Saturday, July 30, 2016

Kimberly Wallis Presenting at the CBA, Will Estate and Trust Fundamentals for Estate Practitioners

Kimberly Wallis of our firm, Sabey Rule LLP, will be among the faculty at the Canadian Bar Association, Will Estate and Trust Fundamentals for Estate Practitioners. This five-day program will be held from October 26th through October 30th, 2016 at the Westin Prince, in Toronto, Ontario. The program, chaired by Melanie Yach of Aird & Berlis LLP, is directed to junior to intermediate trusts and estate practitioners as well as general practitioners. While held in Toronto, this program is national in scope, and will draw participants from throughout Canada.

You may read the agenda here, and the registration form is available here. Please note that there is a discount on the registration fees for those registering no later than August 8, 2016.

Kimberly will be leading a workshop on Saturday, October 29th on "Busting the Trust."

Sunday, July 24, 2016

Marley v. Rawlings

As I wrote in my most recent post, Fuchs v. Fuchs, I am looking at cases in other jurisdictions dealing with rectification of wills for a paper I am working on. I am not aware of any cases in British Columbia interpreting our new provision allowing for rectification of a will, section 59 of the Wills, Estates and Succession Act. Accordingly, I am looking elsewhere. Fuchs is an Alberta case. 

England has had legislation permitting rectification of wills for longer than either Alberta or British Columbia. Section 20 of the Administration of Justice Act, 1982, c. 53 is similar, but section 20 (1) is worded somewhat more narrowly than section 59 (1) of the WESA. Section 20 (1) provides:

(1)If a court is satisfied that a will is so expressed that it fails to carry out the testator’s intentions, in consequence—
(a)of a clerical error; or 
(b)of a failure to understand his instructions, 
it may order that the will shall be rectified so as to carry out his intentions. 
Section 20 was recently considered by the United Kingdom Supreme Court in Marley v.Rawlings, [2014] UKSC 2 (BAILII). In that case, two spouses intended to make wills leaving their estates to each other, with a provision that if the other did not survive by one month, each left the residue of his or her estate to Terry Michael Marley, who was unrelated, but they considered him to be like a son to them. The wills were straight forward enough, but with one problem: the husband signed will intended for the wife, and the wife intended to sign the will intended for the husband. After the husband’s death, his wife having predeceased him, the United Kingdom Supreme Court rectified his will so that it contained the typed parts of the will signed by his wife.

Sunday, July 17, 2016

Fuchs v. Fuchs

I am still waiting for some reported British Columbia cases interpreting section 59 of the Wills, Estates and Succession Act (“WESA”), which expressly allows the court to rectify a will. Subsections 59 (1) and (2) provide as follows:

Rectification of will
 59  (1) On application for rectification of a will, the court, sitting as a court of construction or as a court of probate, may order that the will be rectified if the court determines that the will fails to carry out the will-maker's intentions because of

(a) an error arising from an accidental slip or omission,
(b) a misunderstanding of the will-maker's instructions, or
(c) a failure to carry out the will-maker's instructions.
 (2) Extrinsic evidence, including evidence of the will-maker's intent, is admissible to prove the existence of a circumstance described in subsection (1).

In the absence of finding a British Columbia cases dealing with this section, I have been looking at cases in other jurisdictions for a paper I am writing for the Continuing Legal Education Society of British Columbia, and have come across some decisions from Alberta.

Alberta, like B.C., recently overhauled its succession law. Alberta’s Wills and Succession Act came into effect in February 1, 2012 (we were a little behind, with B.C.’s WESA coming into effect March 31, 2014). Alberta also now has a provision allowing the court to rectify a will. The wording of subsection 39 (1) of Alberta’s legislation is similar:

Rectification 39(1)  The Court may, on application, order that a will be rectified by adding or deleting characters, words or provisions specified by the Court if the Court is satisfied, on clear and convincing evidence, that the will does not reflect the testator’s intentions because of
(a)    an accidental slip, omission or misdescription, or
(b)    a misunderstanding of, or a failure to give effect to, the testator’s instructions by a person who prepared the will.
One of the cases I have found in which the Alberta Court of Queen’s Bench rectified a will under Alberta’s legislation, Fuchs v. Fuchs, 2013 ABQB 76 (CanLII), is interesting because of an interplay between changes in legislation dealing with the effect of marriage on a will, as well as the transition rules reflecting whether the new legislation applies or the old.

In 1998, Hans Fuchs and Barbara Fuchs began co-habiting. Mr. Fuchs made his will on June 22, 1999 leaving his estate to Barbara Fuchs. They were not yet legally married, and the will did not contain a clause stating it was in contemplation of marriage. Mr. and Mrs. Fuchs were legally married on April 20, 2001. Mr. Fuchs died on February 8, 2012.  

At the time Mr. Fuchs made his will, the old Alberta law, the Alberta Wills Act, provided that marriage revoked a will unless there was a declaration in the will that it was made in contemplation of marriage. Again, this is similar to British Columbia’s old Wills Act. Like British Columbia, Alberta’s new legislation has changed the law so that marriage no longer revokes a will.

If the Fuchs’ marriage revoked Mr. Fuchs’ will, then he would have died without a will, and Mrs. Fuchs would be entitled to half of the estate under Alberta’s intestacy rules, and his children from a previous marriage would be entitled to the other half. But if the will were found to be valid, then Mrs. Fuchs receives the entire estate.

Here is where the transition rules become interesting. You may notice that Mr. Fuchs died shortly after the new legislation came into effect in Alberta. The old law said marriage revokes a will unless there is a declaration that it is made in contemplation of marriage, but the new legislation does not. Associate Chief Justice Rooke held that the old law still applies in this case because under section 8 of Alberta’s Wills and Succession Act, the old law applies if the will was made before February 1, 2012. The date of the will, rather than the date of death, is the key date in respect of whether marriage revokes a will.

However, section 8 also provides that section 39 of Alberta’s Wills and Succession Act allowing the court to rectify a will applies if the will-maker died after the new law came into effect.

Associate Chief Justice Rooke found that Mr. Fuchs intended that his will would remain valid after his marriage, and that he made it in contemplation of his marriage to Mrs. Fuchs. Accordingly, Associate Chief Justice Rooke applied Alberta's rectification provision to rectify teh will by adding the sentence: "This will is in contemplation of my marriage to my friend BARBARA LIPPKA [Mrs. Fuchs' maiden name] at such time as I am legally able to do so." 

In the result, the Court held that Mr. Fuchs' will was not revoked by the marriage, and Mrs. Fuchs was entitled to his estate under the will.

The transition rules in British Columbia are a little different, but I think a court in B.C. could apply the same analysis on similar facts. In British Columbia, although I am not aware of any cases on point yet, the key event for determining whether a marriage revokes a will is likely the date of the marriage (rather than the date of the will or the date of death). This is because of section 186 (3). Section 186 says,

Transition — application of Part 4
186 (1)Subject to subsections (2) and (3) of this section and section 189, Part 4 [Wills] applies to a will, whenever executed, if the will-maker dies on or after the date on which Part 4 comes into force.
(2) Subsection (1) does not invalidate a will validly made before the date on which Part 4 comes into force.
(3) Subsection (1) does not revive a will validly revoked before the date on which Part 4 comes into force.

Under B.C.s old Wills Act, marriage revoked a will unless it was made in contemplation of marriage. If the marriage occurred before WESA came into effect on March 31, 2014, the marriage would have revoked the will, and pursuant to subsection 186 (3), the will would not be revived by WESA.

However, the rectification provision in section 59 applies if the will maker died after WESA came into effect. Accordingly, if a will-maker in B.C. dies on or after March 31, 2014, and the court finds that the will made prior to marriage omitted the phrase “this will is made in contemplation of my marriage to…” because of

“(a) an error arising from an accidental slip or omission,
(b) a misunderstanding of the will-maker's instructions, or
(c) a failure to carry out the will-maker's instructions…,”

the court could rectify the will by adding the necessary words, in which case, the marriage will not have revoked the will.

Sunday, June 19, 2016

New Requirement that Bare Trusts be Disclosed on Property Transfer Tax Returns

The Government of British Columbia has amended the Property Transfer Tax Return to require more information on the purchase of land, effective June 10, 2016. The requirement that a purchaser who is not a Canadian citizen or permanent resident identify his or her citizenship has received some press coverage. Although I don’t like it at all, I am writing about another change: the requirement that the person taking title disclose whether he or she, or it (if a corporation) holds the title in a bare trust.

The question on the Property Transfer Tax Return is “Is this a transfer of a bare trust?” I am not sure how one transfers a bare trust, but the question is intended to elicit whether the person acquiring title will hold title as a bare trustee. To hold land in a bare trust means that although you have title, you hold it for someone else, who is the true owner. Because the title holder has no management powers and is subject to the direction of the true owner, the title holder is an agent of the owner (rather than a trustee in the sense I often write about with significant powers and responsibilities).

If the answer to the question is “yes,” then the Return has a number of other questions. As set out in the Land Title & Survey Authority website here, if the transfer is to register a bare trust,
... an additional page will be created to enter information for the Settlors and Beneficiaries.
Select whether they are an Individual, Corporation or Other.
If Individual is selected, answer Yes or No to the question “On the date of registration, are you a Canadian citizen or a permanent resident as defined in the Immigration and Refugee Protection Act (Canada)?”
Select the country of citizenship. If there is more than one country of citizenship, select all that apply using the “ADD” button.
The address for each of the Settlors and Beneficiaries must be filled in.
If Company is selected, an additional page will be created. Fill in the “Total number of directors”
Fill in the names of all directors, their country of citizenship (all that applies) and address.
I am not clear on why the Government is collecting information on bare trusts. It may be intended to ensure that the Government is able to collect information on the whether the true owners are not Canadian citizens or permanent resident. Otherwise, someone who is neither a  permanent resident or Canadian could avoid disclosing his or her citizenship by using a permanent resident or Canadian citizen as a bare trustee.

Alternatively, the Government may also be considering whether bare trusts are being used to avoid paying property transfer tax. I came across a story on CTV with the headline “Real estate loophole lets wealthy buyers save millions in taxes.” The story was about how people can avoid paying property transfer tax by having a company hold bare title. Instead of transferring title to the land, the land stays in the company, but the control of the company is transferred to the purchaser.

The fact is, though, that anytime a company owns land (whether as the true owner or as a bare trustee), and someone buys the shares of the company rather than the land from the company, title to the land does not change hands, and there is no property transfer tax payable.

If the motive for adding information about bare trust to the Return is related to “loss” of revenue through the use of bare trusts, then I doubt it will be very helpful to the Government. As set out above, it is only when the title is transferred that purchaser is required to file the Return. If a bare trust is used to avoid the property transfer tax, the provincial Government will not know about the subsequent sale. Nor, is it necessary to file a Return, if after purchasing land, the owner later decides to declare that the owner holds title as a bare trustee. I don’t know what mechanism the Government could use to even gather information about changes in beneficial ownership without a change in title, let alone tax those changes. Such a mechanism would no doubt be intrusive and difficult to enforce.

I do use bare trusts to avoid property transfer tax, but in a different context. If I have a client who wishes to transfer real estate into a trust for estate planning, then we have to consider whether to register the trust with the Land Title Office. In some cases, there is an exemption available from property transfer tax. For example, if the property meets the requirements of the Property Transfer Tax Act for a principal residence (which are different from the Income Tax Act, Canada requirements), and if the trustee is a “related individual,” for example a spouse or child, then the land can be transferred to the trustee without paying property transfer tax. But there are plenty of traps for the unwary. For example, if my client wishes to be the trustee of her own trust, and we transfer title to her as trustee, property transfer tax is triggered even if it is her principal residence. Why? Under the legislation, she is not a “related individual” to herself.

When property transfer tax will be triggered by transferring title to the trustee, one option is for the owner, who is settling the trust, to sign a bare trust agreement declaring herself a bare trustee for the trustee of the trust. Some might see this as a loophole from tax. But consider the fact that in most of the trusts created for estate planning, for practical purposes little changes for the person settling the trust. Often she is the sole beneficiary during her lifetime, and it’s only upon her death that her beneficiaries, often children and grandchildren benefit. It is different from a sale of land to an unrelated purchaser, but in many cases, this type of estate planning is caught by the legislation.

Instead of making the Property Transfer Tax Return more intrusive, it would be preferable to scrap the property transfer tax, which is becoming more complex, likely increases the cost of real estate, and collect revenue from some other source. This will involve raising other taxes, but next to probate fees, the property transfer tax is probably the most flawed tax British Columbia has. 

Saturday, June 11, 2016

Wong v. Chong Estate

The law with respect to joint tenancy in British Columbia is nuanced. The basic idea is that if property is held in a joint tenancy between two people, on the death of one, the title passes to the survivor. But if one of the joint tenants gratuitously transferred the property into a joint tenancy or paid the purchase price to buy the property but puts title in a joint tenancy, then there is a presumption that the other joint tenant holds his or her interest in trust for the person who transferred the property or paid for it. This presumption, called a presumption or resulting trust, is a presumption only, which may be rebutted by evidence that the person who paid for the property intended a gift. When the parties are married spouses, there is a different presumption that the person who paid for the property intended a gift. But it really comes down to what the court finds what the intention was of the person who paid for the property at the time her or she purchased it, or in the case of a transfer, the time of the transfer.

But here’s where it gets more nuanced. Supposing one person buys property and puts title into a joint tenancy with another person, intending to retain control of the property during his or her lifetime, but that on death, the survivor will be entitled to the benefit of the property. In such a case, what if the joint tenancy is severed? This can be done in a number of ways, including either of the joint tenants transferring a half interest to himself or herself. In this case, is the person who did not pay for the party able to retain a half interest, and leave it to someone else in his or her will?

Rick Wong and Julia Chong were married on March 23, 2002. She had a daughter from a previous marriage, Janine Yuen, and he had no children.

Mr. Wong arranged to purchase a duplex in 2005. He contributed a little over $11,000 toward the purchase of the duplex, and borrowed a further $550,000. He mortgaged the new property, and Mr. Wong’s mother also assisted by providing security for the loan. When he signed the contract to purchase the duplex, he told 
Ms. Chong that he wanted to buy the property as a source of rental income for their retirement. He had some health problems and neither Mr. Wong nor Ms. Chong had any private pensions.

Mr. Wong and Ms. Chong took title to the duplex as joint tenants.

After they purchased the duplex, Mr. Wong used the rental income for mortgage payments. He also contributed additional funds to pay down the mortgage and pay other expenses for the duplex. He did work repairing the building, and hired contractors for other work. Ms Chong had little involvement. Most of the funds came from rental income, from Mr. Wong’s accounts or from joint accounts held by Mr. Wong and Ms. Chong during times when Mr. Wong was contributing all of the funds to the joint accounts. Some of the funds also came from joint accounts into which both Mr. Wong and Ms. Chong were contributing.
Ms. Wong died of cancer on May 26, 2013.

Shortly before she died, at a time when she knew she was terminally ill, she made her last will, dated March 21, 2013, in which she left her estate to her daughter. On April 5, she severed the joint tenancy on the duplex, without telling her husband.  Because she severed the joint tenancy, the title to the duplex did not pass to Mr. Wong by right of survivorship.

It should be noted that on the death of Ms. Chong, her daughter received other assets outside of the estate with a value of approximately $400,000 including life insurance and an investment account. Mr. Wong, on the other hand received about $32,000 outside of the estate on his wife’s death.
Ms. Chong’s daughter, Ms. Yuen, maintained that she was entitled to the half-interest in the duplex as the beneficiary of her mother’s will, the joint tenancy having been severed, and her mother having title to a half interest as a tenant in common.

Ms. Wong sued. He alleged among other things that there was a contract between his wife and him that the survivor would receive the duplex by right of survivorship. He also claimed that because he paid the purchase price, and as between his wife and him, he contributed most of the funds, that Ms. Chong’s estate held title to the half interest in trust for him.

In her decision in Wong v. Chong Estate, 2016 BCSC 953, Madam Justice Burke found that there was insufficient evidence that Mr. Wong and Ms. Chong had a contractually binding agreement that Ms. Chong could not sever the joint tenancy.  She held that the presumption of resulting trust did apply. She found that when Mr. Wong bought the duplex and put the title into a joint tenancy with his wife, he intended to confer the right of survivorship only. Unless he died first, and until his death, she had no other beneficial interest in the duplex.

Madam Justice Burke wrote:
[85]         Considering all of the details as set out in the agreed statement of facts and the evidence before the Court, I am of the opinion that a resulting trust should be found in this case and that all the beneficial interest in the Ewart Property [the duplex] remains with Mr. Wong.
[86]         Mr. Wong testified that he purchased the property with the intention that it serve as a source of retirement income for both him and Ms. Chong. He said that if he pre-deceased Ms. Chong, she would receive the interest in the property, but not before then. This testimony was corroborated by the plaintiff’s two sisters, who discussed this plan with the plaintiff at the time of purchase, and by the plaintiff’s friend Len Collard. None of the testimony in this regard was challenged on cross-examination.
[87]         Importantly, Mr. Wong’s testimony is also corroborated in several ways:
(a)            Mr. Wong does not receive a pension through his employment; it therefore makes sense that he would make efforts to secure retirement income through other means, such as acquiring the Ewart Property;
(b)            Mr. Wong had serious health concerns and had reason to believe he would predecease Ms. Chong;
(c)            Mr. Wong paid the vast majority of money (and all of the effort) toward the Ewart Property, including several large lump-sum payments, despite the fact that Ms. Chong had an income;
(d)            Ms. Chong severed the joint tenancy secretly and continued to keep that information from Mr. Wong even when questioned about her retirement planning in the later stages of her life; and
(e)            As the defendants stated, Mr. Wong was a real estate agent who would likely have been familiar with the concepts of joint tenancy and beneficial interest.
[88]         All of the above, whether arising at the time of the transfer or years later, indicate or are consistent with the evidence that Mr. Wong had no intention at the time of the transfer of gifting Ms. Chong the beneficial interest in the property.
[89]         Clearly, it was Mr. Wong’s intention that, should he predecease Ms. Chong, she would take the benefit of the property. It is clear from the evidence, though, that Mr. Wong did not intend to make an inter vivos gift of the beneficial interest in the Ewart Property for Ms. Chong to make use of as she pleased. On a balance of probabilities, Mr. Wong has proved that there was no donative intent. Ms. Chong’s deliberate concealment of the severance, as noted, shows she was very much aware of that. She held the beneficial interest for Mr. Wong.
[90]         In my opinion, Mr. Wong has rebutted the presumptions of advancement and indefeasible title. His testimony, consistent with the available evidence, indicates an intention at the time of transfer that Ms. Chong would take a beneficial interest only on the death of Mr. Wong. Ms. Chong, and subsequently Ms. Yuen, held her interest subject to a resulting trust in favour of the plaintiff; the beneficial title to the Ewart Property remains with him.

In the result, Mr. Wong owns the full interest in the duplex. 

Monday, May 30, 2016

Sabey Rule LLP Announces Association with Ken M. Kramer Q.C. and KMK Law Corporation.

I am pleased to announce the association of Ken M.  Kramer Q.C.  and his firm KMK Law Corporation with our law firm, Sabey Rule LLP. 
Ken is a senior lawyer and founder and principal of KMK Law Corporation, a boutique law firm in downtown Vancouver providing Estates, Trusts, Elder Law, Litigation and Mediation services.  He has particular expertise in planning for persons with disabilities and is a frequent lecturer for the Continuing Legal Education Society of British Columbia, the Vancvouer Wills and Trusts section of the Canadian Bar Association, B.C. Branch and the People’s Law School among other organizations.  

Ken is also the current Chair of the Province of BC's Emergency Medical Assistants Licensing Board, which oversees licensing and regulates over 15,000 First Responders in British Columbia.  He has also sat on numerous boards and committees over the past 25 years with a specific focus on disability and seniors issues and is currently the Chair of the Board for the BC Centre for Elder Advocacy & Supports and the Elder Law section of the Canadian Bar Association.  Ken is also an elected member of the Canadian Bar Association, B.C. Branch Provincial Council for Vancouver and past Chair of Muscular Dystrophy Canada. 
In this regard, and in recognition of his excellence in the practice of law and his contributions to  the community, Ken was designated Queen’s Counsel in 2015

Ken will assist Sabey Rule LLP in serving our clients, particularly in the Greater Vancouver Area. We will be working together on significant estate disputes.  He will also be a valuable resource to our lawyers in Kelowna.

Ken’s office is located in downtown Vancouver at Park Place, Suite 500 – 666 Burrard Street, Vancouver, B.C., V6C 2X8.  His office phone number is 604-990-0995.  You may also get further information about Ken and his practice by visiting the KMK Law Corporation website. 

Saturday, May 21, 2016

What Happens to Funds Inherited by a Spouse on the Breakdown of the Marriage?

Some of my estate-planning clients have asked me what would happen to the money they intend to leave to their children if one of their children’s marriages breaks down.  In some cases, there may be concern that a marriage breakdown is imminent, while in others it’s a more general, “what if?” question.

When family law was reformed a few years ago in British Columbia, I thought that my answers would be a little more straightforward than they had been in the past. The Family Law Act, which came into effect in March 2013, overhauled the law governing divisions of property in a marriage breakdown. The basic rule is that family property and family debt is shared equally. The parties may agree on a different division, or if an equal division would be “significantly unfair” the court may order a different division, but the basic rule is a 50/50 split. One key aspect of the new property-division regime is that some property is excluded from the divisible family property. The “excluded property” includes inheritances or gifts received by one of the spouses.

At first glance, the answer to the question what happens to my child’s inheritance if her marriage breaks down appears simple:  “don’t worry; it is excluded from the property that she would have to divide equally with her former spouse.”

Alas, if the law were that simple, I might be out of a job.

Section 84 (2) of the Family Law Act includes among the divisible family property,
“(g) the amount by which the value of excluded property has increased since the later of the date
(i) the relationship between the spouses began, or
(ii) the excluded property was acquired.”

Still, this probably conforms to most people’s sense of what is fair. If I (the hypothetical  me) leave an inheritance to my daughter of say $400,000, she invests it and it grows to $500,000 during her marriage, then on the breakdown of the marriage, she keeps the full $400,000 on the breakdown of her marriage, and shares the $100,000 growth with her former spouse.

But it gets murkier (otherwise this would be a much shorter post). Supposing my daughter inherits $400,000 from me, but then uses the funds to purchase a house with her spouse, with the title registered in the spouse’s sole name. On a subsequent breakdown of the marriage, is the house (or at $400,000 of the value of it) remain excluded property that my daughter retains? Or is the full value of the house now equally divided between my daughter and her spouse?

The British Columbia Court of Appeal considered this issue in V.J.F v. S.K.W., 2016 BCCA 186. Mr. F. Inherited $2 million (it was not from parents or other family, but nothing turns on that). He used most of it to purchase land in Vancouver on which he and Ms. W planned to build a new family home. The title was registered in Ms. W’s sole name. The trial judge found that he did this for creditor protection. It should be noted that there was no finding that he acted fraudulently to defeat current creditors, but rather that he did this because of risks of claims associated with his business. At trial, the trail judge found that Mr. F conferred a gift on Ms. W when he used the funds to buy the property in her name, and held that when he did so, the funds were no longer excluded property. Accordingly, the funds land was equally divided between Mr. F. and Ms. W.

Madam Justice Newbury, writing for the Court of Appeal, in upholding the trial judge’s decision, held that the trial judge did not err in finding that Mr. F conferred a gift on Ms. W. He could not protect the property from potential future creditors without conferring an absolute interest in Ms. W. She also held that the presumption of advancement—that is the presumption that when a married spouse transfers property to the other spouse gratuitously, he or she intends to make a gift—continues to apply to transfers between married spouse in the province of British Columbia (in some provinces in has been abolished). In this case the onus was on Mr. F to rebut the presumption that he made a gift, and he did not meet the onus.

Madam Justice Newbury also rejected the view expressed in some of the Supreme Court of British Columbia cases that the Family Law Act regime is a complete code, which supersedes common law property rights. In this view, property that was excluded remains excluded despite the fact that title may be transferred between the spouses. She wrote at paragraphs 74 and 75,

[74]         With all due respect to the contrary view, I conclude that the new FLA scheme does not constitute a “complete code” that “descends as between the spouses” and eliminates common law and equitable principles relating to property. Rather, the scheme builds on those principles, preserving concepts such as gifts and trusts, and evidentiary presumptions such as the presumption of advancement between spouses. Thus I find that the gift of (slightly less than) $2 million made by Mr. F. to Ms. W. became her property and was “property owned by at least one spouse” under s. 84, as opposed to “property derived from the disposition of [excluded] property” within the meaning of s. 85. At the time the definitions are applied – the date of separation – the fact Mr. F. had originally received the $2 million as a gift was no longer relevant. He lost the exclusion when he voluntarily and unreservedly directed that the West 33rd property be transferred to Ms. W. and ‘derived’ no property from that disposition.
[75]         I do not interpret the FLA as reversing the gift or requiring that it be ignored because of the spouses’ separation. Nor do I agree that the FLA effectively ‘prohibits’ gifts between spouses, as Mr. F. suggested. (See para. 56.) Gifts between spouses can continue as they have through the ages. It would take much clearer wording to render them suddenly revocable or null or illegal. (See the comments of Chief Justice Farris in a slightly different context in Duncan v. Duncan (No. 2) [1950] B.C.J. No. 50 at para. 13 (S.C.),aff’d [1950] B.C.J. No. 41. (C.A.).)

This case raises a couple of questions.

First, does this mean that whenever a spouse transfers funds from an inheritance to the other spouse, those funds lose their status as “excluded property?” I suggest that the answer is “not necessarily.” In V.J.F. the trial judge found that Mr. F intended to make a gift, and that the presumption of advancement had not been rebutted. In other cases, the courts may find that a spouse did not intend to confer a gift, and there may be evidence rebutting the presumption of advancement. In such a case, the spouse to whom title is transferred may hold the property as a trustee for the spouse who inherited the funds. In that event, the funds should still be excluded.

Secondly, what about a case where the spouse who receives the inheritance buys a house and the title is held in both names as joint tenants. This is likely a more common event. The beneficiary of the inheritance may want her spouse on title as a joint tenant for estate planning so that if she dies first, her spouse will receive the house by right of survivorship. Although the concept of joint tenancy is nuanced, arguably in that case half of the beneficiary of the inheritance should be able to exclude one half of the funds, and the other half divided equally, on the basis that each spouse has a notional half-interest.

If this is correct, then in my example of my daughter receiving a $400,000 inheritance, if she uses the funds to buy a house to be held in a joint tenancy with her spouse, $200,000 would remain excluded, and $200,000 divided equally between her and her spouse on the breakdown of the marriage. She ends up with $300,000, and he with $100,000 from the inherited funds.