Sunday, September 13, 2009

Joint Tenancy Dilemma: Martinson v. Anniko

Here’s a dilemma. You own your house with your husband as joint tenants so that on the death of either of you, the survivor will become the sole owner of the house. Although your husband intends for you to receive the house by right of survivorship if you outlive him, he has made a will leaving his estate mainly to his other relatives. This is your second marriage. You have children from your first marriage. Ultimately, you would like to leave something to your children. But your main asset is your interest in the house. If your husband outlives you, he will ultimately leave the house mainly to his relatives and not to your children.

In British Columbia you could sever the joint tenancy by transferring a half-interest in the house to yourself. Then if you go first, you could provide for your children in your will (perhaps with a provision allowing your husband to live in it during his lifetime.) But, if he dies first, you will only have your half-interest in the house.

In the case of your husband dying first, you would be better off leaving the house in a joint tenancy. But if you die first, your children will not receive anything out of the house. Do you sever or not?

With a well thought out, and coordinated plan, nobody should face this dilemma. But people do.

This appears to be what happened in a recent British Columbia Supreme Court decision, Martinson v. Anniko, 2009 BCSC 1104.

Asta Martinson and Hans Martinson married in 1985. Both were 67 years old. They signed a marriage agreement before the marriage, which as amended provided that neither would make any claim to the other’s estate, including any claims under the Wills Variation Act.

Hans Martinson used his assets to buy a home for them in Victoria, which was registered in both of their names as joint tenants. He also put some investments into joint accounts with her.

In his last will dated July 8, 2005, Hans Martinson, left $50,000 to one of Mrs. Martinson’s grandchildren, and the rest of his estate to his nephew and the nephew’s family. His will recites as his reasons for not leaving Mrs. Martinson anything that he had the house in joint tenancy with her, as well as $205,000 investments registered in joint accounts. He also said in his will that he had recently given her a gift of $70,000.

Asta Martinson knew he was making a will that excluded her children. She was concerned that if she died before her husband, her children would not receive much of an inheritance from her. She severed the joint tenancy.

Hans Martinson died before his Asta Martinson. Because she severed the joint tenancy, she only had a half-interest in the house, for which she received $334,000 in 2009.

After he husband’s death, Mrs. Martinson made an application to court to vary her husband’s will under the Wills Variation Act.

When the case went to trial, in addition to the proceeds from the sale of her half-interest in the house, she had $63,000 in a Manulife account, and Registered Income Funds of $33,000. She had spent some of her capital on caregivers and living expenses, but had also given funds to her children.

Mrs. Martinson was 91, and in poor health. She had cared for her husband during his illness, and he was a difficult patient.

Hans Martinson’s estate was worth $476,000.

Mr. Justice Truscott declined to vary Mr. Martinson’s will. Although Mrs. Martinson’s marriage agreement did not bar the court from varying the will, it was taken into consideration in assessing Hans Martinson’s legal and moral obligations to his wife. Mr. Justice Truscott found that the gifts made by Hans Martinson to his wife, as set out in the will, satisfied Mr. Martinson’s obligations. He had rational and valid reasons for making the will he did.

Although the full interest in the house did not go to Mrs. Martinson, as her husband had contemplated in the will, that was caused by Mrs. Martinson’s decision to sever the joint tenancy.

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