If you are granted right of survivorship on a property, does that constitute a gift? And if so, when does the gifting take place — at the time the right is established, or after the joint owner’s death?
Those were some of the questions raised in a recent family law case in British Columbia, in which a couple, the Barylas, decided to part ways after nearly forty years of marriage.
Prior to their separation, their relationship was, by all accounts, a good one. The Barylas raised two children, became grandparents to four grandchildren, and owned a successful family business that afforded them a rather grand lifestyle in Vernon, B.C. The business ultimately allowed the couple to retire in their mid-forties and live off of the fruits of their hard work.
Approximately five years after the parties’ retirement and 10 years before their separation, Mr. Baryla’s mother’s health declined, leaving her with mobility issues. Mr. Baryla arranged for the purchase of the home next door to the Barylas’ family home. Mr. Baryla’s mother moved into the home and the Barylas assisted with her care.
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Title to the next-door-home was placed in Mr. Baryla’s name and his mother’s name, as joint tenants. Mrs. Baryla was not on title.
Mr. Baryla’s mother died in 2013, prior to the parties’ separation. Upon his mother’s passing, Mr. Baryla received his mother’s half-interest in the property. Mr. Baryla became the sole owner.
When they separated one year after Mr. Baryla’s mother passed away, the Barylas could not agree on how the next-door-home should be accounted for in the resolution of the financial issues between them. In particular, Mr. Baryla said the one-half interest he received in the home from his mother upon her passing should not have to be shared with Mrs. Baryla because it was a gift. In British Columbia, and in provinces across Canada, gifts received from third parties during a marriage are excluded from the sharing of property between separated spouses.
Mrs. Baryla disagreed, taking the position that the next-door-home ought to be included in Mr. Baryla’s assets and shared with her. Importantly, Mrs. Baryla said the majority of the funds used to purchase the property came from the parties’ savings. Mr. Baryla said that those funds came from the sale of Mr. Baryla’s mother’s former home. Mrs. Baryla commenced court proceedings in the Supreme Court of British Columbia to resolve the issue, amongst others.
Following a seven-day trial, Justice Loo found that the next-door-home should be included in Mr. Baryla’s assets and shared with Mrs. Baryla. Mr. Baryla appealed to the Court of Appeal for British Columbia, taking the position that Justice Loo had erred. The appellate court agreed with Mr. Baryla.
In reaching his decision released on Jan. 18 (2019 BCCA 22), Justice Savage (writing for the Court of Appeal) embarked upon a discussion of the law of joint tenancy and gifting. Justice Savage confirmed that when property is owned in joint tenancy, each owner holds a right of survivorship. In other words, if one owner dies, the surviving owner automatically obtains the full interest in the property.
Justice Savage went on to have particular regard to whether an ownership interest received as a consequence of a right of survivorship constitutes a gift.
Consistent with a 2007 decision from the Supreme Court of Canada, Justice Savage noted that since the right of survivorship vests when the joint tenancy is established, the right of survivorship is an immediate gift, rather than a gift that arises only after the joint owner’s death.
After finding that the receipt of a right of survivorship constitutes a gift, Justice Savage noted the following:
“By registering the property in the joint names of Mr. Baryla and (Mr. Baryla’s mother), (Mr. Baryla’s mother) gifted the right of survivorship — but to whom? If (Mr. Baryla’s mother) made the gift to Mr. Baryla, then on its face it would qualify as excluded property under s. 85(1)(b.1) of the (Family Law Act) as ‘gifts to a spouse from a third party.’ However, arguably it is not clear to whom (Mr. Baryla’s mother) gifted the right of survivorship. Was the gift to Mr. Baryla alone, or to both Mr. Baryla and Ms. Baryla as both had contributed to the purchase price?”
Justice Savage went on to find that the trial judge did not undertake the analysis necessary to determine whether the gift was to Mr. Baryla alone or to Mr. and Mrs. Baryla.
Sadly, for the Barylas, the resolution of their separation is far from over. Justice Savage directed a new trial on this, and other issues. Against the backdrop of the Court of Appeal’s direction in respect of the gift of a right of survivorship, the next trial judge will hopefully resolve matters once and for all.
As is apparent from this case, the implications of ownership of property and the route to ownership are often unexpectedly far-reaching. Whenever a change of ownership is considered, all parties to the transaction should make their intentions and goals clear. With that information in mind, the transaction can be properly structured and recorded to avoid any future uncertainty. And the need for a new trial.
Adam N. Black is a partner in the family law group at Torkin Manes LLP in Toronto.