Deed of gift highly effective way to avoid disputes
A recent Ontario Superior Court of Justice decision involving a home purchased by a couple in the name of their son demonstrates that a deed of gift can be an effective way to avoid complications down the road, Toronto trusts and estates lawyer Ian Hull tells Canadian Lawyer.
As the legal magazine reports, the matter of Lee v. Lee involves a house purchased by a couple in the name of their son, who never lived in the house and had severed ties with his parents.
“After many years of renting it out, it became the primary residence for the couple upon retirement when, at that point, the son, since married with two children and now divorced, failed to make equalization payments to his ex-wife based partly on the value of the house now occupied by his parents,” Canadian Lawyer reports.
“Absent were documents outlining any agreement between the couple and the son in relation to the house. [Justice Sean F. Dunphy] ultimately decided the ex-wife was entitled to enforce the writ of seizure and sale against the house.”
The case demonstrates the need for a clear delineation of the intention of those involved in a real estate transaction at the time it is made, the article states.
“The best source of protection for everyone involved, including the lawyers, is getting it in writing,” it continues.
Hull, co-founding partner of Hull & Hull, tells Canadian Lawyer the best way to document a gift is through a deed of gift, a sealed precision tool that is enforceable and makes the intention clear that the money was a gift. A deed of gift needs no further acknowledgement and will eliminate any dispute between siblings.
“What I’ll say to the parents is: ‘Let’s document the gift through a deed of gift,’” he says. “It is seldom used but it is incredibly effective.”
He tells the publication a will can acknowledge any contributions, gifts, or loans made to family members. “The rubber hits the road with the will. It can be a great way to privately address the loan,” Hull says.
If the parents appear on the title of the child’s home, for example, that needs to be addressed in the will, particularly if there are other siblings. In the case of a forgivable loan, the article says a will might specify that the child assumes title upon the death of the parents.
This would avoid any unintended consequences, like the siblings becoming co-owners of the house, the article states.