transferees”, having a “life estate” in the cottage. This language seems perilously vague, and indeed gave rise to disputes within the family after the mother passed away. At this point, Susan and Thomas severed the joint tenancy and wanted to sell the cottage as tenants in common. Barry agreed to renounce his life interest to facilitate the sale, while Wendy refused and alleged that she was also an equal owner. On summary judgment, the motion judge held that Wendy had a life interest in the cottage with a right to exclusive use. This was reversed in the judgment by the Ontario Court of Appeal.
ONCA Decision
The Court of Appeal held that Wendy’s life interest in the property was not exclusive. The Court first looked to the wording of the registered transfer on title. This was deemed to be too ambiguous to be relied upon. Susan and Thomas were listed as transferees “without limiting their interest in any way”, which could not be reconciled with Wendy and Barry’s “life interest”. The Court then looked at evidence of the actual intention of the mother in making the transfer. The Court decided that the mother’s intention was to have her four children continue to enjoy shared use of the cottage as they had done previously, as well as intending for Susan and Thomas “to enjoy ownership interests beyond the shared right to use during their lifetimes”. As such, the Court concluded the mother’s intention was to give title of the cottage to Susan and Thomas, while maintaining a non-exclusive life-time licence to occupy for Barry and Wendy that allowed all four children to continue sharing the cottage throughout their lives. As the mother’s intention was able to be deduced by the Court, there was no need to consider the presumption of resulting trust in this case.
Conclusion
Much of this litigation and family strife could have been avoided by more clear and concise legal drafting, or by the mother communicating her estate planning intentions to the children during her lifetime, instead of keeping it a secret. The transfer failed to explicitly state how the life interests of Wendy and Barry would coexist with the ownership of Susan and Thomas. It appears the mother intended Wendy and Barry to have life-time licences, and a properly drafted transfer would have reflected this. This case also demonstrates how, in the absence of a reliable and unambiguous legal document, the court will first look to evidence of the intention of the transferor. Such a situation highlights the perils of succession planning for cottages, where use is often split amongst family members.
Thanks for reading – and enjoy the rest of your day!
Suzana Popovic-Montag & Sean Hess
Hull on Estates #589 – “Cottage Planning”?
In today’s podcast, Stuart Clark and Doreen So discuss the Ontario Court of Appeal’s decision in Donaldson v. Braybrook, 2020 ONCA 66, and what to consider when the ownership of a family cottage was changed to include the children.
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Keeping Up with the Cottage
Cherished, memories, generational, and cozy, are just some of the words that evoke the magnificence that is the family cottage. It is this magnificence that leads many families to want to hold on to the family cottage as part of their estate plan. This is not always easy though, and the family cottage is often the centrerpiece of an estate dispute. As such, careful planning is key.
Those that want the cottage to stay in the family should consider a co-ownership agreement. The purpose of these types of agreements are to set out the governance of the cottage to ensure it is maintained and disputes are resolved.
Some of the key terms to consider in a co-ownership agreement include:
- how basic expenses will be covered, including hydro, telephone, maintenance, and property taxes;
- how extraordinary expenses, including capital expenses, are to be paid;
- when payments are to be made and to whom;
- which family members are allowed to occupy the cottage, and when;
- are guests permitted;
- should there be a management committee charged with making certain decisions;
- what mechanisms should be used to resolve disputes;
- the procedure for the sale or transfer by a co-owner; and
- what happens upon the death of a co-owner.
If the Kardashians can teach us anything about estate planning (and you know that given the title, there had to be a Kardashian reference), it is that family dynamics are in flux. New relationships emerge, siblings develop different values and beliefs, and sometimes, problems arise. A good co-ownership agreement is not cookie-cutter, but a carefully crafted document reflecting the uniqueness of each family member that can evolve over time.
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Estate Planning over the Holidays
The holiday season is upon us, and with it comes family gatherings, buying and wrapping gifts, and travel. Suffice to say, it can be a hectic and busy time. Nonetheless, with 2018 on the horizon, many of us take the time to reflect and set resolutions for the upcoming year. Despite this, so many Canadians do not have a Will.
Why not? Estate planning need not be trying, and the holiday season is a perfect time to start considering your estate plan.
With this in mind, I thought I would highlight an article from the Globe and Mail which does a great job of highlighting issues to get you thinking about your estate plan:
- Get started – make a detailed list of your assets, liabilities, and joint assets, and think about your family’s needs and lifestyle.
- Consider your options – do you want your bequests to be absolute, subject to the terms of a trust, or gifted during your lifetime?
- Appoint representatives – think about who you trust to administer your estate and ensure that they are up for the job.
- Special circumstances – are there any beneficiaries who have special circumstances such as those receiving ODSP, that would benefit from specific trusts?
- Taxation – meet with a professional to understand tax consequences and the vehicles available to limit the payment of taxes, including the use of joint ownership and estate freezes.
- Cottages – should your estate involve the cherished family cottage, think about whether you want it sold, or shared amongst family members. If the latter, think about preparing a co-ownership agreement.
Wishing all of our readers a happy New Year!
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The Family Cottage
With the spring flowers beginning their bloom, and the warm weather slowly settling in, many Canadians turn their attention to summer plans at the cottage. With this in mind, I thought it would be apropos to consider estate planning and the family cottage.
How to best plan for the family cottage is a question I hear all of the time.
At the outset, according to this Globe and Mail article, it is important to consider whether you want to keep the family cottage in the family at all.
If the answer is yes, there are numerous estate planning vehicles available in order to transfer the cottage. As discussed in this prior Hull & Hull LLP blog, some options include making a specific bequest in a Will, where it can be left to certain beneficiaries who would receive the cottage absolutely and do with it as they please. Alternatively, should you wish to impose limitations on what the beneficiaries can (or cannot) do with the cottage, a testamentary or inter vivos trust may be more appropriate.
Of course, any decision should consider the tax implications. A prior Hull & Hull LLP podcast, found here, highlights the different options for dealing with capital gains tax in relation to the cottage.
Clearly, there are many options available and professional advice should be sought. Doing nothing is rarely a good idea. Look no further than the decision of Cowderoy v. Sorkos Estate, where a lengthy dispute ensued over whether the deceased had sufficiently transferred a farm and cottage.
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Delegation in Investment Accounts – Hull on Estate and Succession Planning Podcast #119
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This week on Hull on Estate and Succession Planning, Ian and Suzana discuss delegation issues that arise when dealing with Investment Accounts and address a listeners question about the family cottage.
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Drafting a Co-ownership Agreement – Hull on Estate and Succession Planning Podcast #78
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This week on Hull on Estate and Succession Planning, Ian and Suzana discuss things to remember when drafting a co-ownership agreement of a recreational property with family or friends.
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Arranging an Agreement on Cottage Property – Hull on Estate and Succession Planning Podcast #77
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This week on Hull on Estate and Succession Planning, Ian and Suzana continue talking about cottage and recreational properties.
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Family Cottage Cases of Ownership Transfers – Hull on Estate and Succession Planning Podcast #75
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In this week’s episode of Hull on Estate and Succession Planning, Ian and Suzana share a few stories involving cases of ownership and the family cottage.
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The Family Cottage and Capital Gains Taxes – Hull on Estate and Succession Planning #74
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This week on Hull on Estate and Succession Planning, Ian and Suzana discuss different options for dealing with capital gains tax as it pertains to investments like ‘The family cottage’.
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