When selling property with elderly clients, it is important to consider the power of attorney, joint tenancies, and probate.
1. Determine if there is a valid Power of Attorney in place
A Power of Attorney is a legal document that grants to a person (sometimes called the “Attorney”) the right to sell and dispose of the assets of the Donor (the person granting the power of attorney). In British Columbia, the statute (law) governing powers of attorneys has recently changed and new rules apply to have a valid Power of Attorney. If the Power of Attorney was drafted prior to 2012, the Seller should meet with a lawyer familiar with the recent legal changes.
Importantly an Original Power of Attorney must be available as this document must be filed (or already filed) in the Land Title Office to allow for the transfer of land. Realtors should note that a Power of Attorney is only valid to sell the property while the Donor is alive. If the Donor should pass away prior to executing a Form A Transfer, the power of attorney will not be legally sufficient to transfer title to the lands.
2. Do some fact-finding on the nature of any Joint Tenancies on Title
Joint Tenancies can muddle a property title where one of the spouses has predeceased the other. Where one spouse has passed away and the property is held in joint tenancy, the property passes outside of the estate and vests solely in the surviving joint tenant. Often times the surviving spouse neglects to effect this change of title in the Land Title Office and fails to file the required Land Title forms. To avoid questions and potential closing complications, it is recommended that the Form 17 Transfer to Surviving Joint Tenant be filed as soon as possible, and not later than at the time of listing the property. There is no property transfer tax payable when the property vests to a surviving joint tenant.
3. What happens where adult children are holding title along with their parents as joint tenants?
Generally, this situation should not be entered into without legal advice. Although in some cases this is valid and effective estate planning, in most cases this arrangement and the legal consequences that flow from them have not been fully explored.
From a liability perspective, joint tenancy with children may give rise to a number of legal issues, including:
■ if the child is a minor the Public Guardian approval is required to transfer the property to any third party.
■ If the child does not reside at the residence there is no principal residence capital gains tax exemption available for the child’s interest in the property and therefore unexpected capital gains may arise on sale
■ If the child claims it is only “holding the property for estate purposes” to avoid the capital gains tax in #b, then the arising trust may give rise to Wills Variation Act claims against the estate.
If adult children are on title with their parents, the adult child must also sign the listing agreement (as they are a legal owner of the property even if they are not claiming a beneficial interest). Clients in these situations are well-advised to seek accounting and legal advice BEFORE entering into a binding contract as they may not foresee the adverse tax consequences in completing the transaction.
4. Where the property owner is deceased and dies WITH A VALID WILL, how can the estate sell the property?
Immediately upon the death the owner (assuming there are no surviving joint tenants), all powers of attorney cease to be effective to transfer title to the property.
The appointment of the executor or trustee within the VALID WILL determines who has the capacity to sell the property. This is determined by the court in a process called PROBATE where the estate submits the Deceased’s last will and testament to the Court for approval of its validity. Once a Grant of Probate has been obtained, this Grant of Probate can be filed with the Land Title Office to enable the property to be sold by the estate.
If the Grant of Probate has not been obtained the Seller/ Executor is not yet in a position to complete the standard terms of the contract of purchase and sale, that is to say, that they cannot legally deliver a registrable transfer as required under the contract.
If a contract is entered into prior to the grant of Probate, that contract must be “subject to the seller obtaining a grant of probate”. It should be noted that litigation proceedings, for example, Wills Variation proceedings may still block a sale of the property after a Grant of Probate has been obtained with the placement of a certificate of pending litigation on the property.
5. Where the property owner dies without a will, who can sell the property?
When a person dies without a will, the Estate Administration Act governs who may apply to the court to administer the disposition of the estate. In order of priority, these people are: spouses, children, grandchildren, parents, siblings, other next of kin by degree of relationship. If there are no heirs, the Public Guardian and Trustee may administer the estate.
The Court must issue Letters of Administration before the applying Administrator has any right to dispose of the property.
We often assist Kelowna Realtors and Kelowna Executors and Kelowna Estate Administrators dealing with these all situations, we are happy to help.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional. [jetpack-related-posts]